The Advisors' Blog

– Liz Dunshee

As our colleague John Jenkins blogged today on TheCorporateCounsel.net – and as noted yesterday on its blog – Glass Lewis has posted its 2020 Voting Guidelines. As always, page 1 of the Guidelines summarizes the policy changes – and we’ll be posting memos in our “Proxy Advisors” Practice Area. Compensation-related changes include:

1. Compensation Committee Responsiveness: Glass Lewis codified additional factors we will consider when evaluating the performance of compensation committee members. Specifically, they’ll recommend against all members of the compensation committee when the board adopts a frequency for its advisory vote on executive compensation other than the frequency approved by a plurality of shareholders.

2. Severance & Change-in-Control: Glass Lewis clarified its approach to analyzing both ongoing and new contractual payments and executive entitlements. It typically disfavors contractual agreements that are “excessively restrictive in favor of the executive” – including excessive severance payments, new or renewed single-trigger change-in-control arrangements, excise tax gross ups and multi-year guaranteed awards. The extension of these provisions through renewed or revised employment agreements is also frowned upon.

3. Say-on-Pay Engagement: Glass Lewis expanded its discussion of what it considers to be an appropriate response following low shareholder support for say-on-pay – including differing levels of responsiveness depending on the severity & persistence of shareholder opposition. They expect robust disclosure of engagement activities and specific changes made in response to shareholder feedback. Absent such disclosure, Glass Lewis may consider recommending against the upcoming say-on-pay proposal.

4. Gender Pay Equity: Glass Lewis will review on a case-by-case basis proposals that request that companies disclose their median gender pay ratios (as opposed to proposals asking that such information be adjusted based on factors such as job title, tenure, and geography). In instances where companies have provided sufficient information concerning their diversity initiatives – as well as information concerning how they are ensuring that women and men are paid equally for equal work – it will typically recommend against these resolutions.

5. Other Clarifications: The Guidelines define situations where Glass Lewis reports on post-fiscal year end compensation decisions (pg. 31), sets expectations for disclosure of mid-year adjustments to STI plans (pg. 33-34) and enhances the discussion of excessively broad definitions of “change in control” in employment agreements (pg. 36).