Proxy Adviser Glass Lewis Sends Warning to Womenless Boards

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By Andrea Vittorio

Glass, Lewis & Co. has warned corporate boards without any women that it’s going to tell investors not to vote for them in 2019 as part of a Nov. 22 update to its U.S. guidelines.

The guidelines say it won’t make voting recommendations based solely on board diversity in 2018. But for annual shareholder meetings held on or after Jan. 1, 2019, the proxy adviser will generally recommend votes against directors responsible for nominating new members if they don’t explain their lack of gender diversity or their plan to address it.

Some of the world’s largest investors, such as BlackRock Inc. and State Street Corp., have already started putting their votes behind calls for more women on boards. Women hold about one-fifth of all board seats in the S&P 500 index today, according to data from fellow proxy adviser Institutional Shareholder Services Inc.

“Many institutional investors take a much more aggressive approach,” Kern McPherson, senior director of Glass Lewis’s North American research, told Bloomberg Law. But he said Glass Lewis usually waits a year before issuing ‘against’ recommendations to give companies time to respond.

Other Updates

ISS said recently that its reports will call out companies with all-male boards. But, like Glass Lewis, it won’t factor a lack of gender diversity into director voting recommendations at companies’ next round of annual meetings, at least not in the U.S. Having no female directors will be taken into account in Canada.

Another topic added to Glass Lewis’s guidelines: soon-to-be-reported ratios comparing a chief executive’s pay to that of rank-and-file workers. These ratios, which companies must disclose for the first time in 2018, will be factored in when Glass Lewis assesses a company’s pay practices but won’t be a deciding factor in its voting recommendations, it said. The ratio’s utility to shareholders is one of the main points of contention around the reporting requirement, which was folded into the post-financial crisis Dodd-Frank Act.

The updated Glass Lewis guidelines also touch on the small but growing number of companies that meet with their shareholders virtually each year. In 2019, it will advise votes against members of a board’s governance committee at companies that hold virtual-only meetings without assuring shareholders that they will be afforded “the same rights and opportunities to participate” as they would at an in-person meeting.

A proxy adviser’s recommendation against company management can swing votes on directors and executive pay by anywhere from 6 to 25 percentage points, according to a government review of recent studies.

To contact the reporter on this story: Andrea Vittorio in Washington at avittorio@bloomberglaw.com

To contact the editor responsible for this story: Yin Wilczek at ywilczek@bloomberglaw.com

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