The Advisors' Blog

This month last year, Glass Lewis announced that it will be moving away from “singularly-focused research and vote recommendations based on its house policy.” Last month, the proxy advisor announced that it has now opened a comment period on the four perspectives that will underpin its research beginning in September 2027 and is soliciting feedback from both institutional investor and corporate stakeholder groups. Pay Governance recently released a viewpoint regarding how this shift is likely to impact say-on-pay votes.

The four perspectives share a common compensation foundation. All perspectives maintain core expectations around reasonable pay levels, pay-for-performance alignment, disclosure quality, severance practices, incentive design, non-employee director pay programs, and other key governance topics.

The major differences among the models lie in how the perspectives may weigh performance, sustainability, and stakeholder outcomes. Business Fundamentals could treat top-quartile relative TSR as an explicit mitigating factor, allowing greater tolerance for higher pay or certain design features. Sustainability Focused may instead expect material sustainability considerations in performance measurement and assess whether pay outcomes align with the broader stakeholder experience. Thus, a company’s Say on Pay proposal may draw different recommendations—particularly when pay is high, relative TSR is strong, sustainability metrics are absent, or stakeholder and executive outcomes diverge [. . .]

The proposed Glass Lewis pivot on advisory reports changes the lens through which programs are viewed, but not the fundamentals. Compensation committees should continue to design pay to align with business strategy, performance, and long-term value creation, supported by rigorous governance and an investor-informed rationale. The best-positioned companies will not attempt to tailor their programs to each Glass Lewis perspective; rather, they will understand their shareholders and explain why their programs are right for their business.

It reiterates that this announcement is part of a broader trend where “investor policies—and not one proxy advisor standard—may increasingly drive voting decisions.” It also notes that pay disclosure may be fundamentally transformed by proposed and expected SEC rulemaking that could reduce and streamline required disclosures—and even make many more companies eligible for scaled disclosure and other accommodations, like omitting a say-on-pay proposal. This could raise the stakes for some companies (if investors voice their perspectives through “withhold” votes on compensation committee members, for example) and increase the need to provide more context and address more perspectives in your disclosures, even as disclosure requirements become less prescriptive.

– Meredith Ervine