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US Securities and Corporate Governance

Glass Lewis

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Don’t Forget! Refresher on Glass Lewis COVID-19-Related Guidance and ISS Compensation-Related FAQs

For companies knee deep in proxy statement drafting and 2021 executive compensation decisions, we recommend a quick refresher on Glass Lewis’ December 2020 Approach to Executive Compensation in the Context of the COVID-19 Pandemic and ISS’ October 2020 COVID-19-related compensation FAQs, as well as ISS’ more general December 2020 compensation-related FAQs and equity plan-related FAQs.  Highlights include:

Glass Lewis Approach to Executive Compensation in the Context of the COVID-19 Pandemic

Glass Lewis released this December 2020 guidance to illustrate how it will apply its executive compensation policies in 2021 in the wake of COVID-19.  Glass Lewis noted that the pandemic has not changed its approach to executive pay, which is a “pragmatic, contextual approach that applies in good times and bad.”  Some of the key topics covered are:

Pay-for-Performance Analysis.  Glass Lewis does not expect the macroeconomic climate to have a drastic impact on its pay-for-performance model and will continue to take a holistic approach when evaluating the alignment between executive pay and company performance within the context of the pay-for-performance model and the pandemic.

Say-on-Pay Proposals.  Glass Lewis notes that how companies respond to changing macroeconomic conditions resulting from the pandemic will dominate say-on-pay votes.  Given that an executive’s base salary represents a relatively low portion of his or her total compensation, Glass Lewis will view temporary base salary reductions in the face of the pandemic to be token gestures.  Glass Lewis will instead look closely at overall pay levels, including scrutinizing mid-cycle pay

Prospects Dim for In-Person Meetings in 2021: Glass Lewis Provides Updated Hybrid/Virtual Approach

As we approach our 11th month of COVID-19 restrictions, the pandemic continues to evolve with new variants, while vaccination efforts move forward at a snail’s pace because of limited supplies in many states.  Many hoped for a return to normalcy in 2021, yet the prospects for in-person meetings in the spring seem unclear, if not dim.

Companies and boards grapple with whether it is still feasible to plan for an in-person only meeting or whether they should instead plan in advance for a hybrid or virtual-only meeting.  For many, the prudent course may be to plan in the ordinary course for a hybrid or virtual stockholder meeting, rather than making a last-minute change based on outdated SEC guidance issued during the 2020 proxy season.

While the SEC has not yet provided new guidance for the 2021 proxy season, Glass Lewis on January 14, 2021, issued updated guidance for hybrid/virtual stockholder meetings.  Glass Lewis stated that it would provide reasonable deference to companies that are incorporated in jurisdictions with current restrictions on in-person gatherings and where no established legal framework exists for a virtual-only meeting at this time.  However, Glass Lewis firmly stated its belief that completely “closed-door” meetings without any form of virtual transmission or the formal ability for stockholders to ask questions and receive transparent answers before, during, and/or after the meeting should be avoided at all costs.

Expectations Regarding Meeting Format

Glass Lewis highlighted two benefits for holding hybrid/virtual meetings – namely cost savings to the company

Turning Up the Heat on Board Diversity and E & S Risk Oversight: Quick Guide to ISS and Glass Lewis 2021 Proxy Season Updates

Institutional Shareholder Services (“ISS”) and Glass Lewis recently released their respective policy updates for the 2021 proxy season.  Key updates are summarized below.

Glass Lewis’ 2020 Proxy Season Review: Boards Become Increasingly Younger

Glass Lewis (“GL”) recently issued its 2020 Proxy Season Review (U.S.) (the “Report”) covering the U.S. 2020 Proxy Season (i.e., January 1, 2020 through June 30, 2020).  GL reported on certain 2020 shareholder voting trends and results, as well as certain of GL’s voting recommendations.  The statistics and information included below (1) cover only a portion of the Report and (2) refer to the U.S. 2020 Proxy Season and to the U.S. companies covered by GL, unless otherwise indicated.

Governance and Disclosure

  • Boards are becoming increasingly younger; for example, for companies in the Russell 3000 Index (the “Russell 3000”), (1) the average age for new director nominees decreased to 54.8 years from 55.9 and 57.7 years in 2019 and 2018, respectively, and (2) the average age of all directors decreased to 61.2 years from 61.8 and 63.5 years in 2019 and 2018, respectively;
  • For Russell 3000 companies, the average tenure of men on boards decreased slightly to 12.4 years from 12.9 years in 2019, while the average tenure of women on such boards increased more significantly to 7.2 years from 6.0 years in 2019;
  • Approximately 13.2% of boards did not include women, which was reduced from 18.8% in 2019 and 26.2% in 2018;
  • The number of women in board leadership positions at Russell 3000 companies has increased each year during the past three years; however, women are more likely to serve as committee chairs rather than as board chairs, vice chairs or lead directors; men hold approximately 94.5% of chair
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