Glass Lewis recently released updates to its policies that govern recommendations to shareholders on a number of corporate governance matters. As relates specifically to compensation, such updates include:
- In assessing pay-for-performance, compensation plans that otherwise receive an unsatisfactory rating from Glass Lewis’ qualitative evaluation model may nevertheless receive a recommendation of approval from Glass Lewis if other factors presented outweigh the standard measurements. Such outweighing factors may include: effective overall incentive compensation structure; significant forthcoming enhancements to such structure; reasonable long-term payout levels; and the relevance of selected performance metrics.
- In the say-on-pay analysis, the new guidelines instruct shareholders to be wary of one-off awards although recognizing that there may be circumstances when existing compensation award programs are insufficient. One-off awards, in addition, should be tied to future service and performance when possible. In all cases, Glass Lewis again emphasizes disclosure by encouraging companies to explain why existing compensation programs are insufficient and how the one-off awards will affect the other, regular compensation programs already in place.
- Glass Lewis also provided a description of how it examines employee stock purchase plans (ESPPs)—using a quantitative model to estimate the cost of the plan by measuring the anticipated discount, purchase period and purchase activity—then comparing that cost to ESPPs at similar companies. Glass Lewis will generally support these plans assuming a purchase limit of $25,000 per employee per year.
The update also addressed governance aspects including board actions on bylaws, board implementation of majority-supported shareholder proposals, vote recommendations following an IPO and material transactions with directors. The full text of Glass Lewis’ guidelines can be found here.