CLS Blue Sky Blog

Cleary Gottlieb Discusses Updates to Proxy Adviser Guidelines

As 2018 draws to a close, both Institutional Shareholder Services Inc. (“ISS”) and Glass Lewis are in the process of updating their 2019 proxy voting guidelines.

In mid-October, ISS launched its 2019 benchmark voting policy consultation period, pursuant to which ISS solicits feedback on certain of its proposed voting policies for the upcoming proxy season.  This year, ISS requested comment on proposed policies for U.S. public companies related to board gender diversity and its pay-for-performance model, as described in greater detail below.  ISS plans to announce its final policy changes in mid-November.

In addition, Glass Lewis recently released its 2019 shareholder initiatives and proxy voting guidelines, which include the implementation of previously announced policies that were in grace periods, new policies and codifications and clarifications of previously existing approaches to issuing vote recommendations.[1]

A summary of notable executive compensation and governance updates is provided below.  The recent policy updates, and in particular the new Glass Lewis guidelines, are fairly extensive.  In preparing for the 2019 proxy season, U.S. public companies should consider the applicability of the new and proposed policies in light of their individual facts and circumstances.

ISS Proposed Policy Updates

New Glass Lewis 2019 Proxy Voting Guidelines

Executive Compensation Updates

Governance Updates

Glass Lewis framed the additional guidance in light of California’s Senate Bill 826, signed into law by California Governor Jerry Brown in September 2018. The bill requires all companies headquartered in the state to have one woman on their board by the end of 2019.  In addition, by the end of 2021, companies must have at least two women on boards of five members and at least three women on boards with six or more directors.  Accordingly, during the 2019 proxy season, if a company headquartered in California does not have at least one woman on its board, Glass Lewis will generally recommend voting against the chair of the nominating committee unless the company has disclosed a clear plan for how they intend to address this issue prior to the end of 2019.

More broadly, in its shareholder initiatives, Glass Lewis stated that it will generally support shareholder proposals requesting that companies provide disclosure concerning the diversity of their workforce, as well as those asking for details concerning how companies are promoting diversity within their workforce.

In addition, Glass Lewis may, in limited circumstances, recommend against the members of the governance committee in instances where Glass Lewis believes that the exclusion of any shareholder proposal (even where such exclusion is permitted by the SEC) was detrimental to shareholders.  This creates an interesting dynamic between SEC guidance and the influence of proxy advisory firms, and companies considering whether to seek SEC no-action relief on a particular shareholder proposal should be prepared to explain to their boards that a proposal excluded by the SEC may still be taken into consideration by Glass Lewis when making board voting recommendations for governance committee members.


[1] The guidelines are available at and the shareholder initiatives are available at

[2] Note, under ISS policies, if the board is classified and ISS would have recommended an against or withhold vote on a director not otherwise up for election, all of the directors up for election will receive such recommendation.

[3] The proposal is available at

[4] ISS defines Economic Value Added as a company’s Net Operating Profit After Tax less a “capital charge” (the cost to the company of providing an acceptable return to all capital providers).

[5] The proposal is available at

[6] It should be noted that in its shareholder initiatives, Glass Lewis indicated that in instances where a company has adopted a special meeting right of 15% or below and has adopted reasonable proxy access provisions, Glass Lewis will generally recommend that shareholders vote against shareholder proposals asking companies to adopt their bylaws to provide shareholders with the right to action by written consent.

This post comes to us from Cleary, Gottlieb, Steen & Hamilton LLP. It is based on the firm’s memorandum, “Recent Updates to Proxy Advisory Firm Guidelines,” dated November 1, 2018, and available here.

Exit mobile version