The Confederation of Swedish Enterprise welcomes the message from the proxy advisor ISS that ISS will not recommend against the discharge from liability of the directors in all Swedish companies having shares with differentiated voting rights.
The Confederation of Swedish Enterprise has previously high-lighted concerns with the updated ISS benchmark proxy voting policies made public by Institutional Shareholder Services Inc. (”ISS”) during the fall 2022. Under the policy, ISS intends to recommend against directors individually or against the discharge of (non-executive) directors for maintaining a corporate structure with unequal voting rights.
Considering the Swedish legal framework on discharging directors from liability, ISS has now confirmed that they do not believe that discharge from liability under Swedish law is an appropriate tool to use as an accountability mechanism to raise concerns with the use of unequal voting rights.
The practical application of the policy will thus not imply that ISS will recommend against the discharge from liability of directors in Swedish companies only because a company has shares with differentiated voting rights. Although ISS deems board elections generally more appropriate as an accountability mechanism, it is our understanding that the application of the policy does not mean that ISS will recommend against all directors only because a company has shares with differentiated voting rights. A case by case assessment will be made, looking into each specific company and its directors specifically.
The Confederation of Swedish Enterprise welcomes the dialogue with ISS and the confirmation obtained. It is positive that the proxy advisor will take local considerations into consideration when applying its proxy voting policies. Local dialogue, transparency and communication are key to minimize the number of potential concerns and questions on the market concerning practical implications of proxy voting policies.