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Glass Lewis Issues 2021 Proxy Season Updates

On November 23, Glass Lewis issued its Proxy Voting Policy Guidelines for 2021. Glass Lewis, like other proxy advisory firms, reviews proposals to be voted on at public company shareholder meetings and makes voting recommendations to its clients based on its voting policies and standards.

Certain significant policy changes for 2021 that Glass Lewis announced are summarized below.

Board Gender Diversity

Glass Lewis will maintain its existing policy of generally recommending voting against nominating committee chairs of companies without at least one female director on the board of directors, and, beginning in 2021, will also note as a concern boards consisting of fewer than two female directors. For shareholder meetings held after January 1, 2022, Glass Lewis will generally recommend voting against nominating committee chairs of boards with fewer than two female directors. However, for boards with six or fewer total directors, the existing policy, only requiring a minimum of one female, will remain in place.

Director Diversity and Skills

Starting in 2021, for companies in the S&P 500, Glass Lewis will include an assessment of company disclosure of director diverse attributes and skills. Glass Lewis’s reports will reflect how a company’s proxy statement disclosure presents (1) the board’s current percentage of racial and ethnic diversity, (2) whether the board’s definition of diversity includes gender, race or ethnicity, (3) whether the board has a adopted a policy requiring women and minorities to be included in the pool of initial candidates when selecting director nominees and (4) board skills disclosure.

Glass Lewis will not make voting recommendations based solely on this analysis but it may inform its assessment of a company’s overall governance.

Board Refreshment

Glass Lewis will note as a potential concern in its reports where the average tenure of non-executive directors is 10 years or more, and the company has not added a new independent director in the last five years.

Environmental and Social Risk Oversight

For 2021, Glass Lewis will note as a concern when the board of an S&P 500 company does not provide clear disclosure concerning board-level oversight afforded to environmental or social issues. Starting in 2022, Glass Lewis will generally recommend voting against the governance committee chair of an S&P 500 company where the company fails to provide explicit disclosure concerning the board’s role in overseeing these issues.

Special Purpose Acquisition Companies

For 2021, Glass Lewis has added a new policy section relating to special purpose acquisition companies (SPACs).

Where a SPAC seeks shareholder approval to extend the time frame to consummate a business transaction, Glass Lewis will generally defer to the recommendation of the SPAC’s management and support reasonable extension requests.

Where a SPAC executive officer becomes a member of the company board following a business combination, Glass Lewis will not automatically consider the former SPAC executive to be affiliated with the combined company when the director’s only position on the board of the combined company is that of an otherwise independent director. Absent any evidence of an employment relationship or continuing material financial interest in the combined company, Glass Lewis will consider such a director to be independent.

Vote Results Disclosure

For 2021, Glass Lewis will recommend voting against governance committee chairs where a detailed record of proxy voting results from the last annual meeting has not been disclosed. This requirement will apply to companies incorporated in foreign jurisdictions as well, even if such disclosure is not a legal requirement.

Board Responsiveness

With respect to management resolutions for a shareholder meeting, Glass Lewis will note instances where a resolution received more than 20 percent opposition and may opine on the board’s response, or lack thereof, to such shareholder opposition.

Governance Following an IPO or Spin-Off

Glass Lewis’s 2021 policy clarifies its approach with respect to newly public companies. For companies that adopt a multi-class share structure with disproportionate voting rights or other anti-takeover mechanisms pre-IPO, Glass Lewis will generally recommend voting against all directors who served on the board at the time of the IPO if the board (1) did not commit to submitting the provision to a shareholder vote at the first shareholder meeting after the IPO or (2) did not provide for a reasonable sunset of these provisions (typically three to five years in the case of a classified board or poison pill, or seven years or less in the case of a multi-class share structure). Where a multi-class share structure exists, Glass Lewis will examine the level of support attributed to unaffiliated shareholders when determining the vote outcome.

Option Exchanges and Repricing

Glass Lewis remains generally opposed to repricing and exchanges of employee and director options. Glass Lewis may not object to such a transaction where macroeconomic or industry trends, rather than specific company issues, cause a stock’s value to decline dramatically. The new guidance provides that, in such scenarios, Glass Lewis may opt to support such proposal only if (1) officers and board members cannot participate in the program and (2) the exchange is value-neutral or value-creative to shareholders using conservative assumptions.

Virtual-Only Shareholder Meetings

Glass Lewis has removed its temporary COVID-19 related policy on virtual shareholder meeting disclosures. They have reverted to their standard policy, requiring companies choosing to hold a meeting in a virtual-only format to provide disclosure that addresses the ability of shareholders to participate in the meeting. This includes disclosure of shareholders’ ability to ask questions, as well as logistical details for meeting access and technical support. Where such disclosure is not provided, Glass Lewis will generally recommend voting against the members of the governance committee.

The full text of Glass Lewis’s 2021 Proxy Voting Policy Guidelines updates is available here.

©2022 Katten Muchin Rosenman LLPNational Law Review, Volume X, Number 339

About this Author

Brian Hecht Corporate Lawyer Katten

Brian Hecht is a Corporate partner in Katten's New York office. He offers broad transactional experience in capital markets transactions, mergers and acquisitions and corporate governance matters. Within capital markets, Brian's practice focuses on initial public offerings, high yield offerings, spin-offs, tender offers and investment grade debt offerings. Within mergers and acquisitions, he represents private equity funds and public companies in both public and private acquisitions and divestitures.

Prior to joining Katten, Brian was a...

Mark Reyes Securities Lawyer Katten Muchin law firm Chicago office

Mark J. Reyes concentrates his practice in corporate and securities matters, including representing issuers and investors in public offerings and private placements of equity and debt securities and advising clients in complex corporate transactions such as mergers, acquisitions, private investments in public equity (PIPEs), private equity investments and joint ventures. He also counsels public companies on securities law compliance, disclosures and corporate governance matters.

Shown below is a...

Mark D. Wood, corporate securities lawyer Katten Muchin Chicago Law firm

Mark D. Wood is head of Katten's Securities practice and concentrates in corporate and securities law. Mark represents public companies, issuers and investment banks in initial public offerings (IPOs) and other public offerings, private investment in public equity (PIPE) transactions, debt securities and other securities matters.

Mark also represents clients in complex corporate transactions, including tender offers, mergers, acquisitions, dispositions, going-private transactions, private equity investments, joint ventures and...