Glass Lewis Policy Changes

GLASS LEWIS UPDATED 2021 PROXY VOTING POLICY GUIDELINES FOR THE UNITED STATES AND CONTINENTAL EUROPE

Glass Lewis has recently released its Voting Policy Guidelines (‘’the guidelines’‘) for the 2021 proxy season. For both Continental Europe and US markets, the guidelines include key updates covering the issues on board diversity, environmental and social risk oversight as well as executive remuneration related matters.  

Glass Lewis has recently released its Voting Policy Guidelines (‘’the guidelines’‘) for the 2021 proxy season. For both the Continental Europe and US markets, the guidelines include key updates covering issues of board diversity, environmental and social risk oversight, as well as executive remuneration-related matters.  

The new guidelines will become effective for the annual and extraordinary meetings beginning January 1, 2021.

MAIN CHANGES

Environmental and Social Risk Oversight. Glass Lewis emphasizes the importance of overseeing the material risks related to environmental and social factors for the Companies. Boards are expected to take responsibility to mitigate the impact of these risks on the companies’ governance robustness and subsequently on shareholder interests. Accordingly, 2021 and onwards , the governance committee chairs will be expected to provide explicit disclosure on the sustainability of business operations and the potential risks related to environmental and social matters.  

Board Gender Diversity. In the 2021 proxy season, Glass Lewis will note gender diversity as a concern if the board lacks gender diversity. In Continental Europe, all mid-cap and large-cap index companies will require their boards to be consisted of at least 30% of directors of each genders while in US, the boards with six or fewer directors will be required to have a minimum of one female director, and boards with more than six candidates will be expected to have at least two female members. Effective from January 1, 2022, Glass Lewis will recommend voting against the nomination committee chair when the board fails to meet these gender diversity requirements. 

Executive Remuneration. In the Continental Europe market, Glass Lewis focuses on remuneration committee’s discretion and the disclosures related to performance metrics and the targets. Further, the Companies are expected to provide an alignment between executive remuneration and experience of its stakeholders in the past financial year. In the US’s case, the new amendments involve the executive incentive plans. Accordingly, the Companies are expected to clearly disclose changes in their short-term incentive plans. Further, in the US market, Glass Lewis may recommend voting against a remuneration proposal in the event of inappropriate long-term awards or, excluding exceptional circumstances, significantly reduced percentages of long-term incentives. Transparency and explicit disclosures regarding pandemic-related changes as well as upward discretion are also expected. 

Since Covid-19-related pay cuts in addition to flaws in dividend payments negatively affected different stakeholders of the Companies, the financial outcomes of the executives––particularly of the CEOs––should be reconsidered and adjusted when necessary. 

Apart from the common topics stated above, the following changes will become effective in the 2021 proxy season for the Continental Europe market: 

Anti-Takeover Devices: Glass Lewis details its approach to poison pills and exemplifies the cases where it may recommend for anti-takeover proposals such as those limited in timing; aiming to achieve a significant objective or there is an exceptional justification.  

Director Age/Term Limits: Glass Lewis has changed its policy from generally recommending withholding support from proposals which set a limit on directors age or term limit. 

Virtual Meetings:  Glass Lewis supports virtual shareholder meetings, and the Companies are expected to set clear procedures for virtual technology meetings. 

Human Capital Management: In addition to equal representation of all genders; board-level diversity of ethnicity, national origin, skills and experience will be discussed in the proxy analysis. Further, the boards will be expected to be accountable on workforce diversity, inclusion, employee wellbeing and responsible labour practices.  

For the companies in the US market, Glass Lewis will consider proxy statements for the board’s racial/ethnic diversity together with its diversity definition, the board policy on the inclusion of women and minorities into the pool of director nominees, and the disclosure on board skills. 

Furthermore, Glass Lewis added a new section to the US guidelines regarding its approach to common issues associated with special purpose acquisition companies. Additionally, effective January 1, 2021, Glass Lewis will recommend voting against the governance committee chair when the Company fails to disclose detailed records of the last annual meeting’s proxy voting results. 

FURTHER CHANGES

Glass Lewis have made publicly available guidelines for 2021 for certain markets on its web site. Policy guidelines for Turkey are still to be disclosed. We will provide another post summarising the main changes for Turkey, once they are out. 

Disclaimer: Opinions expressed within the content are solely the author’s and do not reflect the official opinions and beliefs of the companies that he represents.