The Advisors' Blog

This blog features wisdom from respected compensation consultants and lawyers

November 17, 2021

Glass Lewis ’22 Voting Guidelines: Robust Disclosures Are Key for E&S Metrics and Incentives

On Monday, Glass Lewis announced the publication of its 2022 Policy Guidelines.  As always, the first few pages of the Guidelines summarize the policy changes for 2022. This year’s changes seem to focus largely on diversity and SPAC governance, but Glass Lewis clarified its existing policies on several compensation topics, including:

Linking Executive Pay to Environmental & Social Criteria: We have outlined our current approach to the use of E&S metrics in the variable incentive programs for named executive officers. Glass Lewis highlights the use of E&S metrics in our analysis of the advisory vote on executive compensation. However, Glass Lewis does not maintain a policy on the inclusion of such metrics or whether these metrics should be used in either a company’s short- or long-term incentive program. As with other types of metrics, where E&S metrics are included, as determined by the company, we expect robust disclosure on the metrics selected, the rigor of performance targets, and the determination of corresponding payout opportunities. For qualitative E&S metrics, the company should provide shareholders with a thorough understanding of how these metrics will be or were assessed.

Short- and Long-Term Incentives: Our guidance related to Glass Lewis’ analysis of the short-term incentive awards has been clarified to note that Glass Lewis will consider adjustments to GAAP financial results in its assessment of the incentive’s effectiveness at tying executive pay to performance. As with the short-term incentive awards, our analysis of long-term incentive grants also considers the basis for any adjustments to metrics or results. Thus, clear disclosure from companies is equally important for long-term incentive awards.

Grants of Front-Loaded Awards: We have clarified our guidance related to Glass Lewis’ analysis of so-called front-loaded incentive awards. Specifically, while we continue to examine the quantum of award on an annualized basis for the full vesting period of the awards, Glass Lewis also considers the impact of the overall size of awards on dilution of shareholder wealth.

We’re posting memos in our “Proxy Advisors” Practice Area to get you up to speed on what you need to know for the 2022 proxy season.

– Emily Sacks-Wilner