Glass Lewis recently released its 2020 proxy voting guidelines and shareholder initiatives.[1]  The following is a summary of Glass Lewis’ proposed changes and updates for 2020.  Most significantly, the updated guidelines reflect a response to the Securities and Exchange Commission’s recent announcement that it may decline to take a view or may respond orally to no-action requests for shareholder proposals under Rule 14a-8 of the Exchange Act.[2]  Starting in 2020, Glass Lewis generally will recommend a vote against members of a company’s governance committee if a company omits a shareholder proposal from its proxy statement without evidence of receiving no-action relief from the SEC, as described in more detail below.

Governance Updates

Shareholder Proposal Related Policies

  • Risks for Companies in Unilaterally Excluding Shareholder Proposals. Glass Lewis generally will recommend voting against all members of a company’s governance committee where a company has requested no-action relief on a shareholder proposal from the SEC and either:
    • the SEC indicated that it declines to state a view as to the exclusion of such proposal and the company excludes the proposal from its proxy statement; or
    • the SEC has orally concurred with the company’s analysis and granted no-action relief without a written record of its determination and the company fails to provide disclosure regarding the receipt of such no-action relief in its proxy statement.

A company may legally exclude a shareholder proposal without a grant of no-action relief, and the SEC stated that the Staff’s decision to decline to state a view on a proposal should not be interpreted as a requirement that the company include the proposal in its proxy statement.  The new Glass Lewis policy has added another factor to consider in evaluating the potential risks of unilaterally excluding a shareholder proposal.  While the Staff has indicated that it will record the outcome of its oral responses on its website in some fashion, it is not clear how this will work in practice and whether this will be sufficient to satisfy Glass Lewis’ “written record” requirement.

  • Gender Pay Equity Shareholder Proposals. Glass Lewis will review on a case-by-case basis shareholder proposals that request a company to disclose median gender pay ratios, but in instances in which a company has already made sufficient disclosures of its diversity initiatives, as well as measures it is taking to ensure gender pay equity, Glass Lewis will generally recommend voting against such proposals.
  • Supermajority Voting Requirements. Glass Lewis is usually opposed to supermajority shareholder vote requirements.  However, in the case of controlled companies, Glass Lewis believes that supermajority voting provisions serve to protect the interests of minority shareholders.  Accordingly, Glass Lewis may recommend against shareholder proposals to eliminate supermajority voting requirements at controlled companies.
  • Excluding Shareholder Proposals Regarding Special Meeting Rights. Glass Lewis clarified that where a company includes a management proposal to ratify an existing special meeting right in order to exclude a shareholder proposal seeking a special meeting right that is materially different, it will generally recommend a vote against the chair or any member of the governance committee (as opposed to just the chair).

Other Governance Updates

  • Director Attendance. Glass Lewis will generally recommend voting against the governance committee chair when directors’ attendance records for board and committee meetings are not disclosed, or when a director attended less than 75% of such meetings, but the disclosure is so vague that it cannot be determined which specific director failed to attend.  Practically, this should have little effect for most companies given that Item 407(b) of Regulation S-K already requires companies to disclose the name of each director who attended less than 75% of board or committee meetings.
  • Audit Fee Disclosure. Glass Lewis will generally recommend voting against the audit committee chair when a company fails to disclose fees paid to the company’s external auditor.  Glass Lewis has indicated that it believes that disclosure of the balance of fees paid to the auditor for audit-related and non-audit services is fundamental to the ability of shareholders to make informed judgments regarding auditor independence.  As Item 9 of Schedule 14A requires companies to disclose both audit-related fees and non-audit-related fees billed in each of the last two fiscal years by the company’s auditor, the new policy may have little effect in practice.
  • Forum Selection Clauses. Glass Lewis will continue to consider recommending a vote against the chair of the governance committee in the year a board adopted a forum selection clause without a shareholder vote, but this year Glass Lewis has added some additional flexibility, noting that it would consider an exception to its policy by “evaluat[ing] the circumstances surrounding adoption” of the provision and whether it is sufficiently narrow or provides for a reasonable sunset period.

Executive Compensation Updates

Say on Pay Frequency

Glass Lewis has updated its compensation committee performance assessment, indicating that it will now recommend voting against all members of a company’s compensation committee when the board adopts a say on pay frequency vote that differs from the frequency approved by a plurality of shareholders.  While the vote is advisory in nature, Glass Lewis views a failure to implement the say on pay vote in accordance with the frequency approved by shareholders as an example of the board ignoring the clearly expressed will of shareholders.

Say on Pay

Glass Lewis indicated that in assessing a company’s executive compensation program, it would review significant changes or modifications, including post fiscal year-end changes and one time awards, particularly where such changes relate to issues material to Glass Lewis’ vote recommendations.  In addition, Glass Lewis clarified several other aspects of its analysis with respect to say on pay vote recommendations.

  • Responsiveness to Low Shareholder Support for Say on Pay. Glass Lewis clarified its position on company responsiveness to low levels of support for say on pay.  Where 20% or more of shareholders oppose a say on pay proposal, Glass Lewis believes the board should demonstrate some level of engagement with shareholders.  The 2020 policy update clarifies that the level of responsiveness should correlate with the magnitude of opposition, as well as the length of time for which opposition has existed.  Glass Lewis indicated that, in addition to engaging with large shareholders, an appropriate response would include “robust” disclosure of engagement activities and specific changes made in response to shareholder feedback.  If a company fails to adequately respond to low levels of shareholder support, Glass Lewis may recommend an against vote for say on pay.
  • Pay for Performance Analysis. Glass Lewis provided additional detail on its pay for performance model, indicating that compensation and performance are measured against a peer group of appropriate companies that may overlap with a company’s self-chosen peer group.  Companies that demonstrate a weaker link between pay for performance are more likely to receive a negative say on pay vote recommendation, but other qualitative factors such as overall incentive structure, significant forthcoming changes to the compensation program or reasonable long-term payout levels may mitigate concerns.
  • Amendments to Employment Agreements and Contractual Payments and Arrangements. Glass Lewis will view the failure to address problematic pay practices in materially amended employment agreements[3] as a missed opportunity to align company policies with best practices and may recommend against a say on pay vote in this circumstance.  Problematic pay practices include excessive change in control entitlements, modified single-trigger change in control entitlements, excise tax gross-ups and multi-year guaranteed awards.   

Furthermore, the 2020 guidelines include updates to the factors Glass Lewis considers when assessing contractual payments and arrangements.  Executive employment terms that may result in a negative say on pay vote recommendation include: (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 problematic practices in amended employment agreements, as described above.

  • Change in Control. Glass Lewis asserted its position that double-trigger change in control arrangements (i.e., those that require both a change in control and subsequent termination of employment) reflect best practices and that any arrangement that is not explicitly double-trigger may be considered single- or modified single-trigger and result in a negative say on pay vote recommendation.  Glass Lewis also explained its view that excessively broad definitions of change in control can result in an undeserved payout to executives, where a change in control justifying that payout has not actually taken place.
  • Short-Term Incentives. The 2020 policies clarify Glass Lewis’s position on short-term incentives, indicating that where a company applies “upward discretion” to a short-term incentive (e.g., by lowering performance goals mid-year or increasing potential payouts), Glass Lewis now expects detailed disclosure as to the reasoning behind, and necessity of, this decision.

If you have any questions or would like to discuss this further, please do not hesitate to reach out to your regular contacts at the firm.

[1] The Glass Lewis 2020 proxy voting guidelines are available at, and Glass Lewis’ 2020 shareholder initiatives are available at

[2] Available at

[3] Though not explicitly stated by Glass Lewis, it is likely that Glass Lewis would view failure to address these issues in employment agreements that automatically renew by their terms in the same manner.