Category Glass Lewis

Equilar announced that companies may now submit their peer groups through December 31, 2016.  Equilar recommends companies that will file their proxies between January 15, 2017 and July 15, 2017 submit their peer groups.  The company peer groups will be used to create the company’s 2017 Equilar Market Peers™.

As a reminder, the Equilar Market Peers are used by Glass Lewis when it generates its say on pay vote recommendations.

Companies may submit their updated peer groups at: https://insight.equilar.com/app/peer_update/

Equilar’s FAQs on its peer group submission process and how the Equilar Market Peers may differ from the Glass Lewis Market Peers powered by Equilar can be found at: https://insight.equilar.com/app/peer_update/peer_update_faq.jsp

On November 18, 2016, Glass Lewis announced that it had released updated 2017 proxy voting guidelines for several countries and that updated guidelines for other countries would be released over the next few weeks. The announcement can be found at: http://www.glasslewis.com/2017-proxy-season-asian-guidelines-available/

The countries that Glass Lewis released updated proxy voting guidelines for initially were:

• United States: http://www.glasslewis.com/wp-content/uploads/2016/11/2017_Guideline_US.pdf 
• Canada: http://www.glasslewis.com/wp-content/uploads/2016/11/2017_Guideline_Canada.pdf
• Korea
• Singapore
• Indonesia
• Thailand
• Philippines
• Malaysia

Glass Lewis identified the following key areas for changes in the US 2017 proxy voting guidelines (none related to compensation):

• Evaluating director commitments
• Governance following an IPO or spin-off
• Board evaluation and refreshment

And these were the key areas for Canada:

• Evaluating director commitments
• Board responsiveness to a failed advisory vote
• Equity compensation plans
• Shareholder rights plans

ISS and Equilar both recently opened up their peer group submission periods. This will enable companies to update the peer groups that they will report in their next proxy statement to ensure that these groups are reflected in both ISS’s and Equilar’s records (Note: Equilar uses this information to determine the Equilar Market Peer Group that is used by Glass Lewiss in its pay for performance analysis and the proxy voting groups of a number of institutional shareholders).

ISS’s peer group submission runs from 9 am EST on Tuesday, November 24th until 8 PM EST on Friday December 11th.

• Only companies with shareholder meetings between February 1, 2016 and September 16, 2016 are invited to participate.
• For the first time ISS will include companies in the Russell MicroCap Index.
• Only companies that have made changes to their peer groups (from the peer groups disclosed in their last proxy) need to submit information to ISS
• Peers submitted should be the peers used to set compensation for the fiscal year that will be disclosed in the next proxy.
• Companies can begin the peer group submission process at: ISS Peer Group Submission
• Companies submitting new peer companies must follow-up their submissions with a letter on company letterhead (in PDF) with the full list of peers submitted online.

Equilar’s peer group update window runs from November 16th through December 31st.

• The peer group update is recommended for companies that file proxy statements between January 15, 2016 and July 15, 2016.
• More information about the Equilar peer group validation process can be found here: Equilar Peer Group Validation
• Equilar has also published a FAQ on its Peer Group Update process, available at: Equilar Peer Group Update FAQ

Both ISS and Glass Lewis have issued their 2016 policy updates.  Glass Lewis issued its 2016 policy with little fanfare in early November and ISS issued its updated policies for 2016 on November 20, 2015.  Links to both firms’ 2016 policies are as follows:

• Glass Lewis’ Proxy Paper Guidelines, 2016 Proxy Season: http://www.glasslewis.com/assets/uploads/2015/11/GUIDELINES_United_States_20161.pdf
• ISS’ Americas Proxy Voting Guidelines Updates, 2016 Benchmark Policy Recommendations: http://www.issgovernance.com/file/policy/2016-americas-policy-updates.pdf

ISS at the same time issued an updated FAQ on its Equity Plan Scorecard (EPSC) Policy: 2016 U.S. Equity Plan Scorecard, Frequently Asked Questions: http://www.issgovernance.com/file/policy/faq-on-iss-us-equity-plan-scorecard-methodology.pdf

The ISS policy updates and FAQs apply to shareholder meetings held on or after February 1, 2016.

Taking a look at the specific policy updates of each for 2016 concerned with compensation, we see the following:

Glass Lewis

Glass Lewis now indicates that if it identifies egregious compensation practices, it may not only recommend against the Say-on-Pay vote but also recommend against the compensation committee based on the practices or actions of the committee during the year. Glass Lewis identifies as possible egregious practices: large one-off payments; the inappropriate, unjustified use of discretion; or, sustained poor pay performance practices.

ISS

ISS’ 2016 policy updates did not directly impact the majority of its compensation policies. Of note is that ISS did revise its policy with respect to compensation-related votes at externally-managed issuers. Now, ISS will generally recommend against the Say-on-Pay proposal where there is an external management structure in place and there is insufficient detail in the company’s disclosures for ISS to perform a comprehensive pay-for-performance analysis. ISS also changed the way ti will approach shareholder proposals to adopt holding periods and will now “strongly consider retention ratio and holding period duration among several other factors.”

In regard to directors, ISS also modified its policy with respect to overboarding. ISS is providing a 1-year transition period for companies to comply with the new overboarding policy and will only issue “warnings” in its proxy reports.  After that period, ISS will issue negative vote recommendations on directors who are not public company CEOs and who sit on more than five (5) public company boards. ISS will issue such negative vote recommendations until the director sits on five (5) or fewer public company boards. ISS decided not to further restrict the number of boards on which an acting CEO can sit (Sitting CEOs will not be overboarded unless they sit on more than three public company boards–their own board and up to two (2) other public company boards).