Just a week after fellow proxy advisor ISS, Glass Lewis have released their updates to their respective Canadian proxy voting guidelines for the upcoming 2018 proxy season.

Key Policy Highlights

• Board Diversity: When there was some concern regarding a boards lack of diverse director nominees, Glass Lewis has previously noted that concern in their report but had not issued a withhold recommendation on board members based on this reason alone. Glass Lewis will take that one step further next year and consider the lack of the boards diversity when evaluating the boards overall oversight structure. In 2019, Glass Lewis will generally recommend withholding on the chair of the nominating committee that has no female members or no formal written diversity policy. In addition, they may recommend a withhold vote on other nominating committee members after taking into account the size of the company, industry and overall governance profile. Before making their recommendation, Glass Lewis will review diversity considerations disclosure and may refrain from a withhold recommendation for directors of companies outside the S&P/TSX Composite index, or when boards have provided a sufficient rationale for not having any female board members, or have disclosed a plan to address the lack of diversity on the board.
• Virtual Shareholder Meetings: While acknowledging the benefits of a virtual shareholder meeting combined with a traditional in person shareholder meeting, Glass Lewis expressed concern that virtual-only meetings have the potential to curb the ability of a company’s shareholders to meaningfully communicate with the company’s management. Glass Lewis will not be making recommendations to withhold on the governance committee based solely a virtual only shareholder meeting in 2018, however they will be looking closely at the disclosure when assessing the governance profile of an issuer. When analyzing the governance profile of companies that choose to hold virtual-only meetings, they will be looking for assures to shareholders that they will be afforded the same rights and opportunities to participate as they would at an in-person meeting. However, in 2019, Glass Lewis will generally recommend against the members of the governance committees that do not have sufficient disclosure and assurance regarding these rights and opportunities.
• Overboarding: There is no change to the number of boards that directors can serve, however, Glass Lewis has clarified their approach to evaluating outside commitments of directors who serve in executive roles other than CEO (e.g., executive chair). When determining whether to apply the limit of two total board memberships for public executives, Glass Lewis will evaluate the specific duties and responsibilities of the executive’s role in addition to the company’s disclosure regarding that director’s time commitments.
• Board Responsiveness: In instances where 20% or more votes are received against management’s recommended vote, Glass Lewis expects to see engagement and responsiveness because of the expressed shareholder concern. It is important to note for dual class structure issuer, Glass will examine the level of disapproval from unaffiliated shareholders when determining boards responsiveness to shareholders.

Recommendations from proxy advisory firms such as ISS and Glass Lewis can have a significant impact on the voting outcome of business conducted at shareholder meetings. Canadian public companies should review the updates with their legal counsel or proxy solicitor to determine the impact and try to mitigate any potential adverse voting as a result of these policies.