COVID-19 will impact all of Glass Lewis’s governance policies for 2020 and 2021, according to a release published on March 26, 2020. Overall, Glass Lewis acknowledged that applying their current policies may not be appropriate in the face of the unfolding crisis. However, the proxy advisor’s guidelines for executive compensation in particular were sharply worded, with a strong implication that given the chance, companies would “try to make executives whole at even further expense to shareholders” or continue to pay executives while cutting employee pay. The proxy advisor notes that they expect to see “crocodile tears” for maintaining or increasing pay levels, adjustments to equity plan proposals and increased shareholder concern regarding repricing, dilution, burn rates and board discretion, despite the fact that most companies have “taken early and decisive action” to align executives with employees and shareholders in the wake of the crisis.
- Ambiguous modifications to the compensation plan reflecting performance volatility, compensation committee discretion, and greater adjustments to results and payouts;
- Adjustments to equity compensation plans such as repricing, hurdle adjustments, burn rates, and vesting periods (among others); and
- Retention awards, modifying previously challenging performance plans to assure payouts, or paying out well above target in the face of the economic challenges.
- Board composition and effectiveness: The article recognizes that many board members are in higher risk populations. Related policies will incorporate a more lenient view of board attendance. Further, if changes to board composition accelerate, the independence levels of boards may fluctuate.
- Activism and M&A: Glass Lewis expects activism and M&A activity to increase relatively quickly in response to the crisis. A return to more stable market conditions could see increases in proxy contests and M&A deals for the second half of 2020 and into 2021.
- Proposals: The current crisis will be factored into evaluations on shareholder and ESG proposals.