In another sign that proxy season will be here before we know it, Glass Lewis announced this week that it has released its 2022 Proxy Voting Policy Guidelines. These Guidelines address how the proxy advisor approaches matters that affect votes on director elections, auditor ratification, executive pay, and governance structures.
As always, the first few pages of the Guidelines summarize the policy changes. Here are the main ones:
Board Gender Diversity: The policies remind boards that beginning in 2022, Glass Lewis will generally recommend voting against the chair of the nominating committee of a board with fewer than two gender diverse directors, or the entire nominating committee of a board with no gender diverse directors, at companies within the Russell 3000 index.
Beginning with shareholder meetings held after January 1, 2023, Glass Lewis will transition from a fixed numerical approach to a percentage-based approach and will generally recommend voting against the nominating committee chair of a board that is not at least 30 percent gender diverse at companies within the Russell 3000 index.
The policies clarify that when making these voting recommendations, Glass Lewis will carefully review a company’s disclosure of its diversity considerations and may refrain from recommending that shareholders vote against directors of companies when boards have provided a sufficient rationale or plan to address the lack of diversity on the board.
It has also replaced references in the guidelines to female directors with “gender diverse directors,” defined as women and directors that identify with a gender other than male or female.
Interplay With Other Diversity Regulations: The policies address evolving state laws and stock exchange requirements on gender diversity and underrepresented community diversity. Glass Lewis will recommend in accordance with mandated board composition requirements of applicable laws and regulations when they come into effect.
For annual meetings of applicable Nasdaq-listed companies that are held after August 8, 2022, Glass Lewis will recommend voting against the chair of the governance committee when the required board diversity disclosure has not been provided.
Glass Lewis will generally refrain from recommending against directors when applicable state laws do not mandate board composition requirements, are non-binding, or solely impose disclosure or reporting requirements in filings made with each respective state annually.
Disclosure of Director Diversity & Skills: Beginning in 2022, for companies in the S&P 500 index with particularly poor disclosure (i.e., those failing to provide any disclosure in each of the tracked categories), Glass Lewis may recommend voting against the chair of the nominating and/or governance committee. Beginning in 2023, when companies in the S&P 500 index have not provided any disclosure of individual or aggregate racial/ethnic minority demographic information, Glass Lewis will generally recommend voting against the chair of the governance committee.
E&S Risk Oversight: Beginning in 2022, Glass Lewis will note as a concern when boards of companies in the Russell 1000 index do not provide clear disclosure concerning the board-level oversight afforded to environmental and/or social issues. For shareholder meetings held after January 1, 2022, it will generally recommend voting against the governance committee chair of a company in the S&P 500 index who fails to provide explicit disclosure concerning the board’s role in overseeing these issues.
While Glass Lewis believes that it is important that these issues are overseen at the board level and that shareholders are afforded meaningful disclosure of these oversight responsibilities, it believes that companies should determine the best structure for this oversight. In Glass Lewis’s view, this oversight can be effectively conducted by specific directors, the entire board, a separate committee, or combined with the responsibilities of a key committee.
Role of a Committee Chair: Glass Lewis has revised its approach to the role of a committee chair in cases where there is a designated committee chair and the recommendation is to vote against the committee chair, but the chair is not up for election because the board is staggered. Beginning in 2022, in cases where the committee chair is not up for election due to a staggered board, and where Glass Lewis has identified multiple concerns, it will generally recommend voting against other members of the committee who are up for election, on a case-by-case basis.
Multi-Class Share Structures: Beginning in 2022, Glass Lewis will recommend voting against the chair of the governance committee at companies with a multi-class share structure and unequal voting rights when the company does not provide for a reasonable sunset of the multi-class share structure (generally seven years or less).
Governance Following a SPAC Combination: In cases where Glass Lewis determines that the company has adopted overly restrictive governing documents, where, preceding the company becoming publicly traded, the board adopts a multi-class share structure where voting rights are not aligned with economic interest, or an anti-takeover provision, such as a poison pill or classified board, it will generally recommend voting against all members of the board who served at the time of the company becoming publicly traded if the board hasn’t obtained or committed to get shareholder approval or provide for a reasonable sunset provision.
Director Commitments of SPAC Executives: Given the nature of executive roles at SPACs and the limited business operations of SPACs, when a directors’ only executive role is at a SPAC, we will generally apply our higher limit for company directorships. As a result, we generally recommend that shareholders vote against a director who serves in an executive role only at a SPAC while serving on more than five public company boards.
Waiver of Age & Tenure Policies: Beginning in 2022, in cases where the board has waived its term/age limits for two or more consecutive years, Glass Lewis will generally recommend shareholders vote against the nominating and or governance committee chair, unless a compelling rationale is provided for why the board is proposing to waive this rule, such as consummation of a corporate transaction.
Glass Lewis also clarified policies on its ESG approach (noting it looks at issues through the lens of a long-term shareholder), its case-by-case evaluation of shareholder proposals, preferred stock increases, exclusive forum provisions, post-IPO governance, director independence, related party transactions, and E&S metrics in executive pay and other executive pay-related issues (see Emily’s blog on CompensationStandards.com).
We’ll be posting memos in our “Proxy Advisors” Practice Area.
– Liz Dunshee