Glass Lewis Releases 2017 Proxy Guidelines

Practical Law Legal Update w-004-6285 (Approx. 4 pages)

Glass Lewis Releases 2017 Proxy Guidelines

by Practical Law Corporate & Securities

Director Overboarding

The 2017 guidelines codify the director overboarding policy outlined in the 2016 guidelines. In 2017, Glass Lewis will generally recommend voting against any director who either:

Serves as an executive officer of any public company while serving on a total of more than two public company boards.
Serves on a total of more than five public company boards.

Glass Lewis may consider the following factors when determining whether a director's service on an excessive number of boards may limit the ability of that director to devote sufficient time to board duties:

Size and location of the other companies where the director serves on the board.
The director's board duties at the companies in question.
Whether the director serves on the board of any large privately-held companies.
The director's tenure on the boards in question.
The director's attendance record at all companies.

Glass Lewis may also refrain from recommending against a director if the company provides sufficient rationale for the director's continued board service. The rationale should allow shareholders to evaluate:

The scope of the director's other commitments.
The director's contributions to the board, including:
- the director's specialized knowledge of the company's industry, strategy, or key markets;
- the diversity of skills, perspective, and background that the director provides; and
- other relevant factors.

Because it believes that executives will primarily devote their attention to executive duties, Glass Lewis generally will not recommend that shareholders vote against overcommitted directors at the companies where they serve as an executive.

Corporate Governance Following an IPO or Spin-Off

Glass Lewis has clarified its approach to corporate governance at newly-public entities, such as companies that have recently undergone an IPO or spin-off. While it generally believes that these companies should be allowed adequate time to fully comply with marketplace listing requirements and meet basic governance standards, Glass Lewis will also review the terms of the company's governing documents to determine whether shareholder rights are being severely restricted from the outset.

If Glass Lewis believes the board has approved governing documents that significantly restrict the ability of shareholders to effect change, it will consider recommending that shareholders vote against the members of the corporate governance committee or the directors that served at the time the governing documents were adopted, depending on the severity of the concern.

The specific areas of governance that Glass Lewis will review are:

Anti-takeover mechanisms.
Supermajority vote requirements.
General shareholder rights, such as the ability of shareholders to remove directors and call special meetings.

For more information on the corporate governance committee, see Practice Note, Corporate Governance Standards: Nominating and Corporate Governance Committee.

Board Evaluation and Refreshment

Glass Lewis has clarified its approach to board evaluation, succession planning, and refreshment. It generally believes that a robust board evaluation process that is focused on the assessment and alignment of director skills with company strategy is more effective than solely relying on age or tenure limits.

Glass Lewis Releases 2017 Proxy Guidelines | Practical Law