Glass Lewis, a leading proxy advisory firm, recently announced enhancements to the performance metrics used in both its US and Canadian pay-for-performance (PFP) models and its US equity plan model. The current Glass Lewis PFP models assess the link between executive pay and company performance based on the following five metrics: Change in Operating Cash Flow, Change in Earnings Per Share, Total Shareholder Return, Return on Equity and Return on Assets.

Under the revised PFP models, Glass Lewis modified some of the aforementioned performance metrics for certain industries, with the goal of better reflecting how management, boards and analysts evaluate the operating performance of companies in these industries. The following changes became effective on February 2. 

  • Change in Operating Cash Flow has been replaced with Tangible Book Value Per Share Growth for companies in the bank, diversified financials and insurance sectors.
  • Change in Operating Cash Flow has been replaced with Growth in Funds From Operations for real estate investment trusts (REITs), with the exception of mortgage and specialized REITs.

Glass Lewis will also make the same changes to the performance metrics used in its US equity plan model. Glass Lewis anticipates that these changes will have minimal impact on the grades granted by PFP models and the pass/fail assessments under the equity plan model.

Glass Lewis’ announcement is available here.