Enter to open, tab to navigate, enter to select
Glass Lewis Announces Views on Recent Proxy Access Developments
Practical Law Legal Update 6-598-1710 (Approx. 4 pages)
Glass Lewis Announces Views on Recent Proxy Access Developments
by Practical Law Corporate & Securities
| Published on 29 Jan 2015 • USA (National/Federal) |
Glass Lewis announced the approach it will take this proxy season following recent proxy access developments.
On January 28, 2015, Glass, Lewis & Co. (Glass Lewis) announced the approach it will take this proxy season following recent proxy access developments. The announcement came a week after the SEC's Division of Corporation Finance (Division) announced that it will express no views on the application of Exchange Act Rule 14a-8(i)(9) during the current proxy season (see Legal Update, SEC Division of Corporation Finance Suspends No-action Relief This Proxy Season on Conflicting Shareholder Proposals). Rule 14a-8(i)(9) allows companies to exclude from their proxy materials shareholder proposals that directly conflict with management proposals. The SEC's announcement reversed its original position that Whole Foods could rely on Rule 14a-8(i)(9) in excluding a shareholder proposal on proxy access because the company was submitting its own more restrictive proposal (see Legal Update, SEC Grants Whole Foods No-action Relief on its Exclusion of a Proxy Access Shareholder Proposal).
In the announcement, Glass Lewis indicated that it will continue to review each proxy access shareholder proposal, along with the company's response, on a case-by-case basis. Consistent with that approach, it will review a company's response to a proxy access shareholder proposal, including any alternative management proposal submitted to shareholders in place of or in addition to the shareholder proposal, based on the specific facts and circumstances of the company and its actions. Glass Lewis will analyze the reasonableness and proportionality of the company's response to the shareholder proposal, while bearing in mind that the Division will not express views on the application of Rule 14a-8(i)(9) this proxy season.
For alternate management proxy access proposals, Glass Lewis will:
- Evaluate whether a company's proposal varies materially from the shareholder proposal in minimum ownership threshold, minimum holding period and maximum number of nominees to determine whether the company's response is reasonable or would thwart the intent of the shareholder proposal. An example of a material difference would be establishing a minimum ownership threshold (or period) that is significantly higher (or longer) than that submitted by the shareholder, thereby rendering the provision all but unusable.
- Review the company's performance and overall governance profile, the board's independence, leadership, responsiveness to shareholders and oversight, the opportunities for shareholders to effect change (such as being able to call a special meeting), other difference in the terms of the competing proposals, the number, type and nature of the shareholders above the proposed threshold, and the nature of the proponent.
- Review the rationale provided by the company regarding its reaction to the shareholder proposal, including explanation for the difference in the terms of the management proposal and shareholder proposal. In limited cases, Glass Lewis may recommend against certain directors if the management proposal varies materially from the shareholder proposal without sufficient rationale.
Glass Lewis will also:
- Review all aspects of the shareholder proposal to ensure the terms are not overly prescriptive, do not introduce minimum ownership calculation methods open to abuse or would not impose undue or unnecessary burdens on the company or the board.
- Review the terms of a management proxy access proposal to ensure that provisions would not present overly burdensome hurdles such as excessive restrictions on shareholders working as a group that would by themselves, or coupled with restrictive rules regarding ownership size, length and number/percentage of directors, fundamentally vitiate the proxy access right.
To learn more about Rule 14a-8 shareholder proposals, see: