Like ISS (see this PubCo post), proxy advisor Glass Lewis has also revisited the application of its policies to take into account the impact of COVID-19—having conducted, in its words, “scenario planning in order to consider how this will impact governance and broader ESG issues in the present and future.” Glass Lewis advises that it expects, currently and probably through 2021, “all governance issues and most proposal types to be impacted by the pandemic,” including balance-sheet and executive comp issues, on which Glass Lewis expresses some rather strong opinions. Relying on the flexibility inherent in its “contextual approach,” Glass Lewis plans to exercise its “existing discretion and pragmatism” in connection with voting on any affected proposals.
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?
You may recall that, last month, Corp Fin announced that it had revisited its approach to responding to no-action requests to exclude shareholder proposals. In essence, under the new policy, the staff may respond to some requests orally, instead of in writing, and, in some cases, may decline to state a view altogether, leaving the company to make its own determination. (See this PubCo post.) In its most recent proxy guidelines, Glass Lewis explains its expectations from companies in light of the new approach.
The newest SEC Commissioner, Elad Roisman, who has reportedly gotten the nod to head up the SEC’s efforts regarding proxy advisory firms, told the U.S. Chamber of Commerce in late March that he expects the SEC to issue new guidance, sometime after proxy season this year, regarding the use by institutional investors of proxy advisory firm recommendations, as reported in The Deal. And, according to the WSJ, Roisman has “also questioned whether it was appropriate for the SEC to exempt proxy advisers from some regulations on investment advice, including whether they can both advise a company and make recommendations to its shareholders at the same time.” However, as discussed in this PubCo post, the question of whether proxy advisory firms, such as ISS and Glass Lewis, have undue influence over the voting process and should be reined in has long been something of a political donnybrook. With the issue of proxy advisory firm regulation so politically freighted, will the SEC limit the scope of its effort to guidance to institutional investors or, more controversially, go further and impose regulation on proxy advisors, as many companies have advocated?
Proxy advisor Glass Lewis has posted its 2019 Proxy Guidelines and 2019 Guidelines Regarding Shareholder Initiatives. One of the more striking points is that GL indicates that it may, albeit in limited circumstances, recommend against the members of the nominating/governance committee simply for successfully requesting no-action relief from the SEC to exclude (and presumably excluding) a shareholder proposal, where GL views the exclusion to have been detrimental to shareholders. GL’s new guidance includes the following updates:
by Cydney Posner If you haven’t already, please check out our recent Cooley Alert, ISS and Glass Lewis Update 2017 Proxy Voting Policies. It’s a great way to start the new year and a lot more fun than a diet!
by Cydney Posner Companies are paying increased attention to the potential for director “overboarding,” according to the WSJ. Many companies have adopted restrictions on the number of outside seats that directors may hold, often in response to shareholder requests. In addition, some institutional shareholders are guided in their voting by […]