Updated Glass Lewis Proxy Voting Guidelines

I previously blogged about certain compensation related updates to ISS’ proxy voting guidelines for 2020.  With proxy season in full swing, I wanted to highlight some important compensation related changes to the Glass Lewis 2020 voting guidelines, a full copy of which can be found here.

• Contractual Payments and Arrangements. In their 2020 guidelines, Glass Lewis clarifies its policy for say-on-pay proposals with respect to the analysis of both ongoing and new contractual payments and executive entitlements. In particular, Glass Lewis has provided a list of certain executive employment terms that may result in a negative say-on-pay vote recommendation, which includes, but is not limited to: (i) excessively broad change in control triggers; (ii) inappropriate severance entitlements; (iii) inadequately explained or excessive sign-on arrangements; (iv) guaranteed bonuses (especially multi-year guarantees); and (v) the failure to address any concerning practices in amended employment agreements.  With respect to (v), Glass Lewis views the failure to address these issues in renewed or revised agreements as “a missed opportunity to remedy shareholder un-friendly provisions” and “a missed opportunity on the part of the company to align its policies with current best practices.”
• Short-Term Incentive Plans and Upward Discretion. With respect to short-term incentive compensation, Glass Lewis has stated that if a company applies upward discretion, including lowering goals midyear or increasing calculated payouts, it expects a robust disclosure as to why the decision was necessary.
• Change in Control Clarification. The 2020 guidelines reiterate that Glass Lewis considers double-trigger change in control arrangements a best practice and that any arrangement that is not explicitly double-trigger may be considered a single-trigger or modified single-trigger arrangement.  The 2020 guidelines further clarify that excessively broad definitions of change in control are potentially problematic as they may lead to situations where an executive can receive additional compensation where no meaningful change in status or duties has occurred.