April 10, 2020
In an apparent response to the SEC’s proposed rules on proxy advisory firms, Glass Lewis has announced that “unedited company feedback on its research will now be included with all its proxy research papers and delivered directly to the voting decision makers at every investor client.”
Proxy advisory process reform has been a top priority for the HR Policy Association and the Center On Executive Compensation. Glass Lewis' new approach is consistent with the Center On Executive Compensation’s 2018 recommendations to the SEC which were based on multiple Subscriber examples of not being able to address problematic reports. Our recommendations were ultimately included in the Commission’s proposed proxy advisory firm rules.
Companies will have up to seven days to provide Glass Lewis with feedback on their proxy report. Glass Lewis will republish the report with the company’s feedback and will notify investors that the feedback is available. Investors will be able to locate the feedback on the frontpage of the republished report.
Glass Lewis also committed to the following:
The policy does have drawbacks. It appears that companies will need to purchase their report in order to have the right to submit feedback. Further, while the move appears designed to get out in front of the rule, it does not include information on a company’s ability to fact-check and correct reports prior to publication.
Why is this important: The SEC has not finalized these rules, which would not be applicable until 2021 at the earliest. Glass Lewis' move may indicate that proxy advisors are anticipating requirements allowing companies to address errors and omissions. It may also indicate an effort by proxy advisors to head off the SEC's actions by arguing that the proposed rules are unnecessary as they are addressing concerns. ISS, the largest proxy advisor, has publicly opposed the proposed rules and has not published guidance on improvements to its proxy report process. The Center will continue to advocate for companies to have a fair voice in the proxy report process.