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Glass Lewis Releases 2020 US Proxy Paper Guidelines

On November 1, Glass Lewis released its 2020 US Proxy Paper Guidelines. The updates to the voting guidelines primarily add additional factors that Glass Lewis will review when evaluating proposals and issuing its voting recommendation for shareholders. According to Glass Lewis, the updates seek to fulfill Glass Lewis’ overarching goal of protecting and enhancing shareholders’ interests by (1) continuing to increase transparency at the board level, both with respect to the selection of board members and with respect to decisions the board undertakes, and (2) discouraging companies from undertaking actions that would bypass the shareholders’ ability to vote on matters deemed important by Glass Lewis. Significant updates to the voting guidelines are summarized below.

Nominating and governance committee assessment

In September, the SEC issued guidance stating that when a company seeks to exclude a shareholder proposal, the SEC will inform the shareholder and the company of its position to (1) concur, (2) disagree or (3) decline to state a view with respect to the company’s asserted basis for exclusion. The SEC further clarified that, beginning with the 2019-2020 shareholder proposal season, the staff may also respond to no-action requests orally rather than in writing. Glass Lewis clarified that it will recommend voting against all members of the governance committee if a shareholder proposal is omitted and either (a) the SEC declines to state its view with respect to the company’s basis for exclusion or (b) the SEC verbally permits the exclusion, but there is no written record and the company fails to provide any disclosure regarding such relief.

Glass Lewis also added additional factors that it will consider when evaluating governance committee members’ performance. In particular, Glass Lewis will recommend voting against the chair of the nominating and governance committee if (1) board and committee meeting attendance records of directors are not disclosed or (2) a director attended less than 75 percent of board and committee meetings, and the disclosure is vague to a point where it is not possible to determine such director’s identity.

Audit committee and compensation committee assessments

Glass Lewis also established additional factors that it will consider when evaluating audit committee and compensation committee performance. In particular, Glass Lewis will generally recommend voting against the chair of an audit committee if fees paid to a company’s external auditor are not disclosed. In addition, Glass Lewis will recommend voting against all members of the compensation committee if the board adopts a frequency proposal for its advisory vote on executive compensation and such proposal was not approved by a plurality of shareholders.

Contractual payments and arrangements for executives

Glass Lewis clarified that, with respect to ongoing and new contractual payments and executive entitlements, it disfavors contractual agreements that include excessive severance payments, new or renewed single-trigger, change-in-control arrangements, excise tax gross-ups, multi-year guaranteed awards and other provisions that Glass Lewis considers to be problematic. Similarly, contractual arrangements providing for problematic entitlements that are not addressed upon renewal or revision are viewed by Glass Lewis as a missed opportunity to remedy provisions unfavorable to shareholders and could lead to a negative voting recommendation.

Company responsiveness to say-on-pay

Glass Lewis further clarified what it considers an appropriate response to low shareholder support for prior say-on-pay proposals, including the levels of responsiveness based on the severity and persistence of shareholder opposition. Glass Lewis may recommend voting against future say-on-pay proposals if, in response to negative shareholder feedback, a company with low (less than 80 percent) support on a say-on–pay proposal fails to provide robust disclosure of engagement activities and specific changes in response to shareholder feedback.

Exclusive forum provisions

Glass Lewis generally recommends voting against the chair of the governance committee if the board adopts an exclusive forum provision without shareholder approval. However, Glass Lewis may now make exceptions to this policy if it can be reasonably determined that the exclusive forum provision is narrowly crafted to suit the company’s specific circumstances.

In addition, Glass Lewis has made various minor clarifications and edits to its guidelines. The full text of the Glass Lewis 2020 US Proxy Paper Guidelines is available here.

©2019 Katten Muchin Rosenman LLP

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About this Author

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

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...

312-902-5493
Mark Reyes Securities Lawyer Katten Muchin law firm Chicago office
Partner

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 selection of Mark’s engagements.

  • Representation of hospitality company in connection with its initial public offering and listing on NYSE, as well as ongoing counseling with respect to compliance with securities laws and NYSE rules, disclosure and corporate governance matters.
  • Representation of NASDAQ-listed public company in the banking industry in connection with strategic transactions, capital raising transactions, compliance with securities laws and NYSE rules, disclosure and corporate governance matters, including strategic acquisitions, notes offering and at-the-market offering.
  • Representation of clean tech manufacturer for industrial equipment in connection with alternative public offering and listing on NASDAQ, as well as ongoing counseling with respect to compliance with securities laws and NASDAQ rules, disclosure and corporate governance matters.
  • Representation of NASDAQ-listed issuer in connection with selling stockholder block trades.
  • Representation of NYSE-listed industrial manufacturer with respect to compliance with securities laws and NYSE rules, disclosure and corporate governance matters.
  • Representation of NASDAQ-listed medical device company with respect to compliance with securities laws and NASDAQ rules, disclosure and corporate governance matters.
312-902-5612
Farzad F. Damania, Capital markets and securities lawyer, Katten Law Firm
Partner

Farzad F. Damania focuses his practice on capital markets and securities law, mergers and acquisitions, and general corporate law. He is regularly engaged on capital markets transactions, including initial public offerings, follow-on offerings, tender offers, and high yield debt transactions as well as direct investments by private equity acquirers, sellers and co-investors. He also represents public companies on corporate governance issues, securities law compliance and stock exchange regulations.

Farzad counsels US public companies and foreign...

212-940-3838