Glass Lewis released updated policy guidelines for 2019 this week in which it announced several changes to its voting recommendation policy on directors, shareholder proposals and executive compensation issues. Highlights include the following:
- Board Gender Diversity. Starting in January of 2019 (based on a policy announced in November of 2017), Glass Lewis stated it will recommend against the nominating committee chair (and possibly the entire nominating committee) of a board with no female members. Mitigating factors will include a disclosed timetable for adding female directors or a restriction such as director nominating agreements with significant investors.
- Shareholder Proposals. Citing the "dynamic nature" of the SEC's decisions to allow companies to exclude shareholder proposals, Glass Lewis states it will recommend against members of the governance committee where a company excludes a proposal that Glass Lewis believes would have benefited shareholders ("in very limited circumstances").
- ESG Proposals and Oversight. Glass Lewis may recommend against directors responsible for ESG oversight where "it is clear that companies have not properly managed or mitigated" ESG risks to the detriment of shareholder value. In addition, Glass Lewis will vote for proposals calling for increased disclosure on employee diversity.
- Front-Loaded Awards. Noting a new trend in large up-front equity grants designed to serve as compensation for multiple years, Glass Lewis expresses concern that this ties the hands of the compensation committee and ratchets up pay, and will look to ensure that companies disclose and abide by a promise not to make any additional awards for a defined period after the front-loaded award.
- Contractual Payments. Glass Lewis has added new excise tax gross-up clauses to the list of factors that lead to a negative vote recommendation and added a discussion of contractual payments such as sign-on bonuses and severance arrangements, noting that it will be closely reviewing the quantum and design of any such arrangements.
- Clawbacks. Glass Lewis will be increasingly focusing attention on "bare minimum" clawback policies, suggesting that policies should be triggered after any financial restatement.