On November 14, 2024, Glass Lewis (GL) published updates to its U.S. benchmark proxy voting policies. The new policies are applicable to all U.S. company meetings held on or after January 1, 2025.

The 2025 Benchmark Policy Guidelines, including a summary of the 2025 changes are available on GL’s website.

Glass Lewis has made few revisions this year. The updates are summarized below:

Board Oversight of Artificial Intelligence (AI)

In light of the rapid development and use of AI technologies by the companies, Glass Lewis has adopted a new policy on the artificial intelligence (AI)-related risk oversight. In cases where there is harm to shareholders because of insufficient oversight and/or management of AI technologies, Glass Lewis may recommend against responsible directors if it finds that board’s oversight, response or disclosure to the AI-related issues is insufficient. However, if there are no material incidents causing harm to shareholders, Glass Lewis will not recommend against directors even if board’s oversight or company’s disclosure related to AI issues is lacking.

‘Change In Control’ Provisions

As part of its Say-on-Pay guidelines, Glass Lewis has included additional language under the ‘change in control’ section. For companies where the compensation committee has discretion in the treatment of unvested awards, Glass Lewis would like to see disclosure as to how such awards will be treated in case a ‘change in control’ were to occur.

Board Responsiveness to Shareholder Proposals

Glass Lewis’ current policy expects board responsiveness in case of a majority supported shareholder proposal. Under its updated policy, Glass Lewis now also expects an initial level of responsiveness in case a shareholder proposal receives significant support - generally considered to be more than 30% but less than majority of votes cast. Glass Lewis would like the company to engage with its shareholders and to provide disclosure on its outreach initiatives and response to shareholders’ concerns on the issue. Although Glass Lewis does not specify what action it might take in case of a board’s non-responsiveness, we expect that any unfavorable recommendation would likely depend on the severity and history of the issue and the level of shareholder support.

Reincorporation

Glass Lewis has revised its policy language to clarify that it analyzes reincorporation proposals to a different state or country on a case-by-case basis. Its review includes the changes in corporate governance provisions especially those relating to shareholder rights, material differences in corporate statutes and legal precedents, and relevant financial benefits, among other factors. In its updated policy, Glass Lewis has provided an illustrative list of factors that it would closely examine to assess the change in shareholder rights, such as:

  • Will shareholders gain the right to a call special meeting or act by written consent?
  • Will shareholders have the ability to remove directors?
  • Does the new jurisdiction allow for director and officer exculpation and/or exclusive forum provisions?
  • Is the new jurisdiction considered to be a tax haven?

In addition, Glass Lewis would also examine the overall governance provisions of the company. Some of the governance provisions that Glass Lewis mentions are:

  • Has the board been previously unresponsive to shareholders?
  • Does the company have an independent chair?
  • Is the board sufficiently independent?
  • How is the company’s performance relative to peers?
  • Where does the company rank in Glass Lewis’ pay-for-performance analysis?

Approach to Executive Pay Program

Glass Lewis has added language to clarify that it analyzes say-on-pay proposals on a case-by-case basis. In its policy discussion, Glass Lewis now mentions that it reviews all factors related to named executive officers’ compensation, including quantitative analysis, structural features, pay policies, quality of disclosure and pay trajectory. To further emphasize its holistic approach, Glass Lewis states that except in cases of egregious pay decisions and practices, no singular factor is likely to lead to an unfavorable recommendation.