Last week, Glass Lewis made available it’s 2013 proxy voting guidelines to its subscribers only. [ISS came out with their '13 policy updates this morning - I'll cover in Monday's blog.] Here’s some analysis of the new guidelines from Towers Watson’s Dan Kelly & Jim Kroll (I’m posting memos on GL’s update in our “Glass Lewis Policies” Practice Area):
On November 8, Glass Lewis released its updated U.S. 2013 proxy paper guidelines, which immediately went into effect. The 2013 guidelines complement material compensation-related updates that went into effect this past July when Glass Lewis began sourcing peer companies for its pay-for-performance analyses from Equilar. (See “Glass Lewis Updates Its Pay-for-Performance Model.”) Although the recent policy update primarily focuses on issues outside of executive compensation, there are some changes with potential implications for executive pay in the upcoming proxy season:
- Equity plans up for shareholder approval will be examined for share-counting provisions that understate the potential dilution or cost to common shareholders. Although an uncommon practice, Glass Lewis will now evaluate so-called inverse multipliers in fungible share reserves that result in grants of options or stock appreciation rights that are counted against the share reserve as less than one share.
- Board responsiveness to a negative shareholder vote will be under scrutiny any time 25% or more of shareholders vote against the recommendation of management on any proposal. The new general policy will require examination of any disclosures of the board’s actions in response to shareholder concerns since the last annual meeting. Glass Lewis specifically noted that this policy will apply to compensation matters such as recent modifications to the design or structure of the company’s executive compensation programs.
- In recommending negative votes in the absence of a committee chairman, Glass Lewis’s policy has been to recommend that shareholders vote against the senior director (either the longest-serving member of the committee or, if one cannot be determined, the longest-serving board member on the committee). In a change from previous years, the 2013 guidelines call for Glass Lewis to recommend a vote against all directors if seniority cannot be determined. This policy will apply to all committees, including the compensation committee.
No other compensation-related updates were included in the release of the proxy advisor’s U.S. 2013 guidelines. Conspicuously absent from the list of changes was any mention of further updates to say-on-pay voting guidelines or the incorporation of alternative pay definitions. As such, it appears that the Glass Lewis pay-for-performance and say-on-pay analyses were set for the 2013 proxy season after the July updates.
DOJ & SEC Jointly Issue FCPA Guidelines
On Wednesday, the DOJ’s Criminal Division and SEC’s Enforcement Division issued joint guidelines for companies navigating the Foreign Corrupt Practices Act. The 130 pages of guidance – entitled “A Resource Guide to the U.S. Foreign Corrupt Practices Act” – is arguably the most thorough review of anti-bribery compliance since the FCPA was originally passed in 1977. Here is the press release – and here are Enforcement Director Khuzami’s remarks. We are already posting numerous memos in our “Foreign Corrupt Practices Act” Practice Area – and see this blog about declination opinions.
Venture-Backed Companies: Corporate Governance & Disclosure Practices in IPOs
Recently, Wilson Sonsini wrote this 2nd annual report on the governance and disclosure practices of 50 venture-backed companies that went public from July 2011 through June 2012, including those related to directors and independence, board committees and policies, stock plans, key metrics and non-GAAP measures and defensive measures.
- Broc Romanek