Skip to main content
Article | Executive Pay Memo North America

Proxy advisors announce updates for 2020 meetings 

Glass Lewis and ISS release updates focused on the impact of COVID-19 

Governance Advisory Services |Executive Compensation
COVID 19 Coronavirus

By Heather Marshall , Laura Elmore and Michael Biggane | April 10, 2020

Proxy advisors signal policy application guidelines around COVID-19, while Glass Lewis also announces expansion of its Report Feedback Statement program.

As proxy season activities ramp up amid a global pandemic, Glass Lewis and Institutional Shareholder Services (ISS) have each recently released updates for upcoming shareholder meetings, with both commenting on the impact of COVID-19 and their respective policy guidelines. Glass Lewis also issued a statement focused on research report feedback by issuers, a potential nod to SEC proposals from 2019.

Research report feedback

In 2019 the SEC released guidance on how proxy advisors conduct business with their institutional investor clients. The guidance covered areas including calls for greater insight into methodologies underpinning voting recommendations made by proxy advisors as well as when and how proxy advisors engage with companies. For a recap, see the October 2019 article “SEC guidance may change how companies interact with proxy advisors”.

This is perhaps the prompt for Glass Lewis’ April 2 announcement that it will allow companies meeting certain criteria to submit a Report Feedback Statement (RFS). The ability to submit an RFS is available globally for any annual or special meeting, and it will be distributed to investors as part of Glass Lewis’ proxy research report.

The RFS is not meant to report factual errors but will enable companies to respond directly to investors regarding Glass Lewis’ assessment of its proposals. Any RFS will be included fully unedited by Glass Lewis but may be rejected if it does not comply with Glass Lewis’ terms and conditions. Only companies directly purchasing Glass Lewis’ research papers will have the option to submit an RFS with no additional cost, as the price of the research includes the submission of one RFS. The deadline for a submission is seven days after report publication and no later than 14 days prior to the meeting.

The criteria required to submit an RFS (cited from Glass Lewis FAQs) are as follows:

  • Be a company or shareholder proposal proponent at an annual or general meeting of a company covered by Glass Lewis.
  • Disclose meeting materials at least 21 days prior to the relevant meeting.
  • Purchase the relevant research report directly from Glass Lewis.
  • Clearly identify the names of shareholder proponents in the company proxy for any shareholder proposals that are discussed in the RFS for the relevant meeting.
  • Accept the terms and conditions of the RFS.

Additional guidelines to consider for an RFS:

  • Legal counsel should ensure the submission meets all legal and regulatory requirements for disclosures.
  • Information included must be publicly available (e.g., filing, website) and accurate.
  • Statements should not “defame or disparage” Glass Lewis or its related parties.
  • The submission must be signed by an authorized executive and include contact information for potential follow-up from investors.

For more details, visit Glass Lewis’ Report Feedback Statement page at

Impact of COVID-19 on voting guidance

Both Glass Lewis and ISS have now issued public statements on COVID-19. While both spotlight compensation and governance related areas that will be impacted or scrutinized, there is no “direct” guidance on specific actions that will automatically result in negative voting recommendations. Our read of their statements indicates that both intend to apply judgment in reaching their recommendations based on the prevailing circumstances, as they have done historically.

Glass Lewis

While Glass Lewis had already updated its policy to indicate support for virtual meetings in the current COVID-19 environment, its public statement on March 26 addressed broader policy areas, noting it expects that all governance areas will be impacted, specifically:

  • Compensation program approaches
  • Balance sheet and capital management
  • Board composition and effectiveness
  • Activism and M&A
  • At-risk sectors
  • Shareholder proposals and environmental, social and governance factors

Focusing on compensation, Glass Lewis addresses areas that are likely to be negatively received, none of which are particularly surprising. At their core these center on the notion of making executives whole at the expense of shareholders and other employees. Examples of what this might look like include conserving capital while paying large bonuses, repricing options, adjusting performance hurdles and increasing the cost and dilution of future compensation.

Glass Lewis’ current analytical approach is essentially designed for just this type of circumstance. Its guidelines will be applied with appropriate discretion in a practical manner, taking into account each company’s context. It appears that Glass Lewis intends to rely on this feature of its guidance rather than updating its policies wholesale as we move through the year.

Critical to this will be the effective disclosure and rationale provided by companies regarding their decisions and decision-making processes, enabling Glass Lewis to effectively make informed voting recommendations. It is also indicated that past practices will come into play: “Companies with strong pay structures will be challenged to abide by them, and firms with less robust programs will be forced to choose between lying in the bed they’ve made or changing arrangements and all but guaranteeing shareholder ire.” This suggests that those that have a good track record for governance, performance and the use of discretion will be given more latitude than companies that do not.

Glass Lewis concludes its section on compensation by noting that “even those companies who project a ‘business as usual’ approach to executive pay will face opposition if employees and shareholders see their own paychecks cut.” This highlights the importance of compensation committees taking a broader perspective than perhaps they have in the past when reaching executive compensation decisions.


On April 8, ISS published its updated policy guidance for 2020 related to COVID-19 (the regular policy update process will be carried out as usual for 2021). Its guidance also covers a range of areas, including:

  • Shareholder meeting issues, such as postponements and virtual meetings
  • Poison pills, shareholder rights, and director attendance and changes
  • Compensation issues
  • Capital structure and payouts

Again, if we focus on the guidance related to compensation, ISS immediately recognizes the many unknown challenges that lie ahead. Its guidance emphasizes that it will rely on a “case-by-case” approach to its analysis, which highlights the importance of expansive and detailed disclosure.

The two core areas of compensation addressed relate to changes in incentive plan metrics, goals or targets, and the use of option repricing. In summary:

  • ISS anticipates that in the current environment boards are likely to announce plans to materially change aspects of the short-term incentive plans. Decisions and adjustments will be assessed at next year’s meetings, and boards are encouraged to disclose the rationale for making changes.
  • ISS’ existing benchmark voting policies are generally not supportive of changes to in-flight long-term incentive awards because they cover multiyear periods. These will be assessed on a case-by-case basis to determine whether committee discretion was used appropriately. Any new plans will be assessed within the existing ISS policy framework.
  • Guidance on option repricing highlights the importance of shareholder approval. If no shareholder approval is sought, ISS indicates that director actions will be subject to scrutiny, which we interpret to mean it may influence voting recommendations on director reelections.
  • ISS goes on to remind readers that in the U.S. it generally opposes any repricing that happens within one year of a precipitous drop in stock price. Factors examined in assessing proposals include whether: 1) the design is shareholder value-neutral, 2) options are not added back to plan reserve, 3) replacement awards do not vest immediately, and 4) executive officers and directors are excluded. ISS confirm that this approach and these factors remain appropriate in a COVID-19 context.

ISS also provides guidance on poison pills, which can have executive compensation features. As with option repricing, ISS encourages issuers to put these to shareholder vote. Those with a duration of less than one year will be considered on a case-by-case basis, taking into account the disclosed rationale and other relevant factors (e.g., commitment to put any future renewal to shareholder vote). It will be important for ISS to see evidence that directors have sought to appropriately protect shareholders from abusive bidders without inappropriately entrenching the existing board and management team.

Our perspective

While the guidance from Glass Lewis and ISS is not particularly definitive in terms of actions that will or will not result in a negative voting recommendation, companies can take comfort in the fact that both highlight an intent to take a pragmatic and informed approach based on individual circumstances. It should be expected that areas that have historically been a cause of concern to proxy advisors and investors, such as the lowering of performance goals, upward discretion and resetting performance requirements for awards already granted, will continue to be problematic in the current environment.

We also anticipate that in the spirit of the Glass Lewis guidance, institutional investors will be paying close attention to the notion of “equivalency” in treatment among investors, employees and executives. What does this mean? Investors may be less inclined to support companies taking what they perceive to be disproportionate actions to protect executives if returns are markedly down in absolute or relative terms; if dividends are reduced or scrapped; if dilution increases; or if there are significant furloughs, reductions in force or pay cuts for the broader workforce. It will be important for compensation committees to carefully and fairly balance these multiple perspectives in reaching difficult decisions on executive compensation.

What is clear is that companies will need to proactively address any actions taken in a clear and transparent manner in their Compensation Discussion and Analysis, providing the necessary perspective, context and confidence for shareholders to be able to support say-on-pay proposals.


Senior Director, Executive Compensation (New York)

Associate Director, Executive Compensation (Arlington)

Associate Director, Executive Compensation (Cincinnati)

Contact Us

Related Insights