Conformément à l'impulsion mondiale en faveur d'une plus grande diversité et inclusion au sein de la direction des sociétés, Glass Lewis a récemment publié ses lignes directrices sur le vote par procuration de 2021, qui ont été mises à jour en ce qui a trait notamment à la diversité de genre au sein des conseils et au renouvellement des conseils.
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In line with a global push towards greater diversity and inclusion in corporate leadership, Glass Lewis' recently published Proxy Voting Guidelines for 2021 update policies with respect to board gender diversity and board refreshment, among other things.
- Glass Lewis will generally recommend voting against a chair of a nominating committee where the board has less than two female directors beginning in 2022, provided that the board has more than six members. For boards with six or less members, only one female member will be expected.
- Glass Lewis will generally recommend voting against a chair of a governance committee of a S&P/TSX 60 issuer who fails to provide explicit disclosure concerning the board's role in overseeing environmental and social issues beginning in 2022.
- Where the average tenure of non-executive directors is 10 years or more and no new independent directors have joined the board in the last five years, Glass Lewis will note the lack of board refreshment as a potential concern.
Board Gender Diversity
Currently, Glass Lewis will generally recommend withholding votes for the chair of a nominating committee where the board has no female members. Beginning with the upcoming 2021 proxy season, Glass Lewis will take a stronger stance with respect to women on boards where an issuer has less than two board members that are female by noting as a concern in 2021 and recommending withholding votes from the chair of the nominating committee in 2022. For boards with six or less members, Glass Lewis will only require that a board have one female member. However, consideration will be given to an issuer's disclosure regarding diversity considerations, targets and timelines. Where there is sufficient rationale or a disclosed plan to address a lack of diversity, Glass Lewis may refrain from a negative recommendation. What is interesting about Glass Lewis' approach to gender diversity on boards is that, while there is an accommodation for board comprised of less than 6 members, it has otherwise adopted an absolute number irrespective of the size of the board. This contrasts with the typical percentage threshold (generally 30%) that has been set by other investor advocacy groups like Institutional Shareholder Services (ISS) and other advocates for women in leadership like Catalyst and the 30% Club Canada.
Environmental and Social Risk Oversight and Disclosure
As we see investors push for greater and more transparent and standardized environmental, social and governance (ESG) disclosure, beginning in 2021, Glass Lewis will note as a concern when S&P/TSX 60 issuers do not provide clear disclosure regarding the board-level oversight of environmental and/or social issues. For meetings held after January 1, 2022, Glass Lewis will generally recommend voting against the governance chair of a S&P/TSX 60 issuer who fails to provide explicit disclosure concerning the board's role in overseeing environment and social matters.
As noted above, there is a broad push towards greater ESG accountability among Canadian public companies as evidenced by the recent announcement by the CEOs of eight leading Canadian pension plan investment managers calling for increased transparency from issuers with respect to ESG matters. In this respect, the pension plans have asked that issuers disclosure ESG data in a standardized way and specifically point to the Sustainability Accounting Standards Board (SASB) standards and the Task Force on Climate-related Financial Disclosures (TCFD) framework as models for standardizing ESG disclosure. While not limited to ESG disclosure, beginning in 2021, Glass Lewis will hold the chair of a governance committee responsible for poor disclosure standards. Included in this assessment will be the quality and clarity of CBCA-incorporated issuers' disclosure of the representation of "designated groups" at board and management level. This disclosure requirement came into force January 1, 2020 for all Canadian public companies.
Finally, Glass Lewis will take into account board and committee meeting frequency and attendance when providing its recommendations. In particular, Glass Lewis will begin recommending against a governance committee chair where (i) records for board and committee meeting attendance are not disclosed and (ii) the number of audit committee meetings that took place during the most recent year is not disclosed. Glass Lewis will also recommend against the audit committee chair if the audit committee did not meet at least four times during the year.
Board Refreshment and Composition
Beginning in 2021, Glass Lewis will note as a potential concern where the average tenure of non-executive directors is 10 years or more and no new independent directors have joined the board in the last five years, based upon Glass Lewis' own definition of independence. This will not automatically result in a negative recommendation; however, insufficient board refreshment will be considered in Glass Lewis' recommendations where additional board-related concerns are identified.
Among other board concerns, Glass Lewis may recommend voting against the chair of the nominating committee if a board has not addressed major issues of board composition, including the mix of skills and experience of the non-executive members of the board.
In 2021, Glass Lewis will increase its scrutiny over the level of professional expertise on audit committees. At least one member of the audit committee will be expected to have experience as a certified public accountant, CFO or corporate controller of similar experience or demonstrably meaningful experience overseeing such functions as senior executive officers. This is a higher threshold than the "financial literacy" requirement of NI 52-110 which considers a person to be financially literate if he or she has the ability to read and understand a set of financial statements that present a breadth and level of complexity of accounting issues that are generally comparable to the breadth and complexity of the issues that can reasonably be expected to be raised by the issuer's financial statements. For the 2021 proxy season, while Glass Lewis will flag concerns with audit committee members' professional experience, it but will not make a recommendation solely on this basis.
Other Updates for 2021 and Beyond
Additional updates to Glass Lewis' proxy voting policies include:
- Long Term Incentives. Glass Lewis has codified additional factors it will consider when reviewing long-term incentive plans, specifically defining inappropriate performance-based award allocation as a criterion which may, in the presence of other major concerns, contribute to a negative recommendation. Glass Lewis is of the opinion that a significant portion of long-term incentive grants should consist of performance-based awards and roll-backs or elimination of such awards will be reviewed as a regression of best practices.
- Exclusive Forum Provisions. Like ISS, Glass Lewis will generally recommend against a bylaw or article amendment seeking to adopt exclusive forum provisions unless the issuer (i) provides a compelling argument on why the provision would directly benefit shareholders, (ii) provides evidence of abuse of legal process in other non-favoured jurisdictions, (iii) narrowly tailors such provision to the risks involved, and (iv) maintains a strong record of good corporate governance practices.
- Independence Classification. Glass Lewis has clarified its independence classification to provide that employees of significant shareholders (20%) and explicit designees (being directors who explicitly serve as executives or director representatives of such significant shareholders) will be considered to be affiliated and therefore not independent.
- Option Repricing. Glass Lewis will generally recommend against proposals seeking to reprice employee or director options. However, under certain circumstances such repricing may be considered acceptable.
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