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ISS recommends votes against Allied World Assurance buyback plan


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ISS recommends votes against Allied World Assurance buyback plan

Allied WorldAssurance Co. Holdings AG disclosed in a proxy statement filedApril 6 that Institutional Shareholder Services Inc. recommended against thecompany's proposed combined chairman and CEO roles, advisory say-on-pay voteand new share repurchase program.

ISS recommended against the proposed combined chairman andCEO roles because it favors the separation of the two roles "inprinciple." Allied World Assurance said it recommends that shareholders approveChairman, President and CEO Scott Carmilani to serve as chairman of its boarduntil the 2017 annual shareholder meeting, pointing out that it has a"strong counterbalancing" governance structure. The company said ithas a lead independent director and eight independent directors out of its ninedirectors. The company also said all of its active board committees arecomprised of independent directors.

Regarding the proposed advisory say-on-pay vote, ISSacknowledged that Allied World did adjust the compensation payments for allemployees, including its executive officers, to reflect the company's financialresults in 2015, but the proxy advisory firm believes that there are stillsignificant pay concerns. The proxy advisory firm noted that the "non-formulaic"portion of the company's annual incentive award was "above target,"and added that there were no specific accomplishments cited that could justifythis.

Allied World pointed out that Glass Lewis & Co.recommended votes in favor of the proposal. The company also noted that the2015 compensation of its executive officers was significantly lower than it wasin 2014. The company also said Carmilani's 2015 total direct compensation wasbelow both the average and median CEO compensation of its peers.

ISS recommended votes against Allied World Assurance's new$500 million share repurchase program because it would let the company buy backmore than 10% of its share capital. The proxy advisory firm supports sharerepurchase plans in continental European market provided that the company isholding no more than 10% of share capital in treasury and the plan is subjectto a duration of no more than five years and includes a repurchase limit equalto 10% of share capital. The proxy advisory firm noted that it may support thebuying back shares in excess of the 10% limit provided that the sharerepurchase authority has a holding limit of up to 10% of a company's issuedshare capital in treasury and has a duration of no more than 18 months.

Allied World Assurance said its shareholders should approvethe new buyback program. The company said it is subject to U.S. federalsecurities laws because it trades on the NYSE. Regarding the ISS limitations,the company said the first 3 million repurchased shares will only be re-issuedto employees upon the vesting of outstanding equity awards and any additionalcommon shares repurchased will be designated for cancellation and will not bere-issued. The company said it is subject to the Swiss statutory provisionsthat prohibit it from holding in treasury more than 10% of its aggregateshares. In addition, the two-year duration of the share repurchase program,which is within the proxy advisory firm's five-year prescribed window, wouldmake it unlikely for the company to exceed the 10% limitation.

The annual shareholder meeting is scheduled for April 19.