For more than a decade, the SEC has been wrestling with whether and how to regulate the activities of the proxy advisory firms – principally ISS and Glass Lewis – that have come to play such an important role in shareholder voting at U.S. public companies. On July 22, 2020, the SEC adopted rules and
Mary E. Alcock
ISS Issues Additional Voting Policy Guidance in Response to COVID-19 Pandemic
On April 8, Institutional Shareholder Services (“ISS”) published additional guidance on application of its benchmark voting policies amid the COVID-19 pandemic.[1] ISS had previously issued its 2020 benchmark policies update to be applied for shareholder meetings on or after February 1, 2020.[2] Noting the societal and economic uncertainty wrought by COVID-19 since its prior update, ISS provides further guidance focused on four key areas:
- Annual General Meeting (“AGM”) Issues;
- Poison Pills, Shareholder Rights and Boards/Directors;
- Compensation Issues; and
- Capital Structure and Payouts.
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Glass Lewis Expands Report Feedback Statement Service
On April 2, 2020, Glass Lewis announced the global expansion of its Report Feedback Statement (“RFS”) service.[1] This service operates separately from the process for companies reporting factual errors or omissions in a research report and instead focuses on differences of opinion, allowing companies and shareholder proposal proponents to respond directly to Glass Lewis’s research and recommendations.[2]
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Glass Lewis Revised Guideline Regarding Virtual Meetings for 2020 Proxy Season
Glass Lewis recently announced an update of its guidelines, which temporarily relaxes its standard policy against virtual meetings in light of COVID-19. The update provides that “[f]or companies opting to hold a virtual-only shareholder meeting during the 2020 proxy season (March 1, 2020 through June 30, 2020), [Glass Lewis] will generally refrain from recommending to vote against members of the governance committee on this basis, provided that the company discloses, at a minimum, its rationale for doing so, including citing COVID-19.”[1] This formal update of Glass-Lewis’s guidelines comes on the heels of statements by both Glass-Lewis and ISS indicating openness to relax their positions on virtual meetings, which we discussed here.
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UPDATE: Coronavirus & Virtual Annual Meetings
This is an updated version of our prior post to address a new guideline issued by Glass Lewis.
With rising concerns around the spread of COVID-19 (“coronavirus”) in the United States and globally, in order to mitigate health risks, many public companies may consider adding a virtual component to the format of their annual shareholder meetings. In the United States, state law generally governs the availability of a virtual meeting format. At the federal level, the SEC regulates the filing and mailing of proxy solicitation materials. While we have not seen direct guidance from state legislatures on virtual or hybrid meetings in the context of the coronavirus pandemic, on March 13, 2020, the SEC released guidance (“SEC Coronavirus Guidance”) addressing annual shareholder meetings[1] in light of recommendations by the Centers for Disease Control and Prevention (“CDC”) and other public health officials to cancel, or explicitly state policies that prohibit, large, in-person gatherings[2] in an effort to prevent the spread of coronavirus.[3] Set forth below are various considerations that a company should take into account when determining whether to move from an in-person to a virtual or hybrid[4] annual meeting
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Coronavirus & Postponing/Adjourning Annual Meetings
In light of the growing concern about COVID-19 (“coronavirus”) in the United States and globally, the U.S. Centers for Disease Control and Prevention (“CDC”) and other public health officials have recommended cancelling large, in-person gatherings for the next several weeks.[1] As a result, some companies may be considering, or may in the coming weeks need to consider, postponing the date of their shareholder meeting. While moving to a virtual or hybrid meeting, as discussed in our blog post, “Coronavirus & Virtual Annual Meetings,” may be a good solution for certain companies, other companies may determine (or due to a lack of vendor capacity may be forced to determine) that the better course of action for them is to postpone or adjourn their annual meetings.
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Who Are Your Section 162(m) “Covered Employees” After Mergers, Acquisitions and Other Transactions?
Section 162(m) of the Internal Revenue Code limits the deductibility of compensation paid by public companies to certain of their executives in any year to $1 million. The 2017 Tax Cuts and Job Act amended Section 162(m) to expand the number of executives at a public company whose compensation may be non-deductible by reason of…
ISS Updates its 2020 Proxy Voting Policies
A week after Glass Lewis issued its 2020 proxy voting guidelines,[1] Institutional Shareholder Services (ISS) released its final updates to its 2020 proxy voting policies. The updated policies will be applied to shareholder meetings beginning on February 1, 2020, and the changes to U.S. polices are summarized below.
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Glass Lewis Updates Its 2020 Proxy Voting Guidelines
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.
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In its Highly Anticipated Guidance on Proxy Advisory Firms, the SEC Proceeds With Caution
On August 21, the Securities and Exchange Commission (“SEC”) adopted (1) guidance on the proxy voting responsibilities of investment advisers under the Investment Advisers Act and related rules (the “Advisers Guidance”) and (2) interpretation and guidance on the applicability to proxy voting advice of the rules on proxy solicitation under the Securities Exchange Act (the “Solicitation Guidance”).
Continue Reading In its Highly Anticipated Guidance on Proxy Advisory Firms, the SEC Proceeds With Caution