You might recall that, in November 2019, the SEC proposed amendments to the proxy rules to add new disclosure and engagement requirements for proxy advisory firms, such as ISS and Glass Lewis. Among the amendments included in that proposal was a new provision that would require proxy advisory firms to allow companies time to review and provide feedback on the advisory firm’s advice in advance of dissemination of the advice to the firm’s clients. (See this PubCo post.) Although there has been a substantial amount of pushback with regard to the SEC proposal and its earlier related guidance, including litigation filed by ISS (see this PubCo post), as noted on thecorporatecousel.net blog, proxy advisor Glass Lewis has announced that it will now include “unedited company feedback on its research…with all its proxy research papers” and will deliver that information “directly to the voting decision makers at every investor client.” Will ISS follow suit?
According to Glass Lewis, its new Report Feedback Statements will allow companies to “directly express their differences and unfiltered opinions on Glass Lewis’ research and recommendations.” As indicated on the RFS page, RFS submissions will be available for all annual and special meetings for companies and shareholder proponents. Glass Lewis indicates that it will republish the Report Feedback Statement unfiltered and unedited, making it accessible from the front page of the research report, and will notify investors immediately when the company’s feedback is available. Glass Lewis confirms that “[e]very investor making a vote decision will receive the company’s feedback with the time and ability to still make or change their voting decision.” To ensure that all investors have access to the same research report and recommendations, Glass Lewis will remove prior versions of its research report that did not include company feedback and email clients an updated research report that includes the RFS if they have already downloaded an earlier version.
To participate, the company or proponent must buy the relevant Glass Lewis report. (Note that, if the offer to submit an RFS is declined at the time of purchasing a report, the company or proponent will be charged a separate fee if a decision is later made to submit an RFS.) The RFS must be submitted within seven days after the Glass Lewis research report has been published and no later than 14 days before a company’s meeting. In addition, it must be submitted in PDF format on the letterhead of the submitting company or shareholder proponent. If a company submits an RFS discussing a shareholder proposal, it will need to have clearly identified the names of the shareholder proponents in the company proxy—which is not required under SEC proxy rules. Only one RFS will be permitted per meeting from each company or proponent. However, if the company makes an additional public filing that leads Glass Lewis to materially revise its research report, Glass Lewis may, in its discretion, permit submission of an additional RFS for a nominal distribution fee within two business days after publication of the revised Glass Lewis report.
Glass Lewis requires that, prior to submitting an RFS, companies or proponents ensure the following:
- “The submitter has consulted with legal counsel to ensure the submission of its RFS complies with all laws and regulatory requirements applicable to the submitter and its disclosure of information.
- Company information included in the RFS is ‘publicly available’ information, meaning the information has been disseminated in a manner making it available to investors generally. Glass Lewis will not consider, nor distribute, material non-public information.
- A good faith effort has been made to ensure that all the information contained in the RFS is accurate.
- None of the statements included in the RFS defame or disparage Glass Lewis, its subsidiaries, owners, and employees, or any third party. Glass Lewis also expects RFS submitters to exercise professionalism and civility in their responses, including refraining from comments that are not relevant to the RFS and not including any unnecessary personal names or other personally identifiable information.
- Each statement must be signed by an executive at the organization, authorized to submit the RFS on behalf of such organization and should feature contact information to enable investors to follow up with the organization.”
If the RFS does not comply with Glass Lewis’s terms and conditions, Glass Lewis can reject it, but may allow submission of a revised RFS if there is enough time and the resubmission complies with the terms and conditions of the RFS.
Glass Lewis also cautions that the purpose of the RFS is to address differences of opinion with Glass Lewis, not to serve as a forum to evaluate or critique other firms. Nor is the RFS intended to be the vehicle for correction of errors. Companies should continue to notify Glass Lewis of factual errors as soon as possible to allow timely correction—no later than two business days prior to submission of an RFS—so as to allow timely correction and notification to Glass Lewis’s clients. Glass Lewis advises that it will “continue to correct any errors found in its research, including when a company is unable to pre-screen the data used by Glass Lewis.”
Glass Lewis will advise each company and proponent that submits an RFS of the number of investors that were sent the RFS and the number that viewed or downloaded the underlying research report, although, for privacy reasons, no client-specific information will be disclosed.