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	GLASS LEWIS

2025 Benchmark Policy Guidelines

www.glasslewis.com


2024 Benchmark Policy Guidelines — United States	2

Table of Contents

About Glass Lewis6

Guidelines Introduction7

Summary of Changes for 20257

Clarifying Amendments8

A Board of Directors that Serves Shareholder Interest9

Election of Directors9

Independence9

Committee Independence12

Independent Chair12

Performance14

Board Responsiveness15

Board Responsiveness to Shareholder Proposals16

The Role of a Committee Chair16

Audit Committees and Performance17

Standards for Assessing the Audit Committee17

Material Weaknesses20

Compensation Committee Performance21

Nominating and Governance Committee Performance23

Board-Level Risk Management Oversight26

Board Oversight of Environmental and Social Issues27

Board Oversight of Technology28

Board Accountability for Environmental and Social Performance30

Director Commitments31

Other Considerations32

Controlled Companies33

Significant Shareholders34

Governance Following an IPO, Spin-Off, or Direct Listing34

Governance Following a Business Combination with a Special Purpose Acquisition Company36

Dual-Listed or Foreign-Incorporated Companies36

OTC-listed Companies37


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Mutual Fund Boards37

Declassified Boards38

Board Composition and Refreshment39

Board Diversity40

Board Gender Diversity40

Board Underrepresented Community Diversity41

State Laws on Diversity41

Disclosure of Director Diversity and Skills42

Stock Exchange Diversity Disclosure Requirements43

Proxy Access42

Majority Vote for Election of Directors43

The Plurality Vote Standard43

Advantages of a Majority Vote Standard43

Conflicting and Excluded Proposals44

Transparency and Integrity in Financial Reporting45

Auditor Ratification46

Voting Recommendations on Auditor Ratification47

Pension Accounting Issues48

The Link Between Compensation and Performance49

Advisory Vote on Executive Compensation (Say-on-Pay)49

Say-on-Pay Voting Recommendations50

Company Responsiveness52

Pay for Performance52

Short-Term Incentives53

Long-Term Incentives55

Grants of Front-Loaded Awards56

Linking Executive Pay to Environmental and Social Criteria57

One-Time Awards58

Contractual Payments and Arrangements58

Sign-on Awards and Severance Benefits58

Change in Control59

Excise Tax Gross-ups59


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Amended Employment Agreements60

Recoupment Provisions (Clawbacks)60

Hedging of Stock60

Pledging of Stock61

Executive Ownership Guidelines61

Compensation Consultant Independence62

CEO Pay Ratio62

Frequency of Say-on-Pay62

Vote on Golden Parachute Arrangements63

Equity-Based Compensation Proposals63

Option Exchanges and Repricing65

Option Backdating, Spring-Loading and Bullet-Dodging65

Director Compensation Plans67

Employee Stock Purchase Plans67

Executive Compensation Tax Deductibility — Amendment to IRC 162(M)67

Governance Structure and the Shareholder Franchise69

Anti-Takeover Measures69

Poison Pills (Shareholder Rights Plans)69

NOL Poison Pills69

Fair Price Provisions71

Control Share Statutes71

Quorum Requirements72

Director and Officer Indemnification72

Officer Exculpation72

Reincorporation73

Exclusive Forum and Fee-Shifting Bylaw Provisions74

Authorized Shares75

Advance Notice Requirements76

Virtual Shareholder Meetings76

Voting Structure77

Multi-Class Share Structures77


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Cumulative Voting78

Supermajority Vote Requirements79

Transaction of Other Business79

Anti-Greenmail Proposals79

Mutual Funds: Investment Policies and Advisory Agreements79

Real Estate Investment Trusts80

Preferred Stock Issuances at REITs80

Business Development Companies80

Authorization to Sell Shares at a Price Below Net Asset Value81

Auditor Ratification and Below-NAV Issuances81

Special Purpose Acquisition Companies82

Extension of Business Combination Deadline82

SPAC Board Independence82

Director Commitments of SPAC Executives82

Shareholder Proposals83

Overall Approach to Environmental, Social & Governance Issues84

Connect with Glass Lewis86


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About Glass Lewis

Glass Lewis is the world’s choice for governance solutions. We enable institutional investors and publicly

listed companies to make informed decisions based on research and data. We cover 30,000+ meetings each

year, across approximately 100 global markets. Our team has been providing in-depth analysis of companies

since 2003, relying solely on publicly available information to inform its policies, research, and voting

recommendations.

Our customers include the majority of the world’s largest pension plans, mutual funds, and asset

managers, collectively managing over $40 trillion in assets. We have teams located across the United States,

Europe, and Asia-Pacific giving us global reach with a local perspective on the important governance issues.

Investors around the world depend on Glass Lewis’ Viewpoint platform to manage their proxy voting, policy

implementation, recordkeeping, and reporting. Our industry leading Proxy Paper product provides

comprehensive environmental, social, and governance research and voting recommendations weeks ahead of

voting deadlines. Public companies can also use our innovative Report Feedback Statement to deliver their

opinion on our proxy research directly to the voting decision makers at every investor client in time for voting

decisions to be made or changed.

The research team engages extensively with public companies, investors, regulators, and other industry

stakeholders to gain relevant context into the realities surrounding companies, sectors, and the market in

general. This enables us to provide the most comprehensive and pragmatic insights to our customers.

Join the Conversation

Glass Lewis is committed to ongoing engagement with all market participants.

info@glasslewis.com|www.glasslewis.com


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Guidelines Introduction

Summary of Changes for 2025

Glass Lewis evaluates these guidelines on an ongoing basis and formally updates them on an annual basis. This

year we’ve made noteworthy revisions in the following areas, which are summarized below but discussed in

greater detail in the relevant section of this document:

Update: 17 December 2024. We have removed our discussion on page 42 of stock exchange diversity disclosure

requirements.

Board Oversight of AI

We have included a new discussion on our approach to artificial intelligence (AI)-related risk oversight. In recent

years, companies have rapidly begun to develop and adopt uses for artificial intelligence (AI) technologies

throughout various aspects of their operations. Deployed and overseen effectively, AI technologies have the

potential to make companies’ operations and systems more efficient and productive. However, as the use of

these technologies has grown, so have the potential risks associated with companies’ development and use of

AI. Given these potential risks, the benchmark policy takes the view that boards should be cognizant of, and take

steps to mitigate exposure to, any material risks that could arise from their use or development of AI.

In the absence of material incidents related to a company’s use or management of AI-related issues, our

benchmark policy will generally not make voting recommendations on the basis of a company’s oversight of, or

disclosure concerning, AI-related issues. However, in instances where there is evidence that insufficient

oversight and/or management of AI technologies has resulted in material harm to shareholders, Glass Lewis will

review a company’s overall governance practices and identify which directors or board-level committees have

been charged with oversight of AI-related risks. We will also closely evaluate the board’s response to, and

management of, this issue as well as any associated disclosures and the benchmark policy may recommend

against appropriate directors should we find the board’s oversight, response or disclosure concerning AI-related

issues to be insufficient.

Change-In-Control Provisions

We have updated our discussion of change-in-control provisions in the section “The Link Between Compensation

and Performance” to define our benchmark policy view that companies that allow for committee discretion over

the treatment of unvested awards should commit to providing clear rationale for how such awards are treated

in the event a change in control occurs.


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Clarifying Amendments

The following clarifications of our existing policies are included this year:

Board Responsiveness to Shareholder Proposals

We have revised our discussion of board responsiveness to shareholder proposal to reflect that when

shareholder proposals receive significant shareholder support (generally more than 30% but less than majority

of votes cast), the benchmark policy generally takes the view that boards should engage with shareholders on

the issue and provide disclosure addressing shareholder concerns and outreach initiatives.

Reincorporation

We have revised our discussion on reincorporations to reflect that we review all proposals to reincorporate to a

different state or country on a case-by-case basis. Our review includes the changes in corporate governance

provisions, especially those relating to shareholder rights, material differences in corporate statutes and legal

precedents, and relevant financial benefits, among other factors, resulting from the change in domicile.

Approach to Executive Pay Program

We have provided some clarifying statements to the discussion of in the section titled “The Link Between

Compensation and Performance” to emphasize Glass Lewis’ holistic approach to analyzing executive

compensation programs. There are few program features that, on their own, lead to an unfavorable

recommendation from Glass Lewis for a say-on-pay proposal. Our analysis reviews pay programs on a case-by-

case basis. We do not utilize a pre-determined scorecard approach when considering individual features such as

the allocation of the long-term incentive between performance-based awards and time-based awards.

Unfavorable factors in a pay program are reviewed in the context of rationale, overall structure, overall

disclosure quality, the program’s ability to align executive pay with performance and the shareholder experience

and the trajectory of the pay program resulting from changes introduced by the compensation committee.


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A Board of Directors that Serves Shareholder

Interest

Election of Directors

The purpose of Glass Lewis’ proxy research and advice is to facilitate shareholder voting in favor of governance

structures that will drive performance, create shareholder value and maintain a proper tone at the top. Glass

Lewis looks for talented boards with a record of protecting shareholders and delivering value over the medium-

and long-term. We believe that a board can best protect and enhance the interests of shareholders if it is

sufficiently independent, has a record of positive performance, and consists of individuals with diverse

backgrounds and a breadth and depth of relevant experience.

Independence

The independence of directors, or lack thereof, is ultimately demonstrated through the decisions they make. In

assessing the independence of directors, we will take into consideration, when appropriate, whether a director

has a track record indicative of making objective decisions. Likewise, when assessing the independence of

directors we will also examine when a director’s track record on multiple boards indicates a lack of objective

decision-making. Ultimately, we believe the determination of whether a director is independent or not must

take into consideration both compliance with the applicable independence listing requirements as well as

judgments made by the director.

We look at each director nominee to examine the director’s relationships with the company, the company’s

executives, and other directors. We do this to evaluate whether personal, familial, or financial relationships (not

including director compensation) may impact the director’s decisions. We believe that such relationships make it

difficult for a director to put shareholders’ interests above the director’s or the related party’s interests. We also

believe that a director who owns more than 20% of a company can exert disproportionate influence on the

board, and therefore believe such a director’s independence may be hampered, in particular when serving on

the audit committee.

Thus, we put directors into three categories based on an examination of the type of relationship they have with

the company:

Independent Director — An independent director has no material financial, familial or other current

relationships with the company, its executives, or other board members, except for board service and

standard fees paid for that service. Relationships that existed within three to five years1 before the

1 NASDAQ originally proposed a five-year look-back period but both it and the NYSE ultimately settled on a three-year look-

back prior to finalizing their rules. A five-year standard for former employment relationships is more appropriate, in our

view, because we believe that the unwinding of conflicting relationships between former management and board members

is more likely to be complete and final after five years. However, Glass Lewis does not apply the five-year look-back period

to directors who have previously served as executives of the company on an interim basis for less than one year.


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inquiry are usually considered “current” for purposes of this test. For material financial relationships

with the company, we apply a three-year look back, and for former employment relationships with the

company, we apply a five-year look back.

Affiliated Director — An affiliated director has, (or within the past three years, had) a material financial,

familial or other relationship with the company or its executives, but is not an employee of the

company.2 This includes directors whose employers have a material financial relationship with the

company.3 In addition, we view a director who either owns or controls 20% or more of the company’s

voting stock, or is an employee or affiliate of an entity that controls such amount, as an affiliate.4

We view 20% shareholders as affiliates because they typically have access to and involvement with the

management of a company that is fundamentally different from that of ordinary shareholders. More

importantly, 20% holders may have interests that diverge from those of ordinary holders, for reasons such as

the liquidity (or lack thereof) of their holdings, personal tax issues, etc.

Glass Lewis applies a three-year look back period to all directors who have an affiliation with the company other

than former employment, for which we apply a five-year look back.

Definition of “Material”: A material relationship is one in which the dollar value exceeds:

•$50,000 (or where no amount is disclosed) for directors who are paid for a service they have agreed

to perform for the company, outside of their service as a director, including professional or other

services. This threshold also applies to directors who are the majority or principal owner of a firm that

receives such payments; or

•$120,000 (or where no amount is disclosed) for those directors employed by a professional services firm

such as a law firm, investment bank, or consulting firm and the company pays the firm, not the

individual, for services.5 This dollar limit would also apply to charitable contributions to schools where a

2 If a company does not consider a non-employee director to be independent, Glass Lewis will classify that director as an

affiliate.

3 We allow a five-year grace period for former executives of the company or merged companies who have consulting

agreements with the surviving company. (We do not automatically recommend voting against directors in such cases for

the first five years.) If the consulting agreement persists after

this five-year grace period, we apply the materiality thresholds outlined in the definition of “material.”

4 This includes a director who serves on a board as a representative (as part of his or her basic responsibilities) of an

investment firm with greater than 20% ownership. However, while we will generally consider him/her to be affiliated, we

will not recommend voting against unless (i) the investment firm has disproportionate board representation or (ii) the

director serves on the audit committee.

5 We may deem such a transaction to be immaterial where the amount represents less than 1% of the firm’s annual

revenues and the board provides a compelling rationale as to why the director’s independence is not affected by the

relationship.


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board member is a professor; or charities where a director serves on the board or is an executive;6 and

any aircraft and real estate dealings between the company and the director’s firm; or

•1% of either company’s consolidated gross revenue for other business relationships (e.g., where the

director is an executive officer of a company that provides services or products to or receives services or

products from the company).7

Definition of “Familial” — Familial relationships include a person’s spouse, parents, children, siblings,

grandparents, uncles, aunts, cousins, nieces, nephews, in-laws, and anyone (other than domestic employees)

who shares such person’s home. A director is an affiliate if: i) he or she has a family member who is employed by

the company and receives more than $120,0008 in annual compensation; or, ii) he or she has a family member

who is employed by the company and the company does not disclose this individual’s compensation.

Definition of “Company” — A company includes any parent or subsidiary in a group with the company or any

entity that merged with, was acquired by, or acquired the company.

Inside Director — An inside director simultaneously serves as a director and as an employee of the

company. This category may include a board chair who acts as an employee of the company or is paid as

an employee of the company. In our view, an inside director who derives a greater amount of income as

a result of affiliated transactions with the company rather than through compensation paid by the

company (i.e., salary, bonus, etc. as a company employee) faces a conflict between making decisions

that are in the best interests of the company versus those in the director’s own best interests.

Therefore, we will recommend voting against such a director.

Additionally, we believe a director who is currently serving in an interim management position should be

considered an insider, while a director who previously served in an interim management position for less than

one year and is no longer serving in such capacity is considered independent. Moreover, a director who

previously served in an interim management position for over one year and is no longer serving in such capacity

is considered an affiliate for five years following the date of the director’s resignation or departure from the

interim management position.

Voting Recommendations on the Basis of Board Independence

Glass Lewis believes a board will be most effective in protecting shareholders’ interests if it is at least two-thirds

independent. We note that each of the Business Roundtable, the Conference Board, and the Council of

Institutional Investors advocates that two-thirds of the board be independent. Where more than one-third of

6 We will generally take into consideration the size and nature of such charitable entities in relation to the company’s size and

industry along with any other relevant factors such as the director’s role at the charity. However, unlike for other types of

related party transactions, Glass Lewis generally does not apply a look-back period to affiliated relationships involving

charitable contributions; if the relationship between the director and the school or charity ceases, or if the company

discontinues its donations to the entity, we will consider the director to be independent.

7 This includes cases where a director is employed by, or closely affiliated with, a private equity firm that profits from an

acquisition made by the company. Unless disclosure suggests otherwise, we presume the director is affiliated.

8 Pursuant to SEC rule Item 404 of Regulation S-K under the Securities Exchange Act, compensation exceeding $120,000 is

the minimum threshold deemed material for disclosure of transactions involving family members of directors.


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the members are affiliated or inside directors, we typically8 recommend voting against some of the inside and/or

affiliated directors in order to satisfy the two-thirds threshold.

In the case of a less than two-thirds independent board, Glass Lewis strongly supports the existence of a

presiding or lead director with authority to set the meeting agendas and to lead sessions outside the insider

chair’s presence.

In addition, we scrutinize avowedly “independent” chairs and lead directors. We believe that they should be

unquestionably independent, or the company should not tout them as such.

Committee Independence

We believe that only independent directors should serve on a company’s audit, compensation, nominating, and

governance committees.9 We typically recommend that shareholders vote against any affiliated or inside

director seeking appointment to an audit, compensation, nominating, or governance committee, or who has

served in that capacity in the past year.

Pursuant to Section 952 of the Dodd-Frank Act, as of January 11, 2013, the U.S. Securities and Exchange

Commission (SEC) approved new listing requirements for both the NYSE and NASDAQ which require that boards

apply enhanced standards of independence when making an affirmative determination of the independence of

compensation committee members. Specifically, when making this determination, in addition to the factors

considered when assessing general director independence, the board’s considerations must include: (i) the

source of compensation of the director, including any consulting, advisory or other compensatory fee paid by

the listed company to the director (the “Fees Factor”); and (ii) whether the director is affiliated with the listing

company, its subsidiaries, or affiliates of its subsidiaries (the “Affiliation Factor”).

Glass Lewis believes it is important for boards to consider these enhanced independence factors when assessing

compensation committee members. However, as discussed above in the section titled Independence, we apply

our own standards when assessing the independence of directors, and these standards also take into account

consulting and advisory fees paid to the director, as well as the director’s affiliations with the company and its

subsidiaries and affiliates. We may recommend voting against compensation committee members who are not

independent based on our standards.

Independent Chair

Glass Lewis believes that separating the roles of CEO (or, more rarely, another executive position) and chair

creates a better governance structure than a combined CEO/chair position. An executive manages the business

8 With a staggered board, if the affiliates or insiders that we believe should not be on the board are not up for election, we will

express our concern regarding those directors, but we will not recommend voting against the other affiliates or insiders who are

up for election just to achieve two-thirds independence. However, we will consider recommending voting against the directors

subject to our concern at their next election if the issue giving rise to the concern is not resolved.

9 We will recommend voting against an audit committee member who owns 20% or more of the company’s stock, and we

believe that there should be a maximum of one director (or no directors if the committee is composed of less than three

directors) who owns 20% or more of the company’s stock on the compensation, nominating, and governance committees.


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according to a course the board charts. Executives should report to the board regarding their performance in

achieving goals set by the board. This is needlessly complicated when a CEO chairs the board, since a CEO/chair

presumably will have a significant influence over the board.

While many companies have an independent lead or presiding director who performs many of the same

functions of an independent chair (e.g., setting the board meeting agenda), we do not believe this alternate

form of independent board leadership provides as robust protection for shareholders as an independent chair.

It can become difficult for a board to fulfill its role of overseer and policy setter when a CEO/chair controls the

agenda and the boardroom discussion. Such control can allow a CEO to have an entrenched position, leading to

longer-than-optimal terms, fewer checks on management, less scrutiny of the business operation, and

limitations on independent, shareholder-focused goal-setting by the board.

A CEO should set the strategic course for the company, with the board’s approval, and the board should enable

the CEO to carry out the CEO’s vision for accomplishing the board’s objectives. Failure to achieve the board’s

objectives should lead the board to replace that CEO with someone in whom the board has confidence.

Likewise, an independent chair can better oversee executives and set a pro-shareholder agenda without the

management conflicts that a CEO and other executive insiders often face. Such oversight and concern for

shareholders allows for a more proactive and effective board of directors that is better able to look out for the

interests of shareholders.

Further, it is the board’s responsibility to select a chief executive who can best serve a company and its

shareholders and to replace this person when his or her duties have not been appropriately fulfilled. Such a

replacement becomes more difficult and happens less frequently when the chief executive is also in the position

of overseeing the board.

Glass Lewis believes that the installation of an independent chair is almost always a positive step from a

corporate governance perspective and promotes the best interests of shareholders. Further, the presence of an

independent chair fosters the creation of a thoughtful and dynamic board, not dominated by the views of senior

management. Encouragingly, many companies appear to be moving in this direction — one study indicates that

only 10 percent of incoming CEOs in 2014 were awarded the chair title, versus 48 percent in 2002.10 Another

study finds that 53 percent of S&P 500 boards now separate the CEO and chair roles, up from 37 percent in

2009, although the same study found that only 34 percent of S&P 500 boards have truly independent chairs.11

We do not recommend that shareholders vote against CEOs who chair the board. However, we typically

recommend that our clients support separating the roles of chair and CEO whenever that question is posed in a

proxy (typically in the form of a shareholder proposal), as we believe that it is in the long-term best interests of

the company and its shareholders.

Further, where the company has neither an independent chair nor independent lead director, we will

recommend voting against the chair of the governance committee.

10 Ken Favaro, Per-Ola Karlsson and Gary L. Nelson. “The $112 Billion CEO Succession Problem.” (Strategy+Business, Issue 79,

Summer 2015).

11 Spencer Stuart Board Index, 2019, p. 6.


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Performance

The most crucial test of a board’s commitment to the company and its shareholders lies in the actions of the

board and its members. We look at the performance of these individuals as directors and executives of the

company and of other companies where they have served.

We find that a director’s past conduct is often indicative of future conduct and performance. We often find

directors with a history of overpaying executives or of serving on boards where avoidable disasters have

occurred serving on the boards of companies with similar problems. Glass Lewis has a proprietary database of

directors serving at over 8,000 of the most widely held U.S. companies. We use this database to track the

performance of directors across companies.

Voting Recommendations on the Basis of Performance

We typically recommend that shareholders vote against directors who have served on boards or as executives of

companies with records of poor performance, inadequate risk oversight, excessive compensation, audit- or

accounting-related issues, and/or other indicators of mismanagement or actions against the interests of

shareholders. We will reevaluate such directors based on, among other factors, the length of time passed since

the incident giving rise to the concern, shareholder support for the director, the severity of the issue, the

director’s role (e.g., committee membership), director tenure at the subject company, whether ethical lapses

accompanied the oversight lapse, and evidence of strong oversight at other companies.

Likewise, we examine the backgrounds of those who serve on key board committees to ensure that they have

the required skills and diverse backgrounds to make informed judgments about the subject matter for which the

committee is responsible.

We believe shareholders should avoid electing directors who have a record of not fulfilling their responsibilities

to shareholders at any company where they have held a board or executive position. We typically recommend

voting against:

•A director who fails to attend a minimum of 75% of board and applicable committee meetings,

calculated in the aggregate.12

•A director who belatedly filed a significant form(s) 4 or 5, or who has a pattern of late filings if the late

filing was the director’s fault (we look at these late filing situations on a case-by-case basis).

•A director who is also the CEO of a company where a serious and material restatement has occurred

after the CEO had previously certified the pre-restatement financial statements.

•A director who has received two against recommendations from Glass Lewis for identical reasons within

the prior year at different companies (the same situation must also apply at the company being

analyzed).

Furthermore, with consideration given to the company’s overall corporate governance, pay-for-performance

alignment and board responsiveness to shareholders, we may recommend voting against directors who served

12 However, where a director has served for less than one full year, we will typically not recommend voting against for failure to

attend 75% of meetings. Rather, we will note the poor attendance with a recommendation to track this issue going forward. We

will also refrain from recommending to vote against directors when the proxy discloses that the director missed the meetings

due to serious illness or other extenuating circumstances.


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throughout a period in which the company performed significantly worse than peers and the directors have not

taken reasonable steps to address the poor performance.

Board Responsiveness

Glass Lewis believes that boards should be responsive to shareholders when a significant percentage of

shareholders vote contrary to the recommendation of management, depending on the issue.

When 20% of more of shareholders vote contrary to management (which occurs when more than 20% of votes

on the proposal are cast as AGAINST and/or ABSTAIN), we believe that boards should engage with shareholders

on the issue and demonstrate some initial level of responsiveness. These include instances when 20% or more of

shareholders:

(i)withhold votes from (or vote against) a director nominee; or

(ii)vote against a management-sponsored proposal.

In our view, a 20% threshold is significant enough to warrant a close examination of the underlying issues and an

evaluation of whether the board responded appropriately following the vote, particularly in the case of a

compensation or director election proposal. While the 20% threshold alone will not automatically generate a

negative vote recommendation from Glass Lewis on a future proposal (e.g., to recommend against a director

nominee, against a say-on-pay proposal, etc.), it may be a contributing factor to our recommendation to vote

against management’s recommendation in the event we determine that the board did not respond

appropriately.

When a majority of shareholders vote contrary to management, we believe that boards should engage with

shareholders on the issue and provide a more robust response to fully address shareholder concerns. These

include instances when a majority or more of shareholders:

(i)withhold votes from (or vote against) a director nominee;

(ii)vote against a management-sponsored proposal;

At controlled companies and companies that have multi-class share structures with unequal voting rights, we

will carefully examine the level of approval or disapproval attributed to unaffiliated shareholders when

determining whether board responsiveness is warranted. In the case of companies that have multi-class share

structures with unequal voting rights, we will generally examine the level of approval or disapproval attributed

to unaffiliated shareholders on a “one share, one vote” basis. At controlled and multi-class companies, when at

least 20% or more of unaffiliated shareholders vote contrary to management, we believe that boards should

engage with shareholders and demonstrate some initial level of responsiveness, and when a majority or more of

unaffiliated shareholders vote contrary to management, we believe that boards should engage with

shareholders and provide a more robust response to address shareholder concerns.

As a general framework, our evaluation of board responsiveness involves a review of publicly available

disclosures (e.g., the proxy statement, annual report, 8-Ks, company website, etc.) released following the date of

the company’s last annual meeting up through the publication date of our most current Proxy Paper. Depending

on the specific issue, our focus typically includes, but is not limited to, the following:


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•At the board level, any changes in directorships, committee memberships, disclosure of related party

transactions, meeting attendance, or other responsibilities;

•Any revisions made to the company’s articles of incorporation, bylaws or other governance documents;

•Any press or news releases indicating changes in, or the adoption of, new company policies, business

practices or special reports; and

•Any modifications made to the design and structure of the company’s compensation program, as well as

an assessment of the company’s engagement with shareholders on compensation issues as discussed in

the Compensation Discussion & Analysis (CD&A), particularly following a material vote against a

company’s say-on-pay.

•Proxy statement disclosure discussing the board’s efforts to engage with shareholders and the actions

taken to address shareholder concerns.

Our Proxy Paper analysis will include a case-by-case assessment of the specific elements of board

responsiveness that we examined along with an explanation of how that assessment impacts our current voting

recommendations.

Board Responsiveness to Shareholder Proposals

Majority-Supported Shareholder Proposals

We expect clear action from the board when shareholder proposals receive support from a majority of votes

cast (excluding abstentions and broker non-votes). In our view, this may include fully implementing the request

of the shareholder proposal and/or engaging with shareholders on the issue and providing sufficient disclosures

to address shareholder concerns.

Significantly Supported Shareholder Proposals

When shareholder proposals receive significant support (generally more than 30% but less than majority of

votes cast), we believe an initial level of board responsiveness is warranted. In instances where a shareholder

proposal has received at least 30% shareholder support, we generally believe boards should engage with

shareholders on the issue and provide disclosure addressing shareholder concerns and outreach initiatives.

Further, as discussed above, at controlled companies and companies that have multi-class share structures with

unequal voting rights, we will carefully examine the level of approval or disapproval attributed to unaffiliated

shareholders when determining whether board responsiveness is warranted.

The Role of a Committee Chair

Glass Lewis believes that a designated committee chair maintains primary responsibility for the actions of his or

her respective committee. As such, many of our committee-specific voting recommendations are against the

applicable committee chair rather than the entire committee (depending on the seriousness of the issue). In

cases where the committee chair is not up for election due to a staggered board, and where we have identified

multiple concerns, we will generally recommend voting against other members of the committee who are up for

election, on a case-by-case basis.


2024 Benchmark Policy Guidelines — United States	17

In cases where we would ordinarily recommend voting against a committee chair but the chair is not specified,

we apply the following general rules, which apply throughout our guidelines:

•If there is no committee chair, we recommend voting against the longest-serving committee member or,

if the longest-serving committee member cannot be determined, the longest-serving board member

serving on the committee (i.e., in either case, the “senior director”); and

•If there is no committee chair, but multiple senior directors serving on the committee, we recommend

voting against both (or all) such senior directors.

In our view, companies should provide clear disclosure of which director is charged with overseeing each

committee. In cases where that simple framework is ignored and a reasonable analysis cannot determine which

committee member is the designated leader, we believe shareholder action against the longest serving

committee member(s) is warranted. Again, this only applies if we would ordinarily recommend voting against

the committee chair but there is either no such position or no designated director in such role.

Audit Committees and Performance

Audit committees play an integral role in overseeing the financial reporting process because stable capital

markets depend on reliable, transparent, and objective financial information to support an efficient and

effective capital market process. Audit committees play a vital role in providing this disclosure to shareholders.

When assessing an audit committee’s performance, we are aware that an audit committee does not prepare

financial statements, is not responsible for making the key judgments and assumptions that affect the financial

statements, and does not audit the numbers or the disclosures provided to investors. Rather, an audit

committee member monitors and oversees the process and procedures that management and auditors

perform. The 1999 Report and Recommendations of the Blue Ribbon Committee on Improving the Effectiveness

of Corporate Audit Committees stated it best:

A proper and well-functioning system exists, therefore, when the three main groups responsible for

financial reporting — the full board including the audit committee, financial management including the

internal auditors, and the outside auditors — form a ‘three legged stool’ that supports responsible

financial disclosure and active participatory oversight. However, in the view of the Committee, the audit

committee must be ‘first among equals’ in this process, since the audit committee is an extension of the

full board and hence the ultimate monitor of the process.

Standards for Assessing the Audit Committee

For an audit committee to function effectively on investors’ behalf, it must include members with sufficient

knowledge to diligently carry out their responsibilities. In its audit and accounting recommendations, the

Conference Board Commission on Public Trust and Private Enterprise said “members of the audit committee

must be independent and have both knowledge and experience in auditing financial matters.”13

13 Commission on Public Trust and Private Enterprise. The Conference Board. 2003.


2024 Benchmark Policy Guidelines — United States	18

We are skeptical of audit committees where there are members that lack expertise as a Certified Public

Accountant (CPA), Chief Financial Officer (CFO) or corporate controller, or similar experience. While we will not

necessarily recommend voting against members of an audit committee when such expertise is lacking, we are

more likely to recommend voting against committee members when a problem such as a restatement occurs

and such expertise is lacking.

Glass Lewis generally assesses audit committees against the decisions they make with respect to their oversight

and monitoring role. The quality and integrity of the financial statements and earnings reports, the

completeness of disclosures necessary for investors to make informed decisions, and the effectiveness of the

internal controls should provide reasonable assurance that the financial statements are materially free from

errors. The independence of the external auditors and the results of their work all provide useful information by

which to assess the audit committee.

When assessing the decisions and actions of the audit committee, we typically defer to its judgment and

generally recommend voting in favor of its members. However, we will consider recommending that

shareholders vote against the following:

•All members of the audit committee when options were backdated, there is a lack of adequate controls

in place, there was a resulting restatement, and disclosures indicate there was a lack of documentation

with respect to the option grants.

•The audit committee chair, if the audit committee does not have a financial expert or the committee’s

financial expert does not have a demonstrable financial background sufficient to understand the

financial issues unique to public companies.

•The audit committee chair, if the audit committee did not meet at least four times during the year.

•The audit committee chair, if the committee has less than three members.

•Any audit committee member who sits on more than three public company audit committees, unless

the audit committee member is a retired CPA, CFO, controller or has similar experience, in which case

the limit shall be four committees, taking time and availability into consideration including a review of

the audit committee member’s attendance at all board and committee meetings.14

•All members of an audit committee who are up for election and who served on the committee at the

time of the audit, if audit and audit-related fees total one-third or less of the total fees billed by the

auditor.

•The audit committee chair when tax and/or other fees are greater than audit and audit-related fees paid

to the auditor for more than one year in a row (in which case we also recommend against ratification of

the auditor).

•The audit committee chair when fees paid to the auditor are not disclosed.

•All members of an audit committee where non-audit fees include fees for tax services (including, but not

limited to, such things as tax avoidance or shelter schemes) for senior executives of the company. Such

services are prohibited by the Public Company Accounting Oversight Board (PCAOB).

14 Glass Lewis may exempt certain audit committee members from the above threshold if, upon further analysis of relevant

factors such as the director’s experience, the size, industry-mix and location of the companies involved and the director’s

attendance at all the companies, we can reasonably determine that the audit committee member is likely not hindered by

multiple audit committee commitments.


2024 Benchmark Policy Guidelines — United States	19

•All members of an audit committee that reappointed an auditor that we no longer consider to be

independent for reasons unrelated to fee proportions.

•All members of an audit committee when audit fees are excessively low, especially when compared with

other companies in the same industry.

•The audit committee chair if the committee failed to put auditor ratification on the ballot for

shareholder approval. However, if the non-audit fees or tax fees exceed audit plus audit-related fees in

either the current or the prior year, then Glass Lewis will recommend voting against the entire audit

committee.

•All members of an audit committee where the auditor has resigned and reported that a section 10A15

letter has been issued.

•All members of an audit committee at a time when material accounting fraud occurred at the

company.16

•All members of an audit committee at a time when annual and/or multiple quarterly financial

statements had to be restated, and any of the following factors apply:17

oThe restatement involves fraud or manipulation by insiders;

oThe restatement is accompanied by an SEC inquiry or investigation;

oThe restatement involves revenue recognition;

oThe restatement results in a greater than 5% adjustment to costs of goods sold, operating

expense, or operating cash flows; or

oThe restatement results in a greater than 5% adjustment to net income, 10% adjustment to

assets or shareholders equity, or cash flows from financing or investing activities.

•All members of an audit committee if the company repeatedly fails to file its financial reports in a timely

fashion. For example, the company has filed two or more quarterly or annual financial statements late

within the last five quarters.

•All members of an audit committee when it has been disclosed that a law enforcement agency

has charged the company and/or its employees with a violation of the Foreign Corrupt Practices

Act (FCPA).

•All members of an audit committee when the company has aggressive accounting policies and/or poor

disclosure or lack of sufficient transparency in its financial statements.

15 Auditors are required to report all potential illegal acts to management and the audit committee unless they are clearly

inconsequential in nature. If the audit committee or the board fails to take appropriate action on an act that has been

determined to be a violation of the law, the independent auditor is required to send a section 10A letter to the SEC. Such letters

are rare and therefore we believe should be taken seriously.

16 Research indicates that revenue fraud now accounts for over 60% of SEC fraud cases, and that companies that engage in

fraud experience significant negative abnormal stock price declines—facing bankruptcy, delisting, and material asset sales

at much higher rates than do non-fraud firms (Committee of Sponsoring Organizations of the Treadway Commission.

“Fraudulent Financial Reporting: 1998-2007.” May 2010).

17 The SEC issued guidance in March 2021 related to classification of warrants as liabilities at special purpose acquisition

companies (SPACs). We will generally refrain from recommending against audit committee members when the restatement

in question is solely as a result of the aforementioned SEC guidance.


2024 Benchmark Policy Guidelines — United States	20

•All members of the audit committee when there is a disagreement with the auditor and the auditor

resigns or is dismissed (e.g., the company receives an adverse opinion on its financial statements from

the auditor).

•All members of the audit committee if the contract with the auditor specifically limits the auditor’s

liability to the company for damages.18

•All members of the audit committee who served since the date of the company’s last annual meeting if,

since the last annual meeting, the company has reported a material weakness that has not yet been

corrected and the company has not disclosed a remediation plan; or when a material weakness has

been ongoing for more than one year and the company has not disclosed an updated remediation plan

that clearly outlines the company’s progress toward remediating the material weakness.

Material Weaknesses

Effective internal controls over financial reporting should ensure the integrity of companies’ accounting and

financial reporting.

The SEC guidance regarding Management's Report on Internal Control Over Financial Reporting requires that

reports on internal control should include: (i) a statement of management's responsibility for establishing and

maintaining adequate internal control over financial reporting for the company; (ii) management's assessment

of the effectiveness of the company's internal control over financial reporting as of the end of the company's

most recent fiscal year; (iii) a statement identifying the framework used by management to evaluate the

effectiveness of the company's internal control over financial reporting; and (iv) a statement that the registered

public accounting firm that audited the company's financial statements included in the annual report has issued

an attestation report on management's assessment of the company's internal control over financial reporting.

A material weakness occurs when a company identifies a deficiency, or a combination of deficiencies, in internal

controls over financial reporting, such that there is a reasonable possibility that a material misstatement of the

company's annual or interim financial statements will not be prevented or detected on a timely basis. Failure to

maintain effective internal controls can create doubts regarding the reliability of financial reporting and the

preparation of financial statements in accordance with U.S. GAAP and may lead to companies publishing

financial statements that are not free of errors or misstatements.

We believe it is the responsibility of audit committees to ensure that material weaknesses are remediated in a

timely manner and that companies disclose remediation plans that include detailed steps to resolve a given

material weakness. In cases where a material weakness has been ongoing for more than one fiscal year, we

expect the company to disclose an updated remediation plan at least annually thereafter. Updates to existing

remediation plans should state the progress the company has made toward remediating the material weakness

and the remaining actions the company plans to take until the material weakness is fully remediated. As such,

we are critical of audit committees when companies disclose remediation plans that remain unchanged from a

prior period.

18 The Council of Institutional Investors. “Corporate Governance Policies,” p. 4, April 5, 2006; and “Letter from Council of

Institutional Investors to the AICPA,” November 8, 2006.


2024 Benchmark Policy Guidelines — United States	21

When a material weakness is reported and the company has not disclosed a remediation plan, or when a

material weakness has been ongoing for more than one year and the company has not disclosed an updated

remediation plan that clearly outlines the company’s progress toward remediating the material weakness, we

will consider recommending that shareholders vote against all members of a company’s audit committee who

served on the committee during the time when the material weakness was identified.

We also take a dim view of audit committee reports that are boilerplate, and which provide little or no

information or transparency to investors. When a problem such as a material weakness, restatement or late

filings occurs, in forming our judgment with respect to the audit committee we take into consideration the

transparency of the audit committee report.

Compensation Committee Performance

Compensation committees have a critical role in determining the compensation of executives. This includes

deciding the basis on which compensation is determined, as well as the amounts and types of compensation

to be paid. This process begins with the hiring and initial establishment of employment agreements, including

the terms for such items as pay, pensions and severance arrangements. It is important in establishing

compensation arrangements that compensation be consistent with, and based on the long-term economic

performance of, the business’s long-term shareholders returns.

Compensation committees are also responsible for the oversight of the transparency of compensation. This

oversight includes disclosure of compensation arrangements, the matrix used in assessing pay for performance,

and the use of compensation consultants. In order to ensure the independence of the board’s compensation

consultant, we believe the compensation committee should only engage a compensation consultant that is not

also providing any services to the company or management apart from their contract with the compensation

committee. It is important to investors that they have clear and complete disclosure of all the significant terms

of compensation arrangements in order to make informed decisions with respect to the oversight and decisions

of the compensation committee.

Finally, compensation committees are responsible for oversight of internal controls over the executive

compensation process. This includes controls over gathering information used to determine compensation,

establishment of equity award plans, and granting of equity awards. For example, the use of a compensation

consultant who maintains a business relationship with company management may cause the committee to

make decisions based on information that is compromised by the consultant’s conflict of interests. Lax controls

can also contribute to improper awards of compensation such as through granting of backdated or spring-

loaded options, or granting of bonuses when triggers for bonus payments have not been met.

Central to understanding the actions of compensation committee is a careful review of the CD&A report

included in each company’s proxy. We review the CD&A in our evaluation of the overall compensation practices

of a company, as overseen by the compensation committee. The CD&A is also integral to the evaluation of

compensation proposals at companies, such as advisory votes on executive compensation, which allow

shareholders to vote on the compensation paid to a company’s top executives.

When assessing the performance of compensation committees, we will consider recommending that

shareholders vote against the following:


2024 Benchmark Policy Guidelines — United States	22

•All members of a compensation committee during whose tenure the committee failed to address

shareholder concerns following majority shareholder rejection of the say-on-pay proposal in the

previous year. Where the proposal was approved but there was a significant shareholder vote (i.e.,

greater than 20% of votes cast) against the say-on-pay proposal in the prior year, if the board did not

respond sufficiently to the vote including actively engaging shareholders on this issue, we will also

consider recommending voting against the chair of the compensation committee or all members of the

compensation committee, depending on the severity and history of the compensation problems and the

level of shareholder opposition.

•All members of the compensation committee who are up for election and served when the company

failed to align pay with performance if shareholders are not provided with an advisory vote on executive

compensation at the annual meeting.19

•Any member of the compensation committee who has served on the compensation committee of at

least two other public companies that have consistently failed to align pay with performance and whose

oversight of compensation at the company in question is suspect.

•All members of the compensation committee (during the relevant time period) if the company entered

into excessive employment agreements and/or severance agreements.

•All members of the compensation committee when performance goals were changed (i.e., lowered)

when employees failed or were unlikely to meet original goals, or performance-based compensation

was paid despite goals not being attained.

•All members of the compensation committee if excessive employee perquisites and benefits

were allowed.

•The compensation committee chair if the compensation committee did not meet during the year.

•All members of the compensation committee when the company repriced options or completed a “self

tender offer” without shareholder approval within the past two years.

•All members of the compensation committee when vesting of in-the-money options is accelerated.

•All members of the compensation committee when option exercise prices were backdated. Glass Lewis

will recommend voting against an executive director who played a role in and participated in

option backdating.

•All members of the compensation committee when option exercise prices were spring-loaded or

otherwise timed around the release of material information.

•All members of the compensation committee when a new employment contract is given to an executive

that does not include a clawback provision and the company had a material restatement, especially if

the restatement was due to fraud.

•The chair of the compensation committee where the CD&A provides insufficient or unclear information

about performance metrics and goals, where the CD&A indicates that pay is not tied to performance, or

where the compensation committee or management has excessive discretion to alter performance

terms or increase amounts of awards in contravention of previously defined targets.

19 If a company provides shareholders with a say-on-pay proposal, we will initially only recommend voting against the

company's say-on-pay proposal and will not recommend voting against the members of the compensation committee unless

there is a pattern of failing to align pay and performance and/or the company exhibits egregious compensation practices. For

cases in which the disconnect between pay and performance is marginal and the company has outperformed its peers, we will

consider not recommending against compensation committee members.


2024 Benchmark Policy Guidelines — United States	23

•All members of the compensation committee during whose tenure the committee failed to implement a

shareholder proposal regarding a compensation-related issue, where the proposal received the

affirmative vote of a majority of the voting shares at a shareholder meeting, and when a reasonable

analysis suggests that the compensation committee (rather than the governance committee) should

have taken steps to implement the request.20

•All members of the compensation committee when the board has materially decreased proxy statement

disclosure regarding executive compensation policies and procedures in a manner which substantially

impacts shareholders’ ability to make an informed assessment of the company’s executive pay practices.

•All members of the compensation committee when new excise tax gross-up provisions are adopted in

employment agreements with executives, particularly in cases where the company previously

committed not to provide any such entitlements in the future.

•All members of the compensation committee when the board adopts a frequency for future advisory

votes on executive compensation that differs from the frequency approved by shareholders.

•The chair of the compensation committee when” mega-grants” have been granted and the awards

present concerns such as excessive quantum, lack of sufficient performance conditions, and/or are

excessively dilutive, among others.

Nominating and Governance Committee Performance

The nominating and governance committee is responsible for the governance by the board of the company and

its executives. In performing this role, the committee is responsible and accountable for selection of objective

and competent board members. It is also responsible for providing leadership on governance policies adopted

by the company, such as decisions to implement shareholder proposals that have received a majority vote. At

most companies, a single committee is charged with these oversight functions; at others, the governance and

nominating responsibilities are apportioned among two separate committees.

Consistent with Glass Lewis’ philosophy that boards should have diverse backgrounds and members with a

breadth and depth of relevant experience, we believe that nominating and governance committees should

consider diversity when making director nominations within the context of each specific company and its

industry. In our view, shareholders are best served when boards make an effort to ensure a constituency that is

not only reasonably diverse on the basis of age, race, gender and ethnicity, but also on the basis of geographic

knowledge, industry experience, board tenure and culture.

Regarding the committee responsible for governance, we will consider recommending that shareholders vote

against the following:

•All members of the governance committee21 during whose tenure a shareholder proposal relating to

important shareholder rights received support from a majority of the votes cast (excluding abstentions

20 In all other instances (i.e., a non-compensation-related shareholder proposal should have been implemented) we recommend

that shareholders vote against the members of the governance committee.

21 If the board does not have a committee responsible for governance oversight and the board did not implement a

shareholder proposal that received the requisite support, we will recommend voting against the entire board. If the


2024 Benchmark Policy Guidelines — United States	24

and broker non-votes) and the board has not begun to implement or enact the proposal’s subject

matter.22 Examples of such shareholder proposals include those seeking a declassified board structure, a

majority vote standard for director elections, or a right to call a special meeting. In determining whether

a board has sufficiently implemented such a proposal, we will examine the quality of the right enacted

or proffered by the board for any conditions that may unreasonably interfere with the shareholders’

ability to exercise the right (e.g., overly restrictive procedural requirements for calling a special

meeting).

•All members of the governance committee when a shareholder resolution is excluded from the meeting

agenda but the SEC has declined to state a view on whether such resolution should be excluded, or

when the SEC has verbally permitted a company to exclude a shareholder proposal but there is no

written record provided by the SEC about such determination and the company has not provided any

disclosure concerning this no-action relief.

•The governance committee chair when the chair is not independent and an independent lead or

presiding director has not been appointed.23

•The governance committee chair at companies with a multi-class share structure and unequal voting

rights when the company does not provide for a reasonable sunset of the multi-class share structure

(generally seven years or less).

•In the absence of a nominating committee, the governance committee chair when there are fewer than

five, or the whole governance committee when there are more than 20 members on the board.

•The governance committee chair when the committee fails to meet at all during the year.

•The governance committee chair, when for two consecutive years the company provides what we

consider to be “inadequate” related party transaction disclosure (i.e., the nature of such transactions

and/or the monetary amounts involved are unclear or excessively vague, thereby preventing a share-

holder from being able to reasonably interpret the independence status of multiple directors above and

beyond what the company maintains is compliant with SEC or applicable stock exchange listing

requirements).

•The governance committee chair, when during the past year the board adopted a forum selection clause

(i.e., an exclusive forum provision)24 designating either a state's courts for intra-corporate disputes,

shareholder proposal at issue requested that the board adopt a declassified structure, we will recommend voting against all

director nominees up for election.

22 Where a compensation-related shareholder proposal should have been implemented, and when a reasonable analysis

suggests that the members of the compensation committee (rather than the governance committee) bear the responsibility

for failing to implement the request, we recommend that shareholders only vote against members of the compensation

committee.

23 We believe that one independent individual should be appointed to serve as the lead or presiding director. When such a

position is rotated among directors from meeting to meeting, we will recommend voting against the governance committee

chair as we believe the lack of fixed lead or presiding director means that, effectively, the board does not have an

independent board leader.

24 A forum selection clause is a bylaw provision stipulating that a certain state or federal jurisdiction is the exclusive forum

for specified legal matters. Such a clause effectively limits a shareholder's legal remedy regarding appropriate choice of

venue and related relief.


2024 Benchmark Policy Guidelines — United States	25

and/or federal courts for matters arising under the Securities Act of 1933 without shareholder

approval,25 or if the board is currently seeking shareholder approval of a forum selection clause pursuant

to a bundled bylaw amendment rather than as a separate proposal.

•All members of the governance committee during whose tenure the board adopted, without

shareholder approval, provisions in its charter or bylaws that, through rules on director compensation,

may inhibit the ability of shareholders to nominate directors.

•The governance committee chair when the board takes actions to limit shareholders’ ability to vote on

matters material to shareholder rights (e.g., through the practice of excluding a shareholder proposal by

means of ratifying a management proposal that is materially different from the shareholder proposal).

•The governance committee chair when directors’ records for board and committee meeting attendance

are not disclosed, or when it is indicated that a director attended less than 75% of board and committee

meetings but disclosure is sufficiently vague that it is not possible to determine which specific director’s

attendance was lacking.

•The governance committee chair when a detailed record of proxy voting results from the prior annual

meeting has not been disclosed.

•The governance committee chair when a company does not clearly disclose the identity of a shareholder

proponent (or lead proponent when there are multiple filers) in their proxy statement. For a detailed

explanation of this policy, please refer to our comprehensive Proxy Paper Guidelines for Shareholder

Proposals & ESG-Related Issues, available at www.glasslewis.com/voting-policies-current/.

In addition, we may recommend that shareholders vote against the chair of the governance committee, or the

entire committee, where the board has amended the company’s governing documents to reduce or remove

important shareholder rights, or to otherwise impede the ability of shareholders to exercise such right, and has

done so without seeking shareholder approval. Examples of board actions that may cause such a

recommendation include: the elimination of the ability of shareholders to call a special meeting or to act by

written consent; an increase to the ownership threshold required for shareholders to call a special meeting; an

increase to vote requirements for charter or bylaw amendments; the adoption of provisions that limit the ability

of shareholders to pursue full legal recourse — such as bylaws that require arbitration of shareholder claims

or that require shareholder plaintiffs to pay the company’s legal expenses in the absence of a court victory

(i.e., “fee-shifting” or “loser pays” bylaws); the adoption of a classified board structure; and the elimination of

the ability of shareholders to remove a director without cause.

Regarding the nominating committee, we will consider recommending that shareholders vote against the

following:

•All members of the nominating committee, when the committee nominated or renominated

an individual who had a significant conflict of interest or whose past actions demonstrated a lack of

integrity or inability to represent shareholder interests.

•The nominating committee chair, if the nominating committee did not meet during the year.

25 Glass Lewis will evaluate the circumstances surrounding the adoption of any forum selection clause as well as the general

provisions contained therein. Where it can be reasonably determined that a forum selection clause is narrowly crafted to suit

the particular circumstances facing the company and/or a reasonable sunset provision is included, we may make an exception

to this policy.


2024 Benchmark Policy Guidelines — United States	26

•In the absence of a governance committee, the nominating committee chair when the chair is not

independent, and an independent lead or presiding director has not been appointed.

•The nominating committee chair, when there are fewer than five, or the whole nominating committee

when there are more than 20 members on the board.

•The nominating committee chair, when a director received a greater than 50% against vote the prior

year and not only was the director not removed, but the issues that raised shareholder concern were

not corrected.26

•The chair of the nominating committee of a board that is not at least 30 percent gender diverse,27 or all

members of the nominating committee of a board with no gender diverse directors, at companies

within the Russell 3000 index. For companies outside of the Russell 3000 index, we will recommend

voting against the chair of the nominating committee if there are no gender diverse directors.

•The chair of the nominating committee of a board with fewer than one director from an

underrepresented community on the board, at companies within the Russell 1000 index.

•The nominating committee chair when, alongside other governance or board performance concerns, the

average tenure of non-executive directors is 10 years or more and no new independent directors have

joined the board in the past five years. We will not be making voting recommendations solely on this

basis; rather, insufficient board refreshment may be a contributing factor in our recommendations when

additional board-related concerns have been identified.

In addition, we may consider recommending shareholders vote against the chair of the nominating committee

where the board’s failure to ensure the board has directors with relevant experience, either through periodic

director assessment or board refreshment, has contributed to a company’s poor performance. Where these

issues warrant an against vote in the absence of both a governance and a nominating committee, we will

recommend voting against the board chair, unless the chair also serves as the CEO, in which case we will

recommend voting against the longest-serving director.

Board-Level Risk Management Oversight

Glass Lewis evaluates the risk management function of a public company board on a strictly case-by-case basis.

Sound risk management, while necessary at all companies, is particularly important at financial firms which

inherently maintain significant exposure to financial risk. We believe such financial firms should have a chief risk

officer reporting directly to the board and a dedicated risk committee or a committee of the board charged with

risk oversight. Moreover, many non-financial firms maintain strategies which involve a high level of exposure to

financial risk. Similarly, since many non-financial firms have complex hedging or trading strategies, those firms

should also have a chief risk officer and a risk committee.

26 Considering that shareholder disapproval clearly relates to the director who received a greater than 50% against vote rather

than the nominating chair, we review the severity of the issue(s) that initially raised shareholder concern as well as company

responsiveness to such matters, and will only recommend voting against the nominating chair if a reasonable analysis suggests

that it would be most appropriate. In rare cases, we will consider recommending against the nominating chair when a director

receives a substantial (i.e., 20% or more) vote against based on the same analysis.

27 Women and directors that identify with a gender other than male or female.


2024 Benchmark Policy Guidelines — United States	27

Our views on risk oversight are consistent with those expressed by various regulatory bodies. In its December

2009 Final Rule release on Proxy Disclosure Enhancements, the SEC noted that risk oversight is a key

competence of the board and that additional disclosures would improve investor and shareholder

understanding of the role of the board in the organization’s risk management practices. The final rules, which

became effective on February 28, 2010, now explicitly require companies and mutual funds to describe (while

allowing for some degree of flexibility) the board’s role in the oversight of risk.

When analyzing the risk management practices of public companies, we take note of any significant losses or

writedowns on financial assets and/or structured transactions. In cases where a company has disclosed a sizable

loss or writedown, and where we find that the company’s board-level risk committee’s poor oversight

contributed to the loss, we will recommend that shareholders vote against such committee members on that

basis. In addition, in cases where a company maintains a significant level of financial risk exposure but fails to

disclose any explicit form of board-level risk oversight (committee or otherwise),28 we will consider

recommending to vote against the board chair on that basis. However, we generally would not recommend

voting against a combined chair/CEO, except in egregious cases.

Board Oversight of Environmental and Social Issues

Glass Lewis recognizes the importance of ensuring the sustainability of companies’ operations. We believe that

insufficient oversight of material environmental and social issues can present direct legal, financial, regulatory

and reputational risks that could serve to harm shareholder interests. Therefore, we believe that these issues

should be carefully monitored and managed by companies, and that all companies should have an appropriate

oversight structure in place to ensure that they are mitigating attendant risks and capitalizing on related

opportunities to the best extent possible.

To that end, Glass Lewis believes that companies should ensure that boards maintain clear oversight of material

risks to their operations, including those that are environmental and social in nature. These risks could include,

but are not limited to, matters related to climate change, human capital management, diversity, stakeholder

relations, and health, safety & environment. Given the importance of the board’s role in overseeing

environmental and social risks, we believe this responsibility should be formally designated and codified in the

appropriate committee charters or other governing documents.

While we believe that it is important that these issues are overseen at the board level and that shareholders are

afforded meaningful disclosure of these oversight responsibilities, we believe that companies should determine

the best structure for this oversight. In our view, this oversight can be effectively conducted by specific directors,

the entire board, a separate committee, or combined with the responsibilities of a key committee.

For companies in the Russell 3000 index and in instances where we identify material oversight concerns, Glass

Lewis will review a company’s overall governance practices and identify which directors or board-level

committees have been charged with oversight of environmental and/or social issues. Furthermore, given the

importance of the board’s role in overseeing environmental and social risks, Glass Lewis will generally

28 A committee responsible for risk management could be a dedicated risk committee, the audit committee, or the finance

committee, depending on a given company’s board structure and method of disclosure. At some companies, the entire board is

charged with risk management.


2024 Benchmark Policy Guidelines — United States	28

recommend voting against the governance committee chair of a company in the Russell 1000 index that fails to

provide explicit disclosure concerning the board’s role in overseeing these issues.

When evaluating the board’s role in overseeing environmental and/or social issues, we will examine a

company’s committee charters and governing documents to determine if the company has codified and

maintained a meaningful level of oversight of and accountability for a company’s material environmental and

social impacts.

Board Oversight of Technology

Cyber Risk Oversight

Companies and consumers are exposed to a growing risk of cyber-attacks. These attacks can result in customer

or employee data breaches, harm to a company’s reputation, significant fines or penalties, and interruption to a

company’s operations. Further, in some instances, cyber breaches can result in national security concerns, such

as those impacting companies operating as utilities, defense contractors, and energy companies.

In response to these issues, regulators have increasingly been focused on ensuring companies are providing

appropriate and timely disclosures and protections to stakeholders that could have been adversely impacted by

a breach in a company’s cyber infrastructure.

On July 26, 2023, the SEC approved final rules requiring public companies to report cybersecurity incidents

deemed material within four days of identifying them, detailing their nature, scope, timing, and material impact

under Item 1.05 on Form 8-K.

Furthermore, in annual reports, companies must disclose their processes for assessing, identifying, and

managing material cybersecurity risks, along with their material effects; and describe whether any risks from

prior incidents have materially affected its business strategy, results of operations, or financial condition (or are

reasonably likely to), pursuant to Regulation S-K Item 106. Item 106 will also require registrants to describe the

board of directors’ oversight of risks from cybersecurity threats and management’s role and expertise in

assessing and managing material risks from cybersecurity threats. Similar rules were also adopted for foreign

private issuers. The final rules became effective on September 5, 2023.

Given the regulatory focus on, and the potential adverse outcomes from, cyber-related issues, it is our view that

cyber risk is material for all companies. We therefore believe that it is critical that companies evaluate and

mitigate these risks to the greatest extent possible. With that view, we encourage all issuers to provide clear

disclosure concerning the role of the board in overseeing issues related to cybersecurity, including how

companies are ensuring directors are fully versed on this rapidly evolving and dynamic issue. We believe such

disclosure can help shareholders understand the seriousness with which companies take this issue.

In the absence of material cyber incidents, we will generally not make voting recommendations on the basis of a

company’s oversight or disclosure concerning cyber-related issues. However, in instances where cyber-attacks

have caused significant harm to shareholders we will closely evaluate the board’s oversight of cybersecurity as

well as the company’s response and disclosures.

Moreover, in instances where a company has been materially impacted by a cyber-attack, we believe

shareholders can reasonably expect periodic updates communicating the company’s ongoing progress towards


2024 Benchmark Policy Guidelines — United States	29

resolving and remediating the impact of the cyber-attack. We generally believe shareholders are best served

when such updates include (but are not necessarily limited to) details such as when the company has fully

restored its information systems, when the company has returned to normal operations, what resources the

company is providing for affected stakeholders, and any other potentially relevant information, until the

company considers the impact of the cyber-attack to be fully remediated. These disclosures should focus on the

company’s response to address the impacts to affected stakeholders and should not reveal specific and/or

technical details that could impede the company’s response or remediation of the incident or that could assist

threat actors.

In such instances, we may recommend against appropriate directors should we find the board’s oversight,

response or disclosure concerning cybersecurity-related issues to be insufficient, or are not provided to

shareholders.

Board Oversight of Artificial Intelligence

In recent years, companies have rapidly begun to develop and adopt uses for artificial intelligence (AI)

technologies throughout various aspects of their operations. Deployed and overseen effectively, AI technologies

have the potential to make companies’ operations and systems more efficient and productive. However, as the

use of these technologies has grown, so have the potential risks associated with companies’ development and

use of AI. Given these potential risks, we believe that boards should be cognizant of, and take steps to mitigate

exposure to, any material risks that could arise from their use or development of AI.

Companies that use or develop AI technologies should consider adopting strong internal frameworks that

include ethical considerations and ensure they have provided a sufficient level of oversight of AI. As such,

boards may seek to ensure effective oversight and address skills gaps by engaging in continued board education

and/or appointing directors with AI expertise. With that view, we believe that all companies that develop or

employ the use of AI in their operations should provide clear disclosure concerning the role of the board in

overseeing issues related to AI, including how companies are ensuring directors are fully versed on this rapidly

evolving and dynamic issue. We believe such disclosure can help shareholders understand the seriousness with

which companies take this issue.

While we believe that it is important that these issues are overseen at the board level and that shareholders are

afforded meaningful disclosure of these oversight responsibilities, we believe that companies should determine

the best structure for this oversight. In our view, this oversight can be effectively conducted by specific directors,

the entire board, a separate committee, or combined with the responsibilities of a key committee.

In the absence of material incidents related to a company’s use or management of AI-related issues, we will

generally not make voting recommendations on the basis of a company’s oversight of, or disclosure concerning,

AI-related issues. However, in instances where there is evidence that insufficient oversight and/or management

of AI technologies has resulted in material harm to shareholders, Glass Lewis will review a company’s overall

governance practices and identify which directors or board-level committees have been charged with oversight

of AI-related risks. We will also closely evaluate the board’s response to, and management of, this issue as well

as any associated disclosures and may recommend against appropriate directors should we find the board’s

oversight, response or disclosure concerning AI-related issues to be insufficient.


2024 Benchmark Policy Guidelines — United States	30

Board Accountability for Environmental and Social Performance

Glass Lewis carefully monitors companies’ performance with respect to environmental and social issues,

including those related to climate and human capital management. In situations where we believe that a

company has not properly managed or mitigated material environmental or social risks to the detriment of

shareholder value, or when such mismanagement has threatened shareholder value, Glass Lewis may

recommend that shareholders vote against the members of the board who are responsible for oversight of

environmental and social risks. In the absence of explicit board oversight of environmental and social issues,

Glass Lewis may recommend that shareholders vote against members of the audit committee. In making these

determinations, Glass Lewis will carefully review the situation, its effect on shareholder value, as well as any

corrective action or other response made by the company.

For more information on how Glass Lewis evaluates environmental and social issues, please see Glass Lewis’

Overall Approach to ESG as well as our comprehensive Proxy Paper Guidelines for Shareholder Proposals & ESG-

Related Issues, available at www.glasslewis.com/voting-policies-current/.

Board Accountability for Climate-related Issues

Given the exceptionally broad impacts of a changing climate on companies, the economy, and society in general,

we view climate risk as a material risk for all companies. We therefore believe that boards should be considering

and evaluating their operational resilience under lower-carbon scenarios. While all companies maintain

exposure to climate-related risks, we believe that additional consideration should be given to, and that

disclosure should be provided by those companies whose GHG emissions represent a financially material risk.

We believe that companies with this increased risk exposure should provide clear and comprehensive disclosure

regarding these risks, including how they are being mitigated and overseen. We believe such information is

crucial to allow investors to understand the company’s management of this issue, as well as the impact of a

lower carbon future on the company’s operations.

In line with this view, Glass Lewis will carefully examine the climate-related disclosures provided by companies

in the S&P 500 index with material exposure to climate risk stemming from their own operations29, as well as

companies where we believe emissions or climate impacts, or stakeholder scrutiny thereof, represent an

outsized, financially material risk, in order to assess whether they have produced disclosures in line with the

recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) or IFRS S2 Climate-related

Disclosures. We will also assess whether these companies have disclosed explicit and clearly defined board-level

oversight responsibilities for climate-related issues. In instances where we find either (or both) of these

disclosures to be absent or significantly lacking, we may recommend voting against the chair of the committee

(or board) charged with oversight of climate-related issues, or if no committee has been charged with such

oversight, the chair of the governance committee. Further, we may extend our recommendation on this basis to

additional members of the responsible committee in cases where the committee chair is not standing for

29 This policy will generally apply to companies in the following SASB-defined industries: agricultural products, air freight &

logistics, airlines, chemicals, construction materials, containers & packaging, cruise lines, electric utilities & power generators,

food retailers & distributors, health care distributors, iron & steel producers, marine transportation, meat, poultry & dairy,

metals & mining, non-alcoholic beverages, oil & gas, pulp & paper products, rail transportation, road transportation,

semiconductors, waste management.


2024 Benchmark Policy Guidelines — United States	31

election due to a classified board, or based on other factors, including the company’s size, industry and its

overall governance profile.

Director Commitments

We believe that directors should have the necessary time to fulfill their duties to shareholders. In our view, an

overcommitted director can pose a material risk to a company’s shareholders, particularly during periods of

crisis. In addition, recent research indicates that the time commitment associated with being a director has been

on a significant upward trend in the past decade.30 As a result, we generally recommend that shareholders vote

against a director who serves as an executive officer (other than executive chair) of any public company31 while

serving on more than one external public company board, a director who serves as an executive chair of any

public company while serving on more than two external public company boards, and any other director who

serves on more than five public company boards.

Because we believe that executives will primarily devote their attention to executive duties, we generally will

not recommend that shareholders vote against overcommitted directors at the companies where they serve as

an executive.

When determining whether a director’s service on an excessive number of boards may limit the ability of the

director to devote sufficient time to board duties, we may consider relevant factors such as the size and location

of the other companies where the director serves on the board, the director’s board roles at the companies in

question, whether the director serves on the board of any large privately-held companies, the director’s tenure

on the boards in question, and the director’s attendance record at all companies. In the case of directors who

serve in executive roles other than CEO (e.g., executive chair), we will evaluate the specific duties and

responsibilities of that role in determining whether an exception is warranted.

We may also refrain from recommending against certain directors if the company provides sufficient rationale

for their continued board service. The rationale should allow shareholders to evaluate the scope of the

directors’ other commitments, as well as their contributions to the board including specialized knowledge of the

company’s industry, strategy or key markets, the diversity of skills, perspective and background they provide,

and other relevant factors. We will also generally refrain from recommending to vote against a director who

serves on an excessive number of boards within a consolidated group of companies in related industries, or a

director that represents a firm whose sole purpose is to manage a portfolio of investments which include the

company.

30 For example, the 2015-2016 NACD Public Company Governance Survey states that, on average, directors spent a total of

248.2 hours annual on board-related matters during the past year, which it describes as a “historically high level” that is

significantly above the average hours recorded in 2006. Additionally, the 2020 Spencer Stuart Board Index indicates that,

while 39% of S&P 500 CEOs serve on one additional public board, just 2% of S&P 500 CEOs serve on two additional public

boards and only one CEO serves on three.

31 When the executive officer in question serves only as an executive at a special purpose acquisition company (SPAC) we

will generally apply the higher threshold of five public company directorships.


2024 Benchmark Policy Guidelines — United States	32

Other Considerations

In addition to the three key characteristics — independence, performance, experience — that we use to

evaluate board members, we consider conflict-of-interest issues as well as the size of the board of directors

when making voting recommendations.

Conflicts of Interest

We believe board members should be wholly free of identifiable and substantial conflicts of interest, regardless

of the overall level of independent directors on the board. Accordingly, we recommend that shareholders vote

against the following types of directors:

•A CFO who is on the board: In our view, the CFO holds a unique position relative to financial reporting

and disclosure to shareholders. Due to the critical importance of financial disclosure and reporting, we

believe the CFO should report to the board and not be a member of it.

•A director who provides — or a director who has an immediate family member who provides — material

consulting or other material professional services to the company. These services may include legal,

consulting,32 or financial services. We question the need for the company to have consulting

relationships with its directors. We view such relationships as creating conflicts for directors, since they

may be forced to weigh their own interests against shareholder interests when making board decisions.

In addition, a company’s decisions regarding where to turn for the best professional

services may be compromised when doing business with the professional services firm of one of the

company’s directors.

•A director, or a director who has an immediate family member, engaging in airplane, real estate, or

similar deals, including perquisite-type grants from the company, amounting to more than $50,000.

Directors who receive these sorts of payments from the company will have to make unnecessarily

complicated decisions that may pit their interests against shareholder interests.

•Interlocking directorships: CEOs or other top executives who serve on each other’s boards create an

interlock that poses conflicts that should be avoided to ensure the promotion of shareholder interests

above all else.33

•All board members who served at a time when a poison pill with a term of longer than one year was

adopted without shareholder approval within the prior twelve months.34 In the event a board is

classified and shareholders are therefore unable to vote against all directors, we will recommend voting

against the remaining directors the next year they are up for a shareholder vote. If a poison pill with a

32 We will generally refrain from recommending against a director who provides consulting services for the company if the

director is excluded from membership on the board’s key committees and we have not identified significant governance

concerns with the board.

33 We do not apply a look-back period for this situation. The interlock policy applies to both public and private companies.

On a case-by-case basis, we evaluate other types of interlocking relationships, such as interlocks with close family members

of executives or within group companies. Further, we will also evaluate multiple board interlocks among non-insiders (i.e.,

multiple directors serving on the same boards at other companies), for evidence of a pattern of poor oversight.

34 Refer to the “Governance Structure and the Shareholder Franchise” section for further discussion of our policies

regarding anti-takeover measures, including poison pills.


2024 Benchmark Policy Guidelines — United States	33

term of one year or less was adopted without shareholder approval, and without adequate justification,

we will consider recommending that shareholders vote against all members of the governance

committee. If the board has, without seeking shareholder approval, and without adequate justification,

extended the term of a poison pill by one year or less in two consecutive years, we will consider

recommending that shareholders vote against the entire board.

Size of the Board of Directors

While we do not believe there is a universally applicable optimal board size, we do believe boards should have

at least five directors to ensure sufficient diversity in decision-making and to enable the formation of key board

committees with independent directors. Conversely, we believe that boards with more than 20 members will

typically suffer under the weight of “too many cooks in the kitchen” and have difficulty reaching consensus and

making timely decisions. Sometimes the presence of too many voices can make it difficult to draw on the

wisdom and experience in the room by virtue of the need to limit the discussion so that each voice may be

heard.

To that end, we typically recommend voting against the chair of the nominating committee (or the governance

committee, in the absence of a nominating committee) at a board with fewer than five directors or more than

20 directors.

Controlled Companies

We believe controlled companies warrant certain exceptions to our independence standards. The board’s

function is to protect shareholder interests; however, when an individual, entity (or group of shareholders party

to a formal agreement) owns more than 50% of the voting shares, the interests of the majority of shareholders

are the interests of that entity or individual. Consequently, Glass Lewis does not apply our usual two-thirds

board independence rule and therefore we will not recommend voting against boards whose composition

reflects the makeup of the shareholder population.

Independence Exceptions

The independence exceptions that we make for controlled companies are as follows:

•We do not require that controlled companies have boards that are at least two-thirds independent. So

long as the insiders and/or affiliates are connected with the controlling entity, we accept the presence

of non-independent board members.

•The compensation committee and nominating and governance committees do not need to consist solely

of independent directors.

oWe believe that standing nominating and corporate governance committees at controlled

companies are unnecessary. Although having a committee charged with the duties of searching

for, selecting, and nominating independent directors can be beneficial, the unique composition

of a controlled company’s shareholder base makes such committees weak and irrelevant.

oLikewise, we believe that independent compensation committees at controlled companies are

unnecessary. Although independent directors are the best choice for approving and monitoring

senior executives’ pay, controlled companies serve a unique shareholder population whose

voting power ensures the protection of its interests. As such, we believe that having affiliated

directors on a controlled company’s compensation committee is acceptable. However, given


2024 Benchmark Policy Guidelines — United States	34

that a controlled company has certain obligations to minority shareholders we feel that an

insider should not serve on the compensation committee. Therefore, Glass Lewis will

recommend voting against any insider (the CEO or otherwise) serving on the compensation

committee.

•Controlled companies do not need an independent chair or an independent lead or presiding director.

Although an independent director in a position of authority on the board — such as chair or presiding

director — can best carry out the board’s duties, controlled companies serve a unique shareholder

population whose voting power ensures the protection of its interests.

Size of the Board of Directors

We have no board size requirements for controlled companies.

Audit Committee Independence

Despite a controlled company’s status, unlike for the other key committees, we nevertheless believe that audit

committees should consist solely of independent directors. Regardless of a company’s controlled status, the

interests of all shareholders must be protected by ensuring the integrity and accuracy of the company’s financial

statements. Allowing affiliated directors to oversee the preparation of financial reports could create an

insurmountable conflict of interest.

Board Responsiveness at Multi-Class Companies

At controlled companies and companies that have multi-class share structures with unequal voting rights, we

will carefully examine the level of approval or disapproval attributed to unaffiliated shareholders when

determining whether board responsiveness is warranted. In the case of companies that have multi-class share

structures with unequal voting rights, we will generally examine the level of approval or disapproval attributed

to unaffiliated shareholders on a “one share, one vote” basis. At controlled and multi-class companies, when at

least 20% or more of unaffiliated shareholders vote contrary to management, we believe that boards should

engage with shareholders and demonstrate some initial level of responsiveness, and when a majority or more of

unaffiliated shareholders vote contrary to management we believe that boards should engage with shareholders

and provide a more robust response to fully address shareholder concerns.

Significant Shareholders

Where an individual or entity holds between 20-50% of a company’s voting power, we believe it is reasonable to

allow proportional representation on the board and committees (excluding the audit committee) based on the

individual or entity’s percentage of ownership.

Governance Following an IPO, Spin-Off, or Direct Listing

We believe companies that have recently completed an initial public offering (IPO), spin-off, or direct listing

should be allowed adequate time to fully comply with marketplace listing requirements and meet basic

corporate governance standards. Generally speaking, we refrain from making recommendations on the basis of

governance standards (e.g., board independence, committee membership and structure, meeting attendance,

etc.) during the one-year period following an IPO.


2024 Benchmark Policy Guidelines — United States	35

However, some cases warrant shareholder action against the board of a company that have completed an IPO,

spin-off, or direct listing within the past year. When evaluating companies that have recently gone public, Glass

Lewis will review the terms of the applicable governing documents in order to determine whether shareholder

rights are being severely restricted indefinitely. We believe boards that approve highly restrictive governing

documents have demonstrated that they may subvert shareholder interests following the IPO. In conducting this

evaluation, Glass Lewis will consider:

•The adoption of anti-takeover provisions such as a poison pill or classified board

•Supermajority vote requirements to amend governing documents

•The presence of exclusive forum or fee-shifting provisions

•Whether shareholders can call special meetings or act by written consent

•The voting standard provided for the election of directors

•The ability of shareholders to remove directors without cause

•The presence of evergreen provisions in the company’s equity compensation arrangements

•The presence of a multi-class share structure which does not afford common shareholders voting power

that is aligned with their economic interest

In cases where Glass Lewis determines that the board has approved overly restrictive governing documents, we

will generally recommend voting against members of the governance committee. If there is no governance

committee, or if a portion of such committee members are not standing for election due to a classified board

structure, we will expand our recommendations to additional director nominees, based on who is standing for

election.

In cases where, preceding an IPO, the board adopts a multi-class share structure where voting rights are not

aligned with economic interest, or an anti-takeover provision, such as a poison pill or classified board, we will

generally recommend voting against all members of the board who served at the time of the IPO if the board: (i)

did not also commit to submitting these provisions to a shareholder vote at the company’s first shareholder

meeting following the IPO; or (ii) did not provide for a reasonable sunset of these provisions (generally three to

five years in the case of a classified board or poison pill; or seven years or less in the case of a multi-class share

structure). In the case of a multi-class share structure, if these provisions are put to a shareholder vote, we will

examine the level of approval or disapproval attributed to unaffiliated shareholders when determining the vote

outcome.

In our view, adopting an anti-takeover device unfairly penalizes future shareholders who (except for electing to

buy or sell the stock) are unable to weigh in on a matter that could potentially negatively impact their ownership

interest. This notion is strengthened when a board adopts a classified board with an infinite duration or a poison

pill with a five- to ten-year term immediately prior to going public, thereby insulating management for a

substantial amount of time.

In addition, shareholders should also be wary of companies that adopt supermajority voting requirements

before their IPO. Absent explicit provisions in the articles or bylaws stipulating that certain policies will be

phased out over a certain period of time, long-term shareholders could find themselves in the predicament of

having to attain a supermajority vote to approve future proposals seeking to eliminate such policies.


2024 Benchmark Policy Guidelines — United States	36

Governance Following a Business Combination with a Special Purpose Acquisition Company

The business combination of a private company with a publicly traded special purpose acquisition company

(SPAC) facilitates the private entity becoming a publicly traded corporation. Thus, the business combination

represents the private company’s de-facto IPO. We believe that some cases warrant shareholder action against

the board of a company that have completed a business combination with a SPAC within the past year.

At meetings where shareholders vote on the business combination of a SPAC with a private company,

shareholders are generally voting on a new corporate charter for the post-combination company as a condition

to approval of the business combination. In many cases, shareholders are faced with the dilemma of having to

approve corporate charters that severely restrict shareholder rights to facilitate the business combination.

Therefore, when shareholders are required to approve binding charters as a condition to approval of a business

combination with a SPAC, we believe shareholders should also be provided with advisory votes on material

charter amendments as a means to voice their opinions on such restrictive governance provisions.

When evaluating companies that have recently gone public via business combination with a SPAC, Glass Lewis

will review the terms of the applicable governing documents to determine whether shareholder rights are being

severely restricted indefinitely and whether these restrictive provisions were put forth for a shareholder vote on

an advisory basis at the prior meeting where shareholders voted on the business combination.

In cases where, prior to the combined company becoming publicly traded, the board adopts a multi-class share

structure where voting rights are not aligned with economic interest, or an anti-takeover provision, such as a

poison pill or classified board, we will generally recommend voting against all members of the board who served

at the time of the combined company becoming publicly traded if the board: (i) did not also submit these

provisions to a shareholder vote on an advisory basis at the prior meeting where shareholders voted on the

business combination; (ii) did not also commit to submitting these provisions to a shareholder vote at the

company’s first shareholder meeting following the company becoming publicly traded; or (iii) did not provide for

a reasonable sunset of these provisions (generally three to five years in the case of a classified board or poison

pill; or seven years or less in the case of a multi-class share structure).

Consistent with our view on IPOs, adopting an anti-takeover device unfairly penalizes future shareholders who

(except for electing to buy or sell the stock) are unable to weigh in on a matter that could potentially negatively

impact their ownership interest.

Dual-Listed or Foreign-Incorporated Companies

For companies that trade on multiple exchanges or are incorporated in foreign jurisdictions but trade only in the

U.S., we will apply the governance standard most relevant in each situation. We will consider a number of

factors in determining which Glass Lewis country-specific policy to apply, including but not limited to: (i) the

corporate governance structure and features of the company including whether the board structure is unique to

a particular market; (ii) the nature of the proposals; (iii) the location of the company’s primary listing, if one can

be determined; (iv) the regulatory/governance regime that the board is reporting against; and (v) the availability

and completeness of the company’s SEC filings.


2024 Benchmark Policy Guidelines — United States	37

OTC-listed Companies

Companies trading on the OTC Bulletin Board are not considered “listed companies” under SEC rules and

therefore not subject to the same governance standards as listed companies. However, we believe that more

stringent corporate governance standards should be applied to these companies given that their shares are still

publicly traded.

When reviewing OTC companies, Glass Lewis will review the available disclosure relating to the shareholder

meeting to determine whether shareholders are able to evaluate several key pieces of information, including: (i)

the composition of the board’s key committees, if any; (ii) the level of share ownership of company insiders or

directors; (iii) the board meeting attendance record of directors; (iv) executive and non-employee director

compensation; (v) related-party transactions conducted during the past year; and (vi) the board’s leadership

structure and determinations regarding director independence.

We are particularly concerned when company disclosure lacks any information regarding the board’s key

committees. We believe that committees of the board are an essential tool for clarifying how the responsibilities

of the board are being delegated, and specifically for indicating which directors are accountable for ensuring: (i)

the independence and quality of directors, and the transparency and integrity of the nominating process; (ii)

compensation programs that are fair and appropriate; (iii) proper oversight of the company’s accounting,

financial reporting, and internal and external audits; and (iv) general adherence to principles of good corporate

governance.

In cases where shareholders are unable to identify which board members are responsible for ensuring oversight

of the above-mentioned responsibilities, we may consider recommending against certain members of the board.

Ordinarily, we believe it is the responsibility of the corporate governance committee to provide thorough

disclosure of the board’s governance practices. In the absence of such a committee, we believe it is appropriate

to hold the board’s chair or, if such individual is an executive of the company, the longest-serving non-executive

board member accountable.

Mutual Fund Boards

Mutual funds, or investment companies, are structured differently from regular public companies (i.e., operating

companies). Typically, members of a fund’s advisor are on the board and management takes on a different role

from that of regular public companies. Thus, we focus on a short list of requirements, although many of our

guidelines remain the same.

The following mutual fund policies are similar to the policies for regular public companies:

•Size of the board of directors — The board should be made up of between five and twenty directors.

•The CFO on the board — Neither the CFO of the fund nor the CFO of the fund’s registered investment

advisor should serve on the board.

•Independence of the audit committee — The audit committee should consist solely of independent

directors.

•Audit committee financial expert — At least one member of the audit committee should be designated

as the audit committee financial expert.


2024 Benchmark Policy Guidelines — United States	38

The following differences from regular public companies apply at mutual funds:

•Independence of the board — We believe that three-fourths of an investment company’s board should

be made up of independent directors. This is consistent with a proposed SEC rule on investment

company boards. The Investment Company Act requires 40% of the board to be independent, but in

2001, the SEC amended the Exemptive Rules to require that a majority of a mutual fund board be

independent. In 2005, the SEC proposed increasing the independence threshold to 75%. In 2006, a

federal appeals court ordered that this rule amendment be put back out for public comment, putting it

back into “proposed rule” status. Since mutual fund boards play a vital role in overseeing the

relationship between the fund and its investment manager, there is greater need for independent

oversight than there is for an operating company board.

•When the auditor is not up for ratification — We do not recommend voting against the audit

committee if the auditor is not up for ratification. Due to the different legal structure of an investment

company compared to an operating company, the auditor for the investment company (i.e., mutual

fund)

does not conduct the same level of financial review for each investment company as for an

operating company.

•Non-independent chair — The SEC has proposed that the chair of the fund board be independent. We

agree that the roles of a mutual fund’s chair and CEO should be separate. Although we believe this

would be best at all companies, we recommend voting against the chair of an investment company’s

nominating committee as well as the board chair if the chair and CEO of a mutual fund are the same

person and the fund does not have an independent lead or presiding director. Seven former SEC

commissioners support the appointment of an independent chair and we agree with them that “an

independent board chair would be better able to create conditions favoring the long-term interests of

fund shareholders than would a chair who is an executive of the advisor.” (See the comment letter sent

to the SEC in support of the proposed rule at http://www.sec.gov/news/studies/indchair.pdf.)

•Multiple funds overseen by the same director — Unlike service on a public company board, mutual

fund boards require much less of a time commitment. Mutual fund directors typically serve on dozens of

other mutual fund boards, often within the same fund complex. The Investment Company Institute’s

(ICI) Overview of Fund Governance Practices, 1994-2012, indicates that the average number of funds

served by an independent director in 2012 was 53. Absent evidence that a specific director is hindered

from being an effective board member at a fund due to service on other funds’ boards, we refrain from

maintaining a cap on the number of outside mutual fund boards that we believe a director can serve on.

Declassified Boards

Glass Lewis favors the repeal of staggered boards and the annual election of directors. We believe staggered

boards are less accountable to shareholders than boards that are elected annually. Furthermore, we feel the

annual election of directors encourages board members to focus on shareholder interests.

Empirical studies have shown: (i) staggered boards are associated with a reduction in a firm’s valuation; and (ii)

in the context of hostile takeovers, staggered boards operate as a takeover defense, which entrenches

management, discourages potential acquirers, and delivers a lower return to target shareholders.


2024 Benchmark Policy Guidelines — United States	39

In our view, there is no evidence to demonstrate that staggered boards improve shareholder returns in a

takeover context. Some research has indicated that shareholders are worse off when a staggered board blocks a

transaction; further, when a staggered board negotiates a friendly transaction, no statistically significant

difference in premium occurs.35 Additional research found that charter-based staggered boards “reduce the

market value of a firm by 4% to 6% of its market capitalization” and that “staggered boards bring about and not

merely reflect this reduction in market value.”36 A subsequent study reaffirmed that classified boards reduce

shareholder value, finding “that the ongoing process of dismantling staggered boards, encouraged by

institutional investors, could well contribute to increasing shareholder wealth.”37

Shareholders have increasingly come to agree with this view. In 2019, 90% of S&P 500 companies had

declassified boards, up from 68% in 2009.38 Management proposals to declassify boards are approved with near

unanimity and shareholder proposals on the topic also receive strong shareholder support; in 2014, shareholder

proposals requesting that companies declassify their boards received average support of 84% (excluding

abstentions and broker non-votes), whereas in 1987, only 16.4% of votes cast favored board declassification.39

Further, a growing number of companies, nearly half of all those targeted by shareholder proposals requesting

that all directors stand for election annually, either recommended shareholders support the proposal or made

no recommendation, a departure from the more traditional management recommendation to vote against

shareholder proposals.

Given our belief that declassified boards promote director accountability, the empirical evidence suggesting

staggered boards reduce a company’s value and the established shareholder opposition to such a structure,

Glass Lewis supports the declassification of boards and the annual election of directors.

Board Composition and Refreshment

Glass Lewis strongly supports routine director evaluation, including independent external reviews, and periodic

board refreshment to foster the sharing of diverse perspectives in the boardroom and the generation of new

ideas and business strategies. Further, we believe the board should evaluate the need for changes to board

composition based on an analysis of skills and experience necessary for the company, as well as the results of

the director evaluations, as opposed to relying solely on age or tenure limits. When necessary, shareholders can

address concerns regarding proper board composition through director elections.

35 Lucian Bebchuk, John Coates IV, Guhan Subramanian, “The Powerful Antitakeover Force of Staggered Boards: Further

Findings and a Reply to Symposium Participants,” 55 Stanford Law Review 885-917 (2002).

36 Lucian Bebchuk, Alma Cohen, “The Costs of Entrenched Boards” (2004).

37 Lucian Bebchuk, Alma Cohen and Charles C.Y. Wang, “Staggered Boards and the Wealth of Shareholders: Evidence from

a Natural Experiment,”

SSRN: http://ssrn.com/abstract=1706806 (2010), p. 26.

38 Spencer Stuart Board Index, 2019, p. 15.

39 Lucian Bebchuk, John Coates IV and Guhan Subramanian, “The Powerful Antitakeover Force of Staggered Boards: Theory,

Evidence, and Policy”.


2024 Benchmark Policy Guidelines — United States	40

In our view, a director’s experience can be a valuable asset to shareholders because of the complex, critical

issues that boards face. This said, we recognize that in rare circumstances, a lack of refreshment can contribute

to a lack of board responsiveness to poor company performance.

We will note as a potential concern instances where the average tenure of non-executive directors is 10 years or

more and no new directors have joined the board in the past five years. While we will be highlighting this as a

potential area of concern, we will not be making voting recommendations strictly on this basis, unless we have

identified other governance or board performance concerns.

On occasion, age or term limits can be used as a means to remove a director for boards that are unwilling to

police their membership and enforce turnover. Some shareholders support term limits as a way to force change

in such circumstances.

While we understand that age limits can aid board succession planning, the long-term impact of age limits

restricts experienced and potentially valuable board members from service through an arbitrary means. We

believe that shareholders are better off monitoring the board’s overall composition, including the diversity of its

members, the alignment of the board’s areas of expertise with a company’s strategy, the board’s approach to

corporate governance, and its stewardship of company performance, rather than imposing inflexible rules that

don’t necessarily correlate with returns or benefits for shareholders.

However, if a board adopts term/age limits, it should follow through and not waive such limits. In cases where

the board waives its term/age limits for two or more consecutive years, Glass Lewis will generally recommend

that shareholders vote against the nominating and/or governance committee chair, unless a compelling

rationale is provided for why the board is proposing to waive this rule, such as consummation of a corporate

transaction.

Board Diversity

Glass Lewis recognizes the importance of ensuring that the board is composed of directors who have a diversity

of skills, thought and experience, as such diversity benefits companies by providing a broad range of

perspectives and insights. Glass Lewis closely reviews the composition of the board for representation of diverse

director candidates.

Board Gender Diversity

We consider the nominating and governance committee to be responsible for ensuring sufficient board

diversity, or for publicly communicating its rationale or a plan for increasing diversity. As such, we will generally

recommend voting against the chair of the nominating committee of a board that is not at least 30 percent

gender diverse, or all members of the nominating committee of a board with no gender diverse directors, at

companies within the Russell 3000 index. For companies outside the Russell 3000 index, our policy requires a

minimum of one gender diverse director.

When making these voting recommendations, we will carefully review a company’s disclosure of its diversity

considerations and may refrain from recommending that shareholders vote against directors when boards have

provided sufficient rationale for the lack of diversity or a plan to address the lack of diversity, including a


2024 Benchmark Policy Guidelines — United States	41

timeline of when the board intends to appoint additional gender diverse directors (generally by the next annual

meeting or as soon as reasonably practicable).

We may extend our gender diversity recommendations to additional members of the nominating committee in

cases where the committee chair is not standing for election due to a classified board, or based on other factors,

including the company’s size and industry, applicable laws in its state of headquarters, and its overall

governance profile.

Board Underrepresented Community Diversity

We will generally recommend against the chair of the nominating committee of a board with fewer than one

director from an underrepresented community on the board at companies within the Russell 1000 index.

We define “underrepresented community director” as an individual who self-identifies as Black, African

American, North African, Middle Eastern, Hispanic, Latino, Asian, Pacific Islander, Native American, Native

Hawaiian, or Alaskan Native, or who self-identifies as a member of the LGBTQIA+ community. For the purposes

of this evaluation, we will rely solely on self-identified demographic information as disclosed in company proxy

statements.

When making these voting recommendations, we will carefully review a company’s disclosure of its diversity

considerations and may refrain from recommending that shareholders vote against directors when boards have

provided a sufficient rationale or plan to address the lack of diversity on the board, including a timeline to

appoint additional directors from an underrepresented community (generally by the next annual meeting or as

soon as reasonably practicable).

We may extend our underrepresented community diversity recommendations to additional members of the

nominating committee in cases where the committee chair is not standing for election due to a classified board,

or based on other factors, including the company’s size and industry, applicable laws in its state of headquarters,

and its overall governance profile.

State Laws on Diversity

Several states have begun to encourage board diversity through legislation. Some state laws imposed

mandatory board composition requirements, while other states have enacted or are considering legislation that

encourages companies to diversify their boards but does not mandate board composition requirements.

Furthermore, several states have enacted or are considering enacting certain disclosure or reporting

requirements in filings made with each respective state annually.

Glass Lewis will recommend in accordance with mandatory board composition requirements set forth in

applicable state laws when they come into effect. We will generally refrain from recommending against

directors when applicable state laws do not mandate board composition requirements, are non-binding, or

solely impose disclosure or reporting requirements.

We note that during 2022, California’s Senate Bill 826 and Assembly Bill 979 regarding board gender and

“underrepresented community” diversity, respectively, were both deemed to violate the equal protection clause

of the California state constitution. These laws are currently in the appeals process.


2024 Benchmark Policy Guidelines — United States	42

Accordingly, where we previously recommended in accordance with mandatory board composition

requirements set forth in California’s SB 826 and AB 979, we will refrain from providing recommendations

pursuant to these state board composition requirements until further notice while we continue to monitor the

appeals process. However, we will continue to monitor compliance with these requirements.

Disclosure of Director Diversity and Skills

Because company disclosure is critical when measuring the mix of diverse attributes and skills of directors, Glass

Lewis assesses the quality of such disclosure in companies’ proxy statements. Accordingly, we reflect how a

company’s proxy statement presents: (i) the board’s current percentage of racial/ethnic diversity; (ii) whether

the board’s definition of diversity explicitly includes gender and/or race/ethnicity; (iii) whether the board has

adopted a policy requiring women and minorities to be included in the initial pool of candidates when selecting

new director nominees (aka “Rooney Rule”); and (iv) board skills disclosure. Such ratings will help inform our

assessment of a company’s overall governance and may be a contributing factor in our recommendations when

additional board-related concerns have been identified.

At companies in the Russell 1000 index that have not provided any disclosure in any of the above categories, we

will generally recommend voting against the chair of the nominating and/or governance committee. Further,

when companies in the Russell 1000 index have not provided any disclosure of individual or aggregate racial/

ethnic minority board demographic information, we will generally recommend voting against the chair of the

nominating and/or governance committee.

Proxy Access

In lieu of running their own contested election, proxy access would not only allow certain shareholders to

nominate directors to company boards but the shareholder nominees would be included on the company’s

ballot, significantly enhancing the ability of shareholders to play a meaningful role in selecting their

representatives. Glass Lewis generally supports affording shareholders the right to nominate director candidates

to management’s proxy as a means to ensure that significant, long-term shareholders have an ability to

nominate candidates to the board.

Companies generally seek shareholder approval to amend company bylaws to adopt proxy access in response to

shareholder engagement or pressure, usually in the form of a shareholder proposal requesting proxy access,

although some companies may adopt some elements of proxy access without prompting. Glass Lewis considers

several factors when evaluating whether to support proposals for companies to adopt proxy access including the

specified minimum ownership and holding requirement for shareholders to nominate one or more directors, as

well as company size, performance and responsiveness to shareholders.

For a discussion of recent regulatory events in this area, along with a detailed overview of the Glass Lewis

approach to shareholder proposals regarding Proxy Access, refer to Glass Lewis’ Proxy Paper Guidelines for

Shareholder Proposals & ESG-Related Issues, available at www.glasslewis.com.


2024 Benchmark Policy Guidelines — United States	43

Majority Vote for Election of Directors

Majority voting for the election of directors is fast becoming the de facto standard in corporate board elections.

In our view, the majority voting proposals are an effort to make the case for shareholder impact on director

elections on a company-specific basis.

While this proposal would not give shareholders the opportunity to nominate directors or lead to elections

where shareholders have a choice among director candidates, if implemented, the proposal would allow

shareholders to have a voice in determining whether the nominees proposed by the board should actually serve

as the overseer-representatives of shareholders in the boardroom. We believe this would be a favorable

outcome for shareholders.

The number of shareholder proposals requesting that companies adopt a majority voting standard has declined

significantly during the past decade, largely as a result of widespread adoption of majority voting or director

resignation policies at U.S. companies. In 2019, 89% of the S&P 500 Index had implemented a resignation policy

for directors failing to receive majority shareholder support, compared to 65% in 2009.40

The Plurality Vote Standard

Today, most U.S. companies still elect directors by a plurality vote standard. Under that standard, if one

shareholder holding only one share votes in favor of a nominee (including that director, if the director is a

shareholder), that nominee “wins” the election and assumes a seat on the board. The common concern among

companies with a plurality voting standard is the possibility that one or more directors would not receive a

majority of votes, resulting in “failed elections.”

Advantages of a Majority Vote Standard

If a majority vote standard were implemented, a nominee would have to receive the support of a majority of the

shares voted in order to be elected. Thus, shareholders could collectively vote to reject a director they believe

will not pursue their best interests. Given that so few directors (less than 100 a year) do not receive majority

support from shareholders, we think that a majority vote standard is reasonable since it will neither result in

many failed director elections nor reduce the willingness of qualified, shareholder-focused directors to serve in

the future. Further, most directors who fail to receive a majority shareholder vote in favor of their election do

not step down, underscoring the need for true majority voting.

We believe that a majority vote standard will likely lead to more attentive directors. Although shareholders only

rarely fail to support directors, the occasional majority vote against a director’s election will likely deter the

election of directors with a record of ignoring shareholder interests. Glass Lewis will therefore generally support

proposals calling for the election of directors by a majority vote, excepting contested director elections.

In response to the high level of support majority voting has garnered, many companies have voluntarily taken

steps to implement majority voting or modified approaches to majority voting. These steps range from a

40 Spencer Stuart Board Index, 2019, p. 15.


2024 Benchmark Policy Guidelines — United States	44

modified approach requiring directors that receive a majority of withheld votes to resign (i.e., a resignation

policy) to actually requiring a majority vote of outstanding shares to elect directors.

We feel that the modified approach does not go far enough because requiring a director to resign is not the

same as requiring a majority vote to elect a director and does not allow shareholders a definitive voice in the

election process. Further, under the modified approach, the corporate governance committee could reject a

resignation and, even if it accepts the resignation, the corporate governance committee decides on the

director’s replacement. And since the modified approach is usually adopted as a policy by the board or a board

committee, it could be altered by the same board or committee at any time.

Conflicting and Excluded Proposals

SEC Rule 14a-8(i)(9) allows companies to exclude shareholder proposals “if the proposal directly conflicts with

one of the company’s own proposals to be submitted to shareholders at the same meeting.” On October 22,

2015, the SEC issued Staff Legal Bulletin No. 14H (SLB 14H) clarifying its rule concerning the exclusion of certain

shareholder proposals when similar items are also on the ballot. SLB 14H increased the burden on companies to

prove to SEC staff that a conflict exists; therefore, many companies still chose to place management proposals

alongside similar shareholder proposals in many cases.

During the 2018 proxy season, a new trend in the SEC’s interpretation of this rule emerged. Upon submission of

shareholder proposals requesting that companies adopt a lower special meeting threshold, several companies

petitioned the SEC for no-action relief under the premise that the shareholder proposals conflicted with

management’s own special meeting proposals, even though the management proposals set a higher threshold

than those requested by the proponent. No-action relief was granted to these companies; however, the SEC

stipulated that the companies must state in the rationale for the management proposals that a vote in favor of

management’s proposal was tantamount to a vote against the adoption of a lower special meeting threshold. In

certain instances, shareholder proposals to lower an existing special meeting right threshold were excluded on

the basis that they conflicted with management proposals seeking to ratify the existing special meeting rights.

We find the exclusion of these shareholder proposals to be especially problematic as, in these instances,

shareholders are not offered any enhanced shareholder right, nor would the approval (or rejection) of the

ratification proposal initiate any type of meaningful change to shareholders’ rights.

In instances where companies have excluded shareholder proposals, such as those instances where special

meeting shareholder proposals are excluded as a result of “conflicting” management proposals, Glass Lewis will

take a case-by-case approach, taking into account the following issues:

•The threshold proposed by the shareholder resolution;

•The threshold proposed or established by management and the attendant rationale for the threshold;

•Whether management’s proposal is seeking to ratify an existing special meeting right or adopt a bylaw

that would establish a special meeting right; and

•The company’s overall governance profile, including its overall responsiveness to and engagement with

shareholders.

Glass Lewis generally favors a 10-15% special meeting right. Accordingly, Glass Lewis will generally recommend

voting for management or shareholder proposals that fall within this range. When faced with conflicting


2024 Benchmark Policy Guidelines — United States	45

proposals, Glass Lewis will generally recommend in favor of the lower special meeting right and will recommend

voting against the proposal with the higher threshold. However, in instances where there are conflicting

management and shareholder proposals and a company has not established a special meeting right, Glass Lewis

may recommend that shareholders vote in favor of the shareholder proposal and that they abstain from a

management-proposed bylaw amendment seeking to establish a special meeting right. We believe that an

abstention is appropriate in this instance in order to ensure that shareholders are sending a clear signal

regarding their preference for the appropriate threshold for a special meeting right, while not directly opposing

the establishment of such a right.

In cases where the company excludes a shareholder proposal seeking a reduced special meeting right by means

of ratifying a management proposal that is materially different from the shareholder proposal, we will generally

recommend voting against the chair or members of the governance committee.

In other instances of conflicting management and shareholder proposals, Glass Lewis will consider the following:

•The nature of the underlying issue;

•The benefit to shareholders of implementing the proposal;

•The materiality of the differences between the terms of the shareholder proposal and management

proposal;

•The context of a company’s shareholder base, corporate structure and other relevant circumstances;

and

•A company’s overall governance profile and, specifically, its responsiveness to shareholders as

evidenced by a company’s response to previous shareholder proposals and its adoption of progressive

shareholder rights provisions.

In recent years, we have seen the dynamic nature of the considerations given by the SEC when determining

whether companies may exclude certain shareholder proposals. We understand that not all shareholder

proposals serve the long-term interests of shareholders, and value and respect the limitations placed on

shareholder proponents, as certain shareholder proposals can unduly burden companies. However, Glass Lewis

believes that shareholders should be able to vote on issues of material importance.

We view the shareholder proposal process as an important part of advancing shareholder rights and

encouraging responsible and financially sustainable business practices. While recognizing that certain proposals

cross the line between the purview of shareholders and that of the board, we generally believe that companies

should not limit investors’ ability to vote on shareholder proposals that advance certain rights or promote

beneficial disclosure. Accordingly, Glass Lewis will make note of instances where a company has successfully

petitioned the SEC to exclude shareholder proposals. If after review we believe that the exclusion of a

shareholder proposal is detrimental to shareholders, we may, in certain very limited circumstances, recommend

against members of the governance committee.


2024 Benchmark Policy Guidelines — United States	46

Transparency and Integrity in Financial

Reporting

Auditor Ratification

The auditor’s role as gatekeeper is crucial in ensuring the integrity and transparency of the financial information

necessary for protecting shareholder value. Shareholders rely on the auditor to ask tough questions and to do a

thorough analysis of a company’s books to ensure that the information provided to shareholders is complete,

accurate, fair, and that it is a reasonable representation of a company’s financial position. The only way

shareholders can make rational investment decisions is if the market is equipped with accurate information

about a company’s fiscal health. As stated in the October 6, 2008 Final Report of the Advisory Committee on the

Auditing Profession to the U.S. Department of the Treasury:

“The auditor is expected to offer critical and objective judgment on the financial matters under

consideration, and actual and perceived absence of conflicts is critical to that expectation. The

Committee believes that auditors, investors, public companies, and other market participants must

understand the independence requirements and their objectives, and that auditors must adopt a mindset

of skepticism when facing situations that may compromise their independence.”

As such, shareholders should demand an objective, competent and diligent auditor who performs at or above

professional standards at every company in which the investors hold an interest. Like directors, auditors should

be free from conflicts of interest and should avoid situations requiring a choice between the auditor’s interests

and the public’s interests. Almost without exception, shareholders should be able to annually review an

auditor’s performance and to annually ratify a board’s auditor selection. Moreover, in October 2008, the

Advisory Committee on the Auditing Profession went even further, and recommended that “to further enhance

audit committee oversight and auditor accountability ... disclosure in the company proxy statement regarding

shareholder ratification [should] include the name(s) of the senior auditing partner(s) staffed on the

engagement.”41

On August 16, 2011, the PCAOB issued a Concept Release seeking public comment on ways that auditor

independence, objectivity and professional skepticism could be enhanced, with a specific emphasis on

mandatory audit firm rotation. The PCAOB convened several public roundtable meetings during 2012 to further

discuss such matters. Glass Lewis believes auditor rotation can ensure both the independence of the auditor and

the integrity of the audit; we will typically recommend supporting proposals to require auditor rotation when

the proposal uses a reasonable period of time (usually not less than 5-7 years), particularly at companies with a

history of accounting problems.

On June 1, 2017, the PCAOB adopted new standards to enhance auditor reports by providing additional

important information to investors. For companies with fiscal year end dates on or after December 15, 2017,

reports were required to include the year in which the auditor began serving consecutively as the company’s

auditor. For large accelerated filers with fiscal year ends of June 30, 2019 or later, and for all other companies

with fiscal year ends of December 15, 2020 or later, communication of critical audit matters (CAMs) will also be

required. CAMs are matters that have been communicated to the audit committee, are related to accounts or

41 “Final Report of the Advisory Committee on the Auditing Profession to the U.S. Department of the Treasury.” p. VIII:20,

October 6, 2008.


2024 Benchmark Policy Guidelines — United States	47

disclosures that are material to the financial statements, and involve especially challenging, subjective, or

complex auditor judgment.

Glass Lewis believes the additional reporting requirements are beneficial for investors. The additional

disclosures can provide investors with information that is critical to making an informed judgment about an

auditor’s independence and performance. Furthermore, we believe the additional requirements are an

important step toward enhancing the relevance and usefulness of auditor reports, which too often are seen as

boilerplate compliance documents that lack the relevant details to provide meaningful insight into a particular

audit.

Voting Recommendations on Auditor Ratification

We generally support management’s choice of auditor except when we believe the auditor’s independence or

audit integrity has been compromised. Where a board has not allowed shareholders to review and ratify an

auditor, we typically recommend voting against the audit committee chair. When there have been material

restatements of annual financial statements or material weaknesses in internal controls, we usually recommend

voting against the entire audit committee.

Reasons why we may not recommend ratification of an auditor include:

•When audit fees plus audit-related fees total less than the tax fees and/or other non-audit fees.

•Recent material restatements of annual financial statements, including those resulting in the reporting

of material weaknesses in internal controls and including late filings by the company where the auditor

bears some responsibility for the restatement or late filing.42

•When the auditor performs prohibited services such as tax-shelter work, tax services for the CEO or CFO,

or contingent-fee work, such as a fee based on a percentage of economic benefit to the company.

•When audit fees are excessively low, especially when compared with other companies in the same

industry.

•When the company has aggressive accounting policies.

•When the company has poor disclosure or lack of transparency in its financial statements.

•Where the auditor limited its liability through its contract with the company or the audit contract

requires the corporation to use alternative dispute resolution procedures without adequate

justification.

•We also look for other relationships or concerns with the auditor that might suggest a conflict between

the auditor’s interests and shareholder interests.

•In determining whether shareholders would benefit from rotating the company’s auditor, where

relevant we will consider factors that may call into question an auditor’s effectiveness, including auditor

tenure, a pattern of inaccurate audits, and any ongoing litigation or significant controversies. When

Glass Lewis considers ongoing litigation and significant controversies, it is mindful that such matters may

involve unadjudicated allegations. Glass Lewis does not assume the truth of such allegations or that the

42 An auditor does not audit interim financial statements. Thus, we generally do not believe that an auditor should be opposed

due to a restatement of interim financial statements unless the nature of the misstatement is clear from a reading of the

incorrect financial statements.


2024 Benchmark Policy Guidelines — United States	48

law has been violated. Instead, Glass Lewis focuses more broadly on whether, under the particular facts

and circumstances presented, the nature and number of such lawsuits or other significant controversies

reflects on the risk profile of the company or suggests that appropriate risk mitigation measures may be

warranted.”

Pension Accounting Issues

A pension accounting question occasionally raised in proxy proposals is what effect, if any, projected returns on

employee pension assets should have on a company’s net income. This issue often arises in the executive-

compensation context in a discussion of the extent to which pension accounting should be reflected in business

performance for purposes of calculating payments to executives.

Glass Lewis believes that pension credits should not be included in measuring income that is used to award

performance-based compensation. Because many of the assumptions used in accounting for retirement plans

are subject to the company’s discretion, management would have an obvious conflict of interest if pay were tied

to pension income. In our view, projected income from pensions does not truly reflect a company’s

performance.


2024 Benchmark Policy Guidelines — United States	49

The Link Between Compensation and

Performance

Glass Lewis carefully reviews the compensation awarded to senior executives, as we believe that this is an

important area in which the board’s priorities are revealed. Glass Lewis strongly believes executive

compensation should be linked directly with the performance of the business the executive is charged with

managing. We believe the most effective compensation arrangements provide for an appropriate mix of

performance-based short- and long-term incentives in addition to fixed pay elements while promoting a prudent

and sustainable level of risk-taking.

Glass Lewis believes that comprehensive, timely and transparent disclosure of executive pay is critical to

allowing shareholders to evaluate the extent to which pay is aligned with company performance. When

reviewing proxy materials, Glass Lewis examines whether the company discloses the performance metrics used

to determine executive compensation. We recognize performance metrics must necessarily vary depending on

the company and industry, among other factors, and may include a wide variety of financial measures as well as

industry-specific performance indicators. However, we believe companies should disclose why the specific

performance metrics were selected and how the actions they are designed to incentivize will lead to better

corporate performance.

Moreover, it is rarely in shareholders’ interests to disclose competitive data about individual salaries below the

senior executive level. Such disclosure could create internal personnel discord that would be counterproductive

for the company and its shareholders. We do not believe shareholders need or will benefit from detailed

reports about individual management employees other than the most senior executives.

Advisory Vote on Executive Compensation (Say-

on-Pay)

The Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) required most

companies to hold an advisory vote on executive compensation at the first shareholder meeting that occurs six

months after enactment of the bill (January 21, 2011).

This practice of allowing shareholders a non-binding vote on a company’s compensation report is standard

practice in many non-U.S. countries, and has been a requirement for most companies in the United Kingdom

since 2003 and in Australia since 2005. Although say-on-pay proposals are non-binding, a high level of

“against” or “abstain” votes indicates substantial shareholder concern about a company’s compensation policies

and procedures.

Given the complexity of most companies’ compensation programs, Glass Lewis applies a highly nuanced

approach when analyzing advisory votes on executive compensation. We review each company’s compensation

on a case-by-case basis, recognizing that each company must be examined in the context of industry, size,

maturity, performance, financial condition, its historic pay for performance practices, and any other relevant

internal or external factors.


2024 Benchmark Policy Guidelines — United States	50

We believe that each company should design and apply specific compensation policies and practices that are

appropriate to the circumstances of the company and, in particular, will attract and retain competent executives

and other staff, while motivating them to grow the company’s long-term shareholder value.

Where we find those specific policies and practices serve to reasonably align compensation with performance,

and such practices are adequately disclosed, Glass Lewis will recommend supporting the company’s approach.

If, however, those specific policies and practices fail to demonstrably link compensation with performance, Glass

Lewis will generally recommend voting against the say-on-pay proposal.

Glass Lewis reviews say-on-pay proposals on both a qualitative basis and a quantitative basis, with a focus on

several main areas:

•The overall design and structure of the company’s executive compensation programs including selection

and challenging nature of performance metrics;

•The implementation and effectiveness of the company’s executive compensation programs including

pay mix and use of performance metrics in determining pay levels;

•The quality and content of the company’s disclosure;

•The quantum paid to executives; and

•The link between compensation and performance as indicated by the company’s current and past pay-

for-performance grades.

We also review any significant changes or modifications, including post fiscal year-end changes and one-time

awards, particularly where the changes touch upon issues that are material to Glass Lewis recommendations.

Additionally, while we recognize their rarity in the U.S. market, beneficial features such as but not limited to

post-vesting and/or post-retirement holding requirements may be viewed positively in our holistic analysis.

Say-on-Pay Voting Recommendations

In cases where we find deficiencies in a company’s compensation program’s design, implementation or

management, we will recommend that shareholders vote against the say-on-pay proposal. Generally, such

instances include:

•Evidence of a pattern of poor pay-for-performance practices (e.g., deficient or failing pay-for-

performance grades or a misalignment between incentive payouts and the shareholder experience),

•Unclear or questionable disclosure regarding the overall compensation structure (e.g., limited

information regarding benchmarking processes, limited rationale for bonus performance metrics and

targets, etc.),

•Questionable adjustments to certain aspects of the overall compensation structure (e.g., limited

rationale for significant changes to performance targets or metrics, the payout of guaranteed bonuses

or sizable retention grants, etc.), and/or

•Other egregious compensation practices.

Glass Lewis approaches its analysis of executive compensation programs on a case-by-case basis. Glass Lewis

reviews all factors related to named executive officer compensation, including quantitative analyses, structural

features, the presence of effective best practice policies, disclosure quality and trajectory-related factors. Except

for particularly egregious pay decisions and practices, no one factor would ordinarily lead to an unfavorable


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recommendation without a review of the company’s rationale and/or the influence of such decisions or

practices on other aspects of the pay program, most notably the company’s ability to align executive pay with

performance and the shareholder experience.

Although not an exhaustive list, the following factors are viewed negatively. When weighed together, they may

cause Glass Lewis to recommend voting against a say-on-pay vote:

•Inappropriate or outsized self-selected peer groups and/or benchmarking issues such as compensation

targets set well above the median without adequate justification;

•Egregious or excessive bonuses, equity awards, perquisites or severance payments, including golden

handshakes and golden parachutes;

•Insufficient response to low shareholder support;

•Problematic contractual payments, such as guaranteed bonuses;

•Adjustments to performance results that lead to problematic pay outcomes;

•Insufficiently challenging performance targets and/or high potential payout opportunities;

•Performance targets lowered without justification;

•Discretionary bonuses paid when short- or long-term incentive plan targets were not met;

•High executive pay relative to peers that is not justified by outstanding company performance; and

•The terms of the long-term incentive plans are inappropriate (please see “Long-Term Incentives”).

The aforementioned issues influence Glass Lewis’ assessment of the structure of a company’s compensation

program. We evaluate structure on a “Good, Fair, Poor” rating scale whereby a “Good” rating represents a

compensation program with little to no concerns and market-leading practices, a “Fair” rating represents a

compensation program with some concerns but general adherence to best practices and a “Poor” rating

represents a compensation program that deviates significantly from best practice or contains one or more

egregious compensation practices.

We believe that it is important for companies to provide investors with clear and complete disclosure of all the

significant terms of compensation arrangements. Similar to structure, we evaluate disclosure on a “Good, Fair,

Poor” rating scale. A “Good” rating represents a thorough discussion of all elements of compensation with

rationale. A “Fair” rating represents an adequate discussion of all or most elements of compensation with

rationale. A “Poor” rating represents an incomplete or absent discussion of compensation. In instances where a

company has simply failed to provide sufficient disclosure of its policies, we may recommend shareholders vote

against this proposal solely on this basis, regardless of the appropriateness of compensation levels. Glass Lewis

understands that regulatory disclosure rules such as smaller reporting company disclosure standards may

condone the omission of key executive compensation information. However, we believe that companies should

provide sufficient information in the proxy statement to enable shareholders to vote in an informed manner.

In general, most companies will fall within the “Fair” range for both structure and disclosure, and Glass Lewis

largely uses the “Good” and “Poor” ratings to highlight outliers.

Where we identify egregious compensation practices, we may also recommend voting against the compensation

committee based on the practices or actions of its members during the year. Such practices may include

approving large one-off payments, the inappropriate, unjustified use of discretion, or sustained poor pay for

performance practices. (Refer to the section on "Compensation Committee Performance" for more

information.)


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Company Responsiveness

When companies receive a significant level of shareholder opposition to a say-on-pay proposal, which occurs

when more than 20% of votes on the proposal are cast as AGAINST and/or ABSTAIN, we believe the board

should demonstrate a commensurate level of engagement and responsiveness to the concerns behind the

disapproval, with a particular focus on responding to shareholder feedback. When assessing the level of

opposition to say-on-pay proposals, we may further examine the level of opposition among disinterested

shareholders as an independent group. While we recognize that sweeping changes cannot be made to a

compensation program without due consideration, and that often a majority of shareholders may have voted in

favor of the proposal, given that the average approval rate for say-on-pay proposals is about 90%, we believe

the compensation committee should demonstrate in its proxy statement a level of response to a significant vote

against. In general, our expectations regarding the minimum appropriate levels of responsiveness will

correspond with the level of shareholder opposition, as expressed both through the magnitude of opposition in

a single year, and through the persistence of shareholder disapproval over time.

Responses we consider appropriate include engaging with large shareholders, especially dissenting

shareholders, to identify their concerns, and, where reasonable, implementing changes and/or making

commitments that directly address those concerns within the company’s compensation program. In cases where

particularly egregious pay decisions caused the say on pay proposal to fail, Glass Lewis will closely consider

whether any changes were made directly relating to the pay decision that may address structural concerns that

shareholders have. In the absence of any evidence in the disclosure that the board is actively engaging

shareholders on these issues and responding accordingly, we may recommend holding compensation

committee members accountable for failing to adequately respond to shareholder opposition. Regarding such

recommendations, careful consideration will be given to the level of shareholder protest and the severity and

history of compensation practices.

Pay for Performance

Glass Lewis believes an integral part of a well-structured compensation package is a successful link between pay

and performance. Our proprietary pay-for-performance model, which serves as our primary quantitative

analysis, was developed to better evaluate the link between pay and performance. Generally, compensation and

performance are measured against a peer group of appropriate companies that may overlap, to a certain extent,

with a company’s self-disclosed peers. This quantitative analysis provides a consistent framework and historical

context for our clients to determine how well companies link executive compensation to relative performance.

Companies that demonstrate a weaker link are more likely to receive a negative recommendation; however,

other qualitative factors such as overall incentive structure, significant forthcoming changes to the

compensation program or reasonable long-term payout levels may mitigate our concerns to a certain extent.

While we assign companies a letter grade of A, B, C, D or F based on the alignment between pay and

performance under our primary model, the grades derived from the Glass Lewis pay-for-performance analysis

do not follow the traditional U.S. school letter grade system. Rather, the grades are generally interpreted as

follows:

Grade of A: The company’s percentile rank for pay is significantly less than its percentile rank for performance

Grade of B: The company’s percentile rank for pay is moderately less than its percentile rank for performance


2024 Benchmark Policy Guidelines — United States	53

Grade of C: The company’s percentile rank for pay is approximately aligned with its percentile rank for

performance

Grade of D: The company’s percentile rank for pay is higher than its percentile rank for performance

Grade of F: The company’s percentile rank for pay is significantly higher than its percentile rank for performance

Separately, a specific comparison between the company’s executive pay and its peers’ executive pay levels may

be discussed in the analysis for additional insight into the grade. Likewise, a specific comparison between the

company’s performance and its peers’ performance is reflected in the analysis for further context.

We use this analysis to inform our voting decisions on say-on-pay proposals. If a company receives a “D” or “F”

from our proprietary model, we are more likely to recommend that shareholders vote against the say-on-pay

proposal. However, important supplemental quantitative factors like analyses of realized pay levels and the

“compensation actually paid” data mandated by the SEC’s 2022 final rule regarding pay versus performance may

be considered, and other qualitative factors such as an effective overall incentive structure, the relevance of

selected performance metrics, significant forthcoming enhancements or reasonable long-term payout levels

may give us cause to recommend in favor of a proposal even when we have identified a disconnect between pay

and performance.

In determining the peer groups used in our pay-for-performance letter grades, Glass Lewis utilizes a proprietary

methodology that considers both market and industry peers, along with each company’s self-disclosed peers

and peers of those company-disclosed peers. Each component is considered on a weighted basis and is subject

to size-based ranking and screening. Since the peer group used is based on an independent, proprietary

technique, it will often differ from the one used by the company which, in turn, will affect the resulting analyses.

While Glass Lewis believes that the independent, rigorous methodology it uses provides a valuable perspective

on the company’s compensation program, the company’s self-selected peer group may also presented in the

Proxy Paper for comparative purposes and for supplemental analyses.

Short-Term Incentives

A short-term bonus or incentive (STI) should be demonstrably tied to performance. Whenever possible, we

believe a mix of corporate and individual performance measures is appropriate. We would normally expect

performance measures for STI plans to be based on company-wide or divisional financial measures as well as

non-financial, qualitative or non-formulaic factors such as those related to safety, environmental issues, and

customer satisfaction when they are material to the company’s overall health. While we recognize that

companies operating in different sectors or markets may seek to utilize a wide range of metrics, we expect such

measures to be appropriately tied to a company’s business drivers.

Further, the threshold, target and maximum performance goals and corresponding payout levels that can be

achieved under STI plans should be disclosed. Shareholders should expect stretching performance targets for

the maximum award to be achieved. Any increase in the potential target and maximum award should be clearly

justified to shareholders, as should any decrease in target and maximum performance levels from the previous

year.

Glass Lewis recognizes that disclosure of some measures or performance targets may include commercially

confidential information. Therefore, we believe it may be reasonable to exclude such information in some cases


2024 Benchmark Policy Guidelines — United States	54

as long as the company provides sufficient justification for non-disclosure. However, where a short-term bonus

has been paid, companies should disclose the extent to which performance has been achieved against relevant

targets, including disclosure of the actual target achieved.

Where management has received significant short-term incentive payments but overall performance and/or the

shareholder experience over the measurement year prima facie appears to be poor or negative, we believe the

company should provide a clear explanation of why these significant short-term payments were made. We also

believe any significant changes to the program structure should be accompanied by rationalizing disclosure.

Further, where a company has applied upward discretion, which includes lowering goals mid-year, increasing

calculated payouts or retroactively pro-rating performance periods, we expect a robust discussion of why the

decision was necessary.

Adjustments to GAAP figures may be considered in Glass Lewis’ assessment of the effectiveness of the incentive

at tying executive pay with performance. We believe that where companies use non-GAAP or bespoke metrics,

clear reconciliations between these figures and GAAP figures in audited financial statements should be provided.

Moreover, Glass Lewis believes that in circumstances where significant adjustments were applied to

performance results, thorough, detailed discussion of adjustments akin to a GAAP-to-non-GAAP reconciliation

and their impact on payouts within the proxy statement is warranted. The absence of such enhanced disclosure

for significant adjustments will impact Glass Lewis' assessment of the quality of disclosure and, in turn, may play

a role in the overall recommendation for the advisory vote on executive compensation.

Glass Lewis recognizes the importance of the compensation committee’s prudent and responsible exercise of

discretion over incentive pay outcomes to account for significant, material events that would otherwise be

excluded from performance results of selected metrics of incentive programs. For instance, litigation settlement

charges are typically removed from non-GAAP results before the determination of formulaic incentive payouts,

or health and safety failures may not be reflected in performance results where companies do not expressly

include health and safety metrics in incentive plans. Such events may nevertheless be consequential to

corporate performance results, impact the shareholder experience, and, in some cases, may present material

risks. Conversely, certain events may adversely impact formulaic payout results despite being outside

executives' control. We believe that companies should provide thorough discussion of how such events were

considered in the committee’s decisions to exercise discretion over incentive payouts.

We do not generally recommend against a pay program due to the use of a non-formulaic plan. If a company has

chosen to rely primarily on a subjective assessment or the board’s discretion in determining short-term bonuses,

we believe that the proxy statement should provide a meaningful discussion of the board’s rationale in

determining the bonuses paid as well as a rationale for the use of a non-formulaic mechanism. Particularly

where the aforementioned disclosures are substantial and satisfactory, such a structure will not provoke serious

concern in our analysis on its own. However, in conjunction with other significant issues in a program’s design or

operation, such as a disconnect between pay and performance, the absence of a cap on payouts, or a lack of

performance-based long-term awards, the use of a non-formulaic bonus may help drive a negative

recommendation.


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Long-Term Incentives

Glass Lewis recognizes the value of equity-based incentive programs, which are often the primary long-term

incentive for executives. When used appropriately, they can provide a vehicle for linking an executive’s pay to

company performance, thereby aligning their interests with those of shareholders. In addition, equity-based

compensation can be an effective way to attract, retain and motivate key employees.

There are certain elements that Glass Lewis believes are common to most well-structured long-term incentive

(LTI) plans. These include:

•No re-testing or lowering of performance conditions;

•Performance metrics that cannot be easily manipulated by management;

•Two or more performance metrics;

•At least one relative performance metric that compares the company’s performance to a relevant peer

group or index;

•Performance periods of at least three years;

•Stretching metrics that incentivize executives to strive for outstanding performance while not

encouraging excessive risk-taking;

•Reasonable individual award limits;

•Equity granting practices that are clearly disclosed and

•Additional post-vesting holding periods to encourage long-term executive share ownership.

In evaluating long-term incentive grants, Glass Lewis generally believes that at least half of the grant should

consist of performance-based awards, putting a material portion of executive compensation at-risk and

demonstrably linked to the performance of the company. While we will consistently raise concern with

programs that do not meet this criterion, we may refrain from a negative recommendation in the absence of

other significant issues with the program’s design or operation. However, in cases where performance-based

awards are significantly rolled back or eliminated from a company’s long-term incentive plan, such decisions will

generally be viewed negatively outside of exceptional circumstances. Given the reduction in rigor and

accountability in the pay program, Glass Lewis will assess the revision’s impact on the pay program’s ability to

align executive pay with performance and shareholder experience; programs that fail our assessment may

receive an unfavorable recommendation. They may also lead to an unfavorable recommendation from Glass

Lewis if the change is not offset by meaningful revisions such as to pay quantum and vesting periods, particularly

in the absence of cogent rationale.

As with the short-term incentive, Glass Lewis recognizes the importance of the compensation committee’s

judicious and responsible exercise of discretion over incentive pay outcomes to account for significant events

that would otherwise be excluded from performance results of selected metrics of incentive programs. We

believe that companies should provide thorough discussion of how such events were considered in the

committee’s decisions to exercise discretion or refrain from applying discretion over incentive pay outcomes.

Furthermore, considerations related to the use of non-GAAP metrics under the STI plan similarly apply to the

long-term incentive program.

Performance measures should be carefully selected and should relate to the specific business/industry in which

the company operates and, especially, to the key value drivers of the company’s business. As with short-term


2024 Benchmark Policy Guidelines — United States	56

incentive plans, the basis for any adjustments to metrics or results should be clearly explained, as should the

company’s judgment on the use of discretion and any significant changes to the performance program structure.

While cognizant of the inherent complexity of certain performance metrics, Glass Lewis generally believes that

measuring a company’s performance with multiple metrics serves to provide a more complete picture of the

company’s performance than a single metric. Further, reliance on just one metric may focus too much

management attention on a single target and is therefore more susceptible to manipulation. When utilized for

relative measurements, external benchmarks such as a sector index or peer group should be disclosed and

transparent. The rationale behind the selection of a specific index or peer group should also be disclosed.

Internal performance benchmarks should also be disclosed and transparent, unless a cogent case for

confidentiality is made and fully explained. Similarly, actual performance and vesting levels for previous grants

earned during the fiscal year should be disclosed.

We also believe shareholders should evaluate the relative success of a company’s compensation programs,

particularly with regard to existing equity-based incentive plans, in linking pay and performance when evaluating

potential changes to LTI plans and determining the impact of additional stock awards. We will therefore review

the company’s pay-for-performance analyses (see above for more information) and specifically the proportion

of total compensation that is stock-based.

Grants of Front-Loaded Awards

Many U.S. companies have chosen to provide large grants, usually in the form of equity awards, that are

intended to serve as compensation for multiple years. This practice, often called front-loading, is taken up either

in the regular course of business or as a response to specific business conditions and with a predetermined

objective. The so-called “mega-grant”, an outsized award to one individual sometimes valued at over $100

million is sometimes but not always provided as a front-loaded award. We believe shareholders should generally

be wary of this granting approach, and we accordingly weigh these grants with particular scrutiny.

While the use of front-loaded awards is intended to lock-in executive service and incentives, the same rigidity

also raises the risk of effectively tying the hands of the compensation committee. As compared with a more

responsive annual granting schedule program, front-loaded awards may preclude improvements or changes to

reflect evolving business strategies or to respond to other unforeseen factors. Additionally, if structured poorly,

early vesting of such awards may reduce or eliminate the retentive power at great cost to shareholders. The

considerable emphasis on a single grant can place intense pressures on every facet of its design, amplifying any

potential perverse incentives and creating greater room for unintended consequences. In particular, provisions

around changes of control or separations of service must ensure that executives do not receive excessive

payouts that do not reflect shareholder experience or company performance.

We consider a company’s rationale for granting awards under this structure and also expect any front-loaded

awards to include a firm commitment not to grant additional awards for a defined period, as is commonly

associated with this practice. Even when such a commitment is provided, unexpected circumstances may lead

the board to make additional payments or awards for retention purposes, or to incentivize management

towards more realistic goals or a revised strategy. If a company breaks its commitment not to grant further

awards, we may recommend against the pay program unless a convincing rationale is provided. The multiyear

nature of these awards generally lends itself to significantly higher compensation figures in the year of grant


2024 Benchmark Policy Guidelines — United States	57

than might otherwise be expected. In our qualitative analysis of the grants of front-loaded awards to executives,

Glass Lewis considers the quantum of the award on an annualized basis and may compare this result to the prior

practice and peer data, among other benchmarks. Additionally, for awards that are granted in the form of

equity, Glass Lewis may consider the total potential dilutive effect of such award on shareholders.

In situations where the front-loaded award was meant to cover a certain portion of the regular long-term

incentive grant for each year during the covered period, our analysis of the value of the remaining portion of the

regular long-term incentives granted during the period covered by the award will account for the annualized

value of the front-loaded portion, and we expect no supplemental grant be awarded during the vesting period of

the front-loaded portion.

Linking Executive Pay to Environmental and Social Criteria

Glass Lewis believes that explicit environmental and/or social (E&S) criteria in executive incentive plans, when

used appropriately, can serve to provide both executives and shareholders a clear line of sight into a company’s

ESG strategy, ambitions, and targets. Although we are strongly supportive of companies’ incorporation of

material E&S risks and opportunities in their long-term strategic planning, we believe that the inclusion of E&S

metrics in compensation programs should be predicated on each company’s unique circumstances. In order to

establish a meaningful link between pay and performance, companies must consider factors including their

industry, size, risk profile, maturity, performance, financial condition, and any other relevant internal or external

factors.

When a company is introducing E&S criteria into executive incentive plans, we believe it is important that

companies provide shareholders with sufficient disclosure to allow them to understand how these criteria align

withtheir strategies. Additionally, Glass Lewis recognizes that there may be situations where certain E&S

performance criteria are reasonably viewed as prerequisites for executive performance, as opposed to

behaviors and conditions that need to be incentivized. For example, we believe that shareholders should

interrogate the use of metrics that award executives for ethical behavior or compliance with policies and

regulations. It is our view that companies should provide shareholders with disclosures that clearly lay out the

rationale for selecting specific E&S metrics, the target-setting process, and corresponding payout opportunities.

Further, particularly in the case of qualitative metrics, we believe that shareholders should be provided with a

clear understanding of the basis on which the criteria will be assessed. Where quantitative targets have been

set, we believe that shareholders are best served when these are disclosed on an ex-ante basis, or the board

should outline why it believes it is unable to do so.

While we believe that companies should generally set long-term targets for their environmental and social

ambitions, we are mindful that not all compensation schemes lend themselves to the inclusion of E&S metrics.

We also are of the view that companies should retain flexibility in not only choosing to incorporate E&S metrics

in their compensation plans, but also in the placement of these metrics. For example, some companies may

resolve that including E&S criteria in the annual bonus may help to incentivize the achievement of short-term

milestones and allow for more maneuverability in strategic adjustments to long-term goals. Other companies

may determine that their long-term sustainability targets are best achieved by incentivizing executives through

metrics included in their long-term incentive plans.


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One-Time Awards

Glass Lewis believes shareholders should generally be wary of awards granted outside of the standard incentive

schemes, as such awards have the potential to undermine the integrity of a company’s regular incentive plans or

the link between pay and performance, or both. We generally believe that if the existing incentive programs fail

to provide adequate incentives to executives, companies should redesign their compensation programs rather

than make additional grants.

However, Glass Lewis reviews grants of supplemental awards on a case-by-case, company-by-company basis to

give adequate consideration for unique circumstances. Companies should provide a thorough description of the

awards, including a cogent and convincing explanation of their necessity and why existing awards do not provide

sufficient motivation and a discussion of how the quantum of the award and its structure were determined.

Further, such awards should be tied to future service and performance whenever possible.

Additionally, we believe companies making supplemental or one-time awards should also describe if and how

the regular compensation arrangements will be affected by these additional grants. In reviewing a company’s

use of supplemental awards, Glass Lewis will evaluate the terms and size of the grants in the context of the

company’s overall incentive strategy and granting practices, as well as the current operating environment.

Contractual Payments and Arrangements

Beyond the quantum of contractual payments, Glass Lewis will also consider the design of any entitlements.

Certain executive employment terms may help to drive a negative recommendation, including, but not limited

to:

•Excessively broad change in control triggers;

•Inappropriate severance entitlements;

•Inadequately explained or excessive sign-on arrangements;

•Guaranteed bonuses (especially as a multiyear occurrence); and

•Failure to address any concerning practices in amended employment agreements.

In general, we are wary of terms that are excessively restrictive in favor of the executive, or that could

potentially incentivize behaviors that are not in a company’s best interest.

Sign-on Awards and Severance Benefits

We acknowledge that there may be certain costs associated with transitions at the executive level. In evaluating

the size of severance and sign-on arrangements, we may consider the executive’s regular target compensation

level, or the sums paid to other executives (including the recipient’s predecessor, where applicable) in

evaluating the appropriateness of such an arrangement.

We believe sign-on arrangements should be clearly disclosed and accompanied by a meaningful explanation of

the payments and the process by which the amounts were reached. Further, the details of and basis for any

“make-whole” payments (paid as compensation for awards forfeited from a previous employer) should be

provided.


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With respect to severance, we believe companies should abide by predetermined payouts in most

circumstances. While in limited circumstances some deviations may not be inappropriate, we believe

shareholders should be provided with a meaningful explanation of any additional or increased benefits agreed

upon outside of regular arrangements. However, where Glass Lewis determines that such predetermined

payouts are particularly problematic or unfavorable to shareholders, we may consider the execution of such

payments in a negative recommendation for the advisory vote on executive compensation.

In the U.S. market, most companies maintain severance entitlements based on a multiple of salary and, in many

cases, bonus. In almost all instances we see, the relevant multiple is three or less, even in the case of a change in

control. We believe the basis and total value of severance should be reasonable and should not exceed the

upper limit of general market practice. We consider the inclusion of long-term incentives in cash severance

calculations to be inappropriate, particularly given the commonality of accelerated vesting and the proportional

weight of long-term incentives as a component of total pay. Additional considerations, however, will be

accounted for when reviewing atypically structured compensation approaches.

Change in Control

Glass Lewis considers double-trigger change in control arrangements, which require both a change in control

and termination or constructive termination, to be best practice. Any arrangement that is not explicitly double-

trigger may be considered a single-trigger or modified single-trigger arrangement. Companies that allow for

committee discretion over the treatment of unvested awards should commit to providing clear rationale for the

committee's ultimate decision as to how such awards should be treated in the event a change in control occurs.

Further, we believe that excessively broad definitions of change in control are potentially problematic as they

may lead to situations where executives receive additional compensation where no meaningful change in status

or duties has occurred.

Excise Tax Gross-ups

Among other entitlements, Glass Lewis is strongly opposed to excise tax gross-ups related to IRC § 4999 and

their expansion, especially where no consideration is given to the safe harbor limit. We believe that under no

normal circumstance is the inclusion of excise tax gross-up provisions in new agreements or the addition of such

provisions to amended agreements acceptable. In consideration of the fact that minor increases in change-in-

control payments can lead to disproportionately large excise taxes, the potential negative impact of tax gross-

ups far outweighs any retentive benefit.

Depending on the circumstances, the addition of new gross-ups around this excise tax may lead to negative

recommendations for a company’s say-on-pay proposal, the chair of the compensation committee, or the entire

committee, particularly in cases where a company had committed not to provide any such entitlements in the

future. For situations in which the addition of new excise tax gross ups will be provided in connection with a

specific change-in-control transaction, this policy may be applied to the say-on-pay proposal, the golden

parachute proposal and recommendations related to the compensation committee for all involved corporate

parties, as appropriate.


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Amended Employment Agreements

Any contractual arrangements providing for problematic pay practices which are not addressed in materially

amended employment agreements will potentially be viewed by Glass Lewis as a missed opportunity on the part

of the company to align its policies with current best practices. Such problematic pay practices include, but are

not limited to, excessive change in control entitlements, modified single-trigger change in control entitlements,

excise tax gross-ups, and multi-year guaranteed awards.

Recoupment Provisions (Clawbacks)

On October 26, 2022, the SEC adopted Rule 10D-1 under the Securities Exchange Act of 1934. The rule mandates

national securities exchanges and associations to promulgate new listing standards requiring companies to

maintain recoupment policies (“clawback provisions”). The final clawback listing standards were approved by

the SEC, effective October 2, 2023 and required listed companies to adopt a compliant policy by December 1,

2023. Glass Lewis believes that clawback provisions play an important role in mitigating excessive risk-taking

that may be encouraged by poorly structured variable incentive programs. Current listing standards require

recoupment of erroneously awarded payouts to current and former executive officers in the event of an

accounting restatement or correction to previous financial statements that is material to the current period,

regardless of fault or misconduct.

Glass Lewis recognizes that excessive risk-taking that can materially and adversely impact shareholders may not

necessarily result in such restatements. We believe that clawback policies should allow recovery from current

and former executive officers in the event of a restatement of financial results or similar revision of performance

indicators upon which the awards were based. Additionally, recoupment policies should provide companies with

the ability to claw back variable incentive payments (whether time-based or performance-based) when there is

evidence of problematic decisions or actions, such as material misconduct, a material reputational failure,

material risk management failure, or a material operational failure, the consequences of which have not already

been reflected in incentive payments and where recovery is warranted.

In situations where the company ultimately determines not to follow through with recovery, Glass Lewis will

assess the appropriateness of such determination for each case. A thorough, detailed discussion of the

company's decision to not pursue recoupment and, if applicable, how the company has otherwise rectified the

disconnect between executive pay outcomes and negative impacts of their actions on the company and the

shareholder experience will be considered. The absence of such enhanced disclosure may impact Glass Lewis'

assessment of the quality of disclosure and, in turn, may play a role in Glass Lewis' overall recommendation for

the advisory vote on executive compensation. The clawback policy should provide recoupment authority

regardless of whether the employment of the executive officer was terminated with or without cause.

Hedging of Stock

Glass Lewis believes that the hedging of shares by executives in the shares of the companies where they are

employed severs the alignment of interests of the executive with shareholders. We believe companies should

adopt strict policies to prohibit executives from hedging the economic risk associated with their share ownership

in the company.


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Pledging of Stock

Glass Lewis believes that shareholders should examine the facts and circumstances of each company rather than

apply a one-size-fits-all policy regarding employee stock pledging. Glass Lewis believes that shareholders benefit

when employees, particularly senior executives, have meaningful financial interest in the success of the

company under their management, and therefore we recognize the benefits of measures designed to encourage

employees to both buy shares out of their own pocket and to retain shares they have been granted; blanket

policies prohibiting stock pledging may discourage executives and employees from doing either.

However, we also recognize that the pledging of shares can present a risk that, depending on a host of factors,

an executive with significant pledged shares and limited other assets may have an incentive to take steps to

avoid a forced sale of shares in the face of a rapid stock price decline. Therefore, to avoid substantial losses from

a forced sale to meet the terms of the loan, the executive may have an incentive to boost the stock price in the

short term in a manner that is unsustainable, thus hurting shareholders in the long-term. We also recognize

concerns regarding pledging may not apply to less senior employees, given the latter group’s significantly more

limited influence over a company’s stock price. Therefore, we believe that the issue of pledging shares should be

reviewed in that context, as should policies that distinguish between the two groups.

Glass Lewis believes that the benefits of stock ownership by executives and employees may outweigh the risks

of stock pledging, depending on many factors. As such, Glass Lewis reviews all relevant factors in evaluating

proposed policies, limitations and prohibitions on pledging stock, including:

•The number of shares pledged;

•The percentage executives’ pledged shares are of outstanding shares;

•The percentage executives’ pledged shares are of each executive’s shares and total assets;

•Whether the pledged shares were purchased by the employee or granted by the company;

•Whether there are different policies for purchased and granted shares;

•Whether the granted shares were time-based or performance-based;

•The overall governance profile of the company;

•The volatility of the company’s stock (in order to determine the likelihood of a sudden stock price drop);

•The nature and cyclicality, if applicable, of the company’s industry;

•The participation and eligibility of executives and employees in pledging;

•The company’s current policies regarding pledging and any waiver from these policies for employees

and executives; and

•Disclosure of the extent of any pledging, particularly among senior executives.

Executive Ownership Guidelines

The alignment between shareholder interests and those of executives helps to ensure that executives are acting

in the best long-term interests of disinterested shareholders. Companies should facilitate this relationship

through the adoption and enforcement of meaningful minimum executive share ownership requirements.

Companies should clearly disclose their executive ownership requirements in their Compensation Discussion and

Analysis section and how the various types of outstanding equity awards are counted or excluded from the

ownership level calculation.


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In determining whether executives have met the requirements or not, the inclusion of unearned performance-

based full value awards and/or unexercised stock options without cogent rationale may be viewed as

problematic. While Glass Lewis views the inclusion of unearned performance-based equity in the ownership

determination renders executive share ownership policies less effective, we continue to believe that

performance-based equity compensation plays an important role in the separate issue of aligning executive pay

with performance.

Compensation Consultant Independence

As mandated by Section 952 of the Dodd-Frank Act, as of January 11, 2013, the SEC approved listing

requirements for both the NYSE and NASDAQ which require compensation committees to consider six factors

(https://www.sec.gov/rules/final/2012/33-9330.pdf, p.31-32) in assessing compensation advisor independence.

According to the SEC, “no one factor should be viewed as a determinative factor.” Glass Lewis believes this six-

factor assessment is an important process for every compensation committee to undertake but believes

companies employing a consultant for board compensation, consulting and other corporate services should

provide clear disclosure beyond just a reference to examining the six points, in order to allow shareholders to

review the specific aspects of the various consultant relationships.

We believe compensation consultants are engaged to provide objective, disinterested, expert advice to the

compensation committee. When the consultant or its affiliates receive substantial income from providing other

services to the company, we believe the potential for a conflict of interest arises and the independence of the

consultant may be jeopardized. Therefore, Glass Lewis will, when relevant, note the potential for a conflict of

interest when the fees paid to the advisor or its affiliates for other services exceed those paid for compensation

consulting.

CEO Pay Ratio

As mandated by Section 953(b) of the Dodd-Frank Wall Street Consumer and Protection Act, beginning in 2018,

issuers will be required to disclose the median annual total compensation of all employees except the CEO, the

total annual compensation of the CEO or equivalent position, and the ratio between the two amounts. Glass

Lewis will display the pay ratio as a data point in our Proxy Papers, as available. While we recognize that the pay

ratio has the potential to provide additional insight when assessing a company’s pay practices, at this time it will

not be a determinative factor in our voting recommendations. On the other hand, we believe the underlying

data may help shareholders evaluate the rationale for certain executive pay decisions such as increases in fixed

pay levels.

Frequency of Say-on-Pay

The Dodd-Frank Act also requires companies to allow shareholders a non-binding vote on the frequency of say-

on-pay votes (i.e., every one, two or three years). Additionally, Dodd-Frank requires companies to hold such

votes on the frequency of say-on-pay votes at least once every six years.

We believe companies should submit say-on-pay votes to shareholders every year. We believe that the time and

financial burdens to a company with regard to an annual vote are relatively small and incremental and are


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outweighed by the benefits to shareholders through more frequent accountability. Implementing biannual or

triennial votes on executive compensation limits shareholders’ ability to hold the board accountable for its

compensation practices through means other than voting against the compensation committee. Unless a

company provides a compelling rationale or unique circumstances for say-on-pay votes less frequent than

annually, we will generally recommend that shareholders support annual votes on compensation.

Vote on Golden Parachute Arrangements

The Dodd-Frank Act also requires companies to provide shareholders with a separate non-binding vote on

approval of golden parachute compensation arrangements in connection with certain change-in-control

transactions. However, if the golden parachute arrangements have previously been subject to a say-on-pay vote

which shareholders approved, then this required vote is waived.

Glass Lewis believes the narrative and tabular disclosure of golden parachute arrangements benefits all

shareholders. Glass Lewis analyzes each golden parachute arrangement on a case-by-case basis, taking into

account, among other items: the nature of the change-in-control transaction, the ultimate value of the

payments particularly compared to the value of the transaction, any excise tax gross-up obligations, the tenure

and position of the executives in question before and after the transaction, any new or amended employment

agreements entered into in connection with the transaction, and the type of triggers involved (i.e., single vs.

double). In cases where new problematic features, such as excise tax gross-up obligations or new and excessive

single-trigger entitlements, are introduced in a golden parachute proposal, such features may contribute to a

negative recommendation not only for the golden parachute proposal under review, but for the next say-on-pay

proposal of any involved corporate parties, as well as recommendations against their compensation committee

as appropriate.

Equity-Based Compensation Proposals

We believe that equity compensation awards, when not abused, are useful for retaining employees and

providing an incentive for them to act in a way that will improve company performance. Glass Lewis recognizes

that equity-based compensation plans are critical components of a company’s overall compensation program,

and we analyze such plans accordingly based on both quantitative and qualitative factors.

Our quantitative analysis assesses the plan’s cost and the company’s pace of granting utilizing a number of

different analyses, comparing the program with absolute limits we believe are key to equity value creation and

with a carefully chosen peer group. In general, our model seeks to determine whether the proposed plan is

either absolutely excessive or is more than one standard deviation away from the average plan for the peer

group on a range of criteria, including dilution to shareholders and the projected annual cost relative to the

company’s financial performance. Each of the analyses (and their constituent parts) is weighted and the plan is

scored in accordance with that weight.

We compare the program’s expected annual expense with the business’s operating metrics to help determine

whether the plan is excessive in light of company performance. We also compare the plan’s expected annual

cost to the enterprise value of the firm rather than to market capitalization because the employees, managers

and directors of the firm contribute to the creation of enterprise value but not necessarily market capitalization


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(the biggest difference is seen where cash represents the vast majority of market capitalization). Finally, we do

not rely exclusively on relative comparisons with averages because, in addition to creeping averages serving to

inflate compensation, we believe that some absolute limits are warranted.

We then consider qualitative aspects of the plan such as plan administration, the method and terms of exercise,

repricing history, express or implied rights to reprice, and the presence of evergreen provisions. We also closely

review the choice and use of, and difficulty in meeting, the awards’ performance metrics and targets, if any. We

believe significant changes to the terms of a plan should be explained for shareholders and clearly indicated.

Other factors such as a company’s size and operating environment may also be relevant in assessing the severity

of concerns or the benefits of certain changes. Finally, we may consider a company’s executive compensation

practices in certain situations, as applicable.

We evaluate equity plans based on certain overarching principles:

•Companies should seek more shares only when needed;

•Requested share amounts or share reserves should be conservative in size so that companies must seek

shareholder approval every three to four years (or more frequently);

•If a plan is relatively expensive, it should not grant options solely to senior executives and board

members;

•Dilution of annual net share count or voting power, along with the “overhang” of incentive plans, should

be limited;

•Annual cost of the plan (especially if not shown on the income statement) should be reasonable as a

percentage of financial results and should be in line with the peer group;

•The expected annual cost of the plan should be proportional to the business’s value;

•The intrinsic value that option grantees received in the past should be reasonable compared with the

business’s financial results;

•Plans should not permit repricing of stock options without shareholder approval;

•Plans should not contain excessively liberal administrative or payment terms;

•Plans should not count shares in ways that understate the potential dilution, or cost, to common

shareholders. This refers to “inverse” full-value award multipliers;

•Selected performance metrics should be challenging and appropriate, and should be subject to relative

performance measurements; and

•Stock grants should be subject to minimum vesting and/or holding periods sufficient to ensure

sustainable performance and promote retention.

Meanwhile, for individual equity award proposals where the recipient of the proposed grant is also a large

shareholder of the company whose vote can materially affect the passage of the proposal, we believe that the

company should strongly consider the level of approval from disinterested shareholders before proceeding with

the proposed grant. Glass Lewis recognizes potential conflicts of interests when vote outcomes can be heavily

influenced by the recipient of the grant. A required abstention vote or non-vote from the recipient for an equity

award proposal in these situations can help to avoid such conflicts. This favorable feature will be weighed

alongside the structure, disclosure, dilution, provided rationale, and other provisions related to the individual

award to assess the award’s alignment with long-term shareholder interests.


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Option Exchanges and Repricing

Glass Lewis is generally opposed to the repricing of employee and director options regardless of how it is

accomplished. Employees should have some downside risk in their equity-based compensation program and

repricing eliminates any such risk. As shareholders have substantial risk in owning stock, we believe that the

equity compensation of employees and directors should be similarly situated to align their interests with those

of shareholders. We believe this will facilitate appropriate risk- and opportunity-taking for the company by

employees.

We are concerned that option grantees who believe they will be “rescued” from underwater options will be

more inclined to take unjustifiable risks. Moreover, a predictable pattern of repricing or exchanges substantially

alters a stock option’s value because options that will practically never expire deeply out of the money are

worth far more than options that carry a risk of expiration.

In short, repricings and option exchange programs change the bargain between shareholders and employees

after the bargain has been struck.

There is one circumstance in which a repricing or option exchange program may be acceptable: if

macroeconomic or industry trends, rather than specific company issues, cause a stock’s value to decline

dramatically and the repricing is necessary to motivate and retain employees. In viewing the company’s stock

decline as part of a larger trend, we would expect the impact to approximately reflect the market or industry

price decline in terms of timing and magnitude. In this circumstance, we think it fair to conclude that option

grantees may be suffering from a risk that was not foreseeable when the original “bargain” was struck. In such a

scenario, we may opt to support a repricing or option exchange program only if sufficient conditions are met.

We look for the following features in a repricing or exchange proposal:

•Officers and board members cannot participate in the program; and

•The exchange is value-neutral or value-creative to shareholders using very conservative assumptions.

In our evaluation of the appropriateness of the program design, we also consider the inclusion of the following

features:

•The vesting requirements on exchanged or repriced options are extended beyond one year;

•Shares reserved for options that are reacquired in an option exchange will permanently retire (i.e., will

not be available for future grants) so as to prevent additional shareholder dilution in the future; and

•Management and the board make a cogent case for needing to motivate and retain existing employees,

such as being in a competitive employment market.

Option Backdating, Spring-Loading and Bullet-Dodging

Glass Lewis views option backdating, and the related practices of spring-loading and bullet-dodging, as egregious

actions that warrant holding the appropriate management and board members responsible. These practices are

similar to repricing options and eliminate much of the downside risk inherent in an option grant that is designed

to induce recipients to maximize shareholder return.

Backdating an option is the act of changing an option’s grant date from the actual grant date to an earlier date

when the market price of the underlying stock was lower, resulting in a lower exercise price for the option. In


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past studies, Glass Lewis identified over 270 companies that have disclosed internal or government

investigations into their past stock-option grants.

Spring-loading is granting stock options while in possession of material, positive information that has not been

disclosed publicly. Bullet-dodging is delaying the grants of stock options until after the release of material,

negative information. This can allow option grants to be made at a lower price either before the release of

positive news or following the release of negative news, assuming the stock’s price will move up or down in

response to the information. This raises a concern similar to that of insider trading, or the trading on material

non-public information.

The exercise price for an option is determined on the day of grant, providing the recipient with the same market

risk as an investor who bought shares on that date. However, where options were backdated, the executive or

the board (or the compensation committee) changed the grant date retroactively. The new date may be at or

near the lowest price for the year or period. This would be like allowing an investor to look back and select the

lowest price of the year at which to buy shares.

A 2006 study of option grants made between 1996 and 2005 at 8,000 companies found that option backdating

can be an indication of poor internal controls. The study found that option backdating was more likely to occur

at companies without a majority independent board and with a long-serving CEO; both factors, the study

concluded, were associated with greater CEO influence on the company’s compensation and governance

practices.43

Where a company granted backdated options to an executive who is also a director, Glass Lewis will recommend

voting against that executive/director, regardless of who decided to make the award. In addition, Glass Lewis

will recommend voting against those directors who either approved or allowed the backdating. Glass Lewis feels

that executives and directors who either benefited from backdated options or authorized the practice have

failed to act in the best interests of shareholders.

Given the severe tax and legal liabilities to the company from backdating, Glass Lewis will consider

recommending voting against members of the audit committee who served when options were backdated, a

restatement occurs, material weaknesses in internal controls exist and disclosures indicate there was a lack of

documentation. These committee members failed in their responsibility to ensure the integrity of the company’s

financial reports.

When a company has engaged in spring-loading or bullet-dodging, Glass Lewis will consider recommending

voting against the compensation committee members where there has been a pattern of granting options at or

near historic lows. Glass Lewis will also recommend voting against executives serving on the board who

benefited from the spring-loading or bullet-dodging.

43 Lucian Bebchuk, Yaniv Grinstein and Urs Peyer. “LUCKY CEOs.” November, 2006.


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Director Compensation Plans

Glass Lewis believes that non-employee directors should receive reasonable and appropriate compensation for

the time and effort they spend serving on the board and its committees. However, a balance is required. Fees

should be competitive in order to retain and attract qualified individuals, but excessive fees represent a financial

cost to the company and potentially compromise the objectivity and independence of non-employee directors.

We will consider recommending support for compensation plans that include option grants or other equity-

based awards that help to align the interests of outside directors with those of shareholders. However, to

ensure directors are not incentivized in the same manner as executives but rather serve as a check on imprudent

risk-taking in executive compensation plan design, equity grants to directors should not be performance-based.

Where an equity plan exclusively or primarily covers non-employee directors as participants, we do not believe

that the plan should provide for performance-based awards in any capacity.

When non-employee director equity grants are covered by the same equity plan that applies to a company’s

broader employee base, we will use our proprietary model and analyst review of this model to guide our voting

recommendations. If such a plan broadly allows for performance-based awards to directors or explicitly provides

for such grants, we may recommend against the overall plan on this basis, particularly if the company has

granted performance-based awards to directors in past.

Employee Stock Purchase Plans

Glass Lewis believes that employee stock purchase plans (ESPPs) can provide employees with a sense of

ownership in their company and help strengthen the alignment between the interests of employees and

shareholders. We evaluate ESPPs by assessing the expected discount, purchase period, expected purchase

activity (if previous activity has been disclosed) and whether the plan has a “lookback” feature. Except for the

most extreme cases, Glass Lewis will generally support these plans given the regulatory purchase limit of

$25,000 per employee per year, which we believe is reasonable. We also look at the number of shares

requested to see if a ESPP will significantly contribute to overall shareholder dilution or if shareholders will not

have a chance to approve the program for an excessive period of time. As such, we will generally recommend

against ESPPs that contain “evergreen” provisions that automatically increase the number of shares available

under the ESPP each year.

Executive Compensation Tax Deductibility —

Amendment to IRC 162(M)

The “Tax Cut and Jobs Act” had significant implications on Section 162(m) of the Internal Revenue Code, a

provision that allowed companies to deduct compensation in excess of $1 million for the CEO and the next three

most highly compensated executive officers, excluding the CFO, if the compensation is performance-based and

is paid under shareholder-approved plans. Glass Lewis does not generally view amendments to equity plans and

changes to compensation programs in response to the elimination of tax deductions under 162(m) as

problematic. This specifically holds true if such modifications contribute to the maintenance of a sound

performance-based compensation program.


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As grandfathered contracts may continue to be eligible for tax deductions under the transition rule for Section

162(m), companies may therefore submit incentive plans for shareholder approval to take of advantage of the

tax deductibility afforded under 162(m) for certain types of compensation.

We believe the best practice for companies is to provide robust disclosure to shareholders so that they can

make fully informed judgments about the reasonableness of the proposed compensation plan. To allow for

meaningful shareholder review, we prefer that disclosure should include specific performance metrics, a

maximum award pool, and a maximum award amount per employee. We also believe it is important to analyze

the estimated grants to see if they are reasonable and in line with the company’s peers.

We typically recommend voting against a 162(m) proposal where: (i) a company fails to provide at least a list of

performance targets; (ii) a company fails to provide one of either a total maximum or an individual maximum; or

(iii) the proposed plan or individual maximum award limit is excessive when compared with the plans of the

company’s peers.

The company’s record of aligning pay with performance (as evaluated using our proprietary pay-for-

performance model) also plays a role in our recommendation. Where a company has a record of setting

reasonable pay relative to business performance, we generally recommend voting in favor of a plan even if the

plan caps seem large relative to peers because we recognize the value in special pay arrangements for continued

exceptional performance.

As with all other issues we review, our goal is to provide consistent but contextual advice given the specifics of

the company and ongoing performance. Overall, we recognize that it is generally not in shareholders’ best

interests to vote against such a plan and forgo the potential tax benefit since shareholder rejection of such plans

will not curtail the awards; it will only prevent the tax deduction associated with them.


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Governance Structure and the Shareholder

Franchise

Anti-Takeover Measures

Poison Pills (Shareholder Rights Plans)

Glass Lewis believes that poison pill plans are not generally in shareholders’ best interests. They can reduce

management accountability by substantially limiting opportunities for corporate takeovers. Rights plans can thus

prevent shareholders from receiving a buy-out premium for their stock. Typically we recommend that

shareholders vote against these plans to protect their financial interests and ensure that they have an

opportunity to consider any offer for their shares, especially those at a premium.

We believe boards should be given wide latitude in directing company activities and in charting the company’s

course. However, on an issue such as this, where the link between the shareholders’ financial interests and their

right to consider and accept buyout offers is substantial, we believe that shareholders should be allowed to vote

on whether they support such a plan’s implementation. This issue is different from other matters that are

typically left to board discretion. Its potential impact on and relation to shareholders is direct and substantial. It

is also an issue in which management interests may be different from those of shareholders; thus, ensuring that

shareholders have a voice is the only way to safeguard their interests.

In certain circumstances, we will support a poison pill that is limited in scope to accomplish a particular

objective, such as the closing of an important merger, or a pill that contains what we believe to be a reasonable

qualifying offer clause. We will consider supporting a poison pill plan if the qualifying offer clause includes each

of the following attributes:

•The form of offer is not required to be an all-cash transaction;

•The offer is not required to remain open for more than 90 business days;

•The offeror is permitted to amend the offer, reduce the offer, or otherwise change the terms;

•There is no fairness opinion requirement; and

•There is a low to no premium requirement.

Where these requirements are met, we typically feel comfortable that shareholders will have the opportunity to

voice their opinion on any legitimate offer.

NOL Poison Pills

Similarly, Glass Lewis may consider supporting a limited poison pill in the event that a company seeks

shareholder approval of a rights plan for the express purpose of preserving Net Operating Losses (NOLs). While

companies with NOLs can generally carry these losses forward to offset future taxable income, Section 382


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of the Internal Revenue Code limits companies’ ability to use NOLs in the event of a “change of ownership.”44 In

this case, a company may adopt or amend a poison pill (NOL pill) in order to prevent an inadvertent change of

ownership by multiple investors purchasing small chunks of stock at the same time, and thereby preserve the

ability to carry the NOLs forward. Often such NOL pills have trigger thresholds much lower than the common

15% or 20% thresholds, with some NOL pill triggers as low as 5%.

In many cases, companies will propose the adoption of bylaw amendments specifically restricting certain share

transfers, in addition to proposing the adoption of a NOL pill. In general, if we support the terms of a particular

NOL pill, we will generally support the additional protective amendment in the absence of significant concerns

with the specific terms of that proposal.

As with traditional poison pills, NOL pills may deter shareholders and potentially serve as entrenchment

mechanisms. Certain features such as low thresholds combined with acting in concert provisions, among other

concerning terms, may disempower shareholders and insulate the board and management. When acting in

concert provisions are present within the terms of a NOL pill, we believe this may raise concerns as to the true

objective of the pill.

Acting in concert provisions broaden the definition of beneficial ownership to prohibit parallel conduct, or

multiple shareholders party to a formal or informal agreement collaborating to influence the board and

management of a company, and aggregate the ownership of such shareholders towards the triggering

threshold. In our view, acting in concert provisions broadly limit the voice of shareholders and may diminish

their ability to engage in a productive dialogue with the company and with other shareholders. When a board

adopts defensive measures without engaging with shareholders, we take a dim view of the board and the

overall governance of the company.

As such, Glass Lewis evaluates NOL pills on a strictly case-by-case basis, taking into consideration, among other

factors: (i) the value of the NOLs to the company; (ii) the likelihood of a change of ownership based on the size

of the holdings and the nature of the larger shareholders; (iii) the trigger threshold; (iv) the duration of the plan

(i.e., whether it contains a reasonable “sunset” provision, generally one year or less); (v) the inclusion of an

acting in concert provision; (vi) whether the pill is implemented following the filing of a Schedule 13D by a

shareholder or there is evidence of hostile activity or shareholder activism; and (vii) if the pill is subject to

periodic board review and/or shareholder ratification.

We believe that shareholders should be offered the opportunity to vote on any adoption or renewal of a NOL

pill regardless of any potential tax benefit that it offers a company. As such, we will consider recommending

voting against those members of the board who served at the time when an NOL pill was adopted without

shareholder approval within the prior twelve months and where the NOL pill is not subject to shareholder

ratification.

44 Section 382 of the Internal Revenue Code refers to a “change of ownership” of more than 50 percentage points by one or

more 5% shareholders within a three-year period. The statute is intended to deter the “trafficking” of net operating losses.


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Fair Price Provisions

Fair price provisions, which are rare, require that certain minimum price and procedural requirements be

observed by any party that acquires more than a specified percentage of a corporation’s common stock. The

provision is intended to protect minority shareholder value when an acquirer seeks to accomplish a merger or

other transaction which would eliminate or change the interests of the minority shareholders. The provision is

generally applied against the acquirer unless the takeover is approved by a majority of “continuing directors”

and holders of a majority, in some cases a supermajority as high as 80%, of the combined voting power of all

stock entitled to vote to alter, amend, or repeal the above provisions.

The effect of a fair price provision is to require approval of any merger or business combination with an

“interested shareholder” by 51% of the voting stock of the company, excluding the shares held by the interested

shareholder. An interested shareholder is generally considered to be a holder of 10% or more of the company’s

outstanding stock, but the trigger can vary.

Generally, provisions are put in place for the ostensible purpose of preventing a back-end merger where the

interested shareholder would be able to pay a lower price for the remaining shares of the company than he or

she paid to gain control. The effect of a fair price provision on shareholders, however, is to limit their ability to

gain a premium for their shares through a partial tender offer or open market acquisition which typically raise

the share price, often significantly. A fair price provision discourages such transactions because of the potential

costs of seeking shareholder approval and because of the restrictions on purchase price for completing a merger

or other transaction at a later time.

Glass Lewis believes that fair price provisions, while sometimes protecting shareholders from abuse in a

takeover situation, more often act as an impediment to takeovers, potentially limiting gains to shareholders

from a variety of transactions that could significantly increase share price. In some cases, even the independent

directors of the board cannot make exceptions when such exceptions may be in the best interests of

shareholders. Given the existence of state law protections for minority shareholders such as Section 203 of the

Delaware Corporations Code, we believe it is in the best interests of shareholders to remove fair price

provisions.

Control Share Statutes

Certain states, including Delaware, have adopted control share acquisition statutes as an anti-takeover defense

for certain closed-end investment companies and business development companies. Control share statutes may

prevent changes in control by limiting voting rights of a person that acquires the ownership of “control shares.”

Control shares are shares of stock equal to or exceeding specified percentages of company voting power, and a

control share statute prevents shares in excess of the specified percentage from being voted, unless: (i) the

board approves them to be voted; or (ii) the holder of the “control shares” receives approval from a

supermajority of “non-interested” shareholders.

Depending on the state of incorporation, companies may automatically rely on control share statutes unless the

fund’s board of trustees eliminates the application of the control share statute to any or all fund share

acquisitions, through adoption of a provision in the fund's governing instrument or by fund board action alone.

In certain other states, companies must adopt control share statutes.


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In our view, control share statues disenfranchise shareholders by reducing their voting power to a level less than

their economic interest and effectively function as an anti-takeover device. We believe all shareholders should

have an opportunity to vote all of their shares. Moreover, anti-takeover measures may prevent shareholders

from receiving a buy-out premium for their stock.

As such, we will generally recommend voting for proposals to opt out of control share acquisition statutes,

unless doing so would allow the completion of a takeover that is not in the best interests of shareholders; and

against proposals to amend the charter to include control share acquisition provisions.

Further, in cases where a closed-end fund or business development company has received a public buyout offer

and has relied on a control share statute as a defense mechanism in the prior year, we will generally recommend

shareholders vote against the chair of the nominating and governance committee, absent a compelling rationale

as to why a rejected acquisition was not in the best interests of shareholders.

Quorum Requirements

Glass Lewis believes that a company’s quorum requirement should be set at a level high enough to ensure that a

broad range of shareholders are represented in person or by proxy, but low enough that the company can

transact necessary business. Companies in the U.S. are generally subject to quorum requirements under the

laws of their specific state of incorporation. Additionally, those companies listed on the NASDAQ Stock Market

are required to specify a quorum in their bylaws, provided however that such quorum may not be less than one-

third of outstanding shares. Prior to 2013, the New York Stock Exchange required a quorum of 50% for listed

companies, although this requirement was dropped in recognition of individual state requirements and

potential confusion for issuers. Delaware, for example, required companies to provide for a quorum of no less

than one-third of outstanding shares; otherwise such quorum shall default to a majority.

We generally believe a majority of outstanding shares entitled to vote is an appropriate quorum for the

transaction of business at shareholder meetings. However, should a company seek shareholder approval of a

lower quorum requirement we will generally support a reduced quorum of at least one-third of shares entitled

to vote, either in person or by proxy. When evaluating such proposals, we also consider the specific facts and

circumstances of the company, such as size and shareholder base.

Director and Officer Indemnification

While Glass Lewis strongly believes that directors and officers should be held to the highest standard when

carrying out their duties to shareholders, some protection from liability is reasonable to protect them against

certain suits so that these officers feel comfortable taking measured risks that may benefit shareholders. As

such, we find it appropriate for a company to provide indemnification and/or enroll in liability insurance to cover

its directors and officers so long as the terms of such agreements are reasonable.

Officer Exculpation

In August 2022, the Delaware General Assembly amended Section 102(b)(7) of the Delaware General

Corporation Law (“DGCL”) to authorize corporations to adopt a provision in their certificate of incorporation to


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eliminate or limit monetary liability of certain corporate officers for breach of fiduciary duty of care. Previously,

the DGCL allowed only exculpation of corporate directors from breach of fiduciary duty of care claims if the

corporation’s certificate of incorporation includes an exculpation provision.

The amendment authorizes corporations to provide for exculpation of the following officers: (i) the

corporation’s president, chief executive officer, chief operating officer, chief financial officer, chief legal officer,

controller, treasurer or chief accounting officer, (ii) “named executive officers” identified in the corporation’s

SEC filings, and (iii) individuals who have agreed to be identified as officers of the corporation.

Corporate exculpation provisions under the DGCL only apply to claims for breach of the duty of care, and not to

breaches of the duty of loyalty. Exculpation provisions also do not apply to acts or omissions not in good faith or

that involve intentional misconduct, knowing violations of the law, or transactions involving the receipt of any

improper personal benefits. Furthermore, officers may not be exculpated from claims brought against them by,

or in the right of, the corporation (i.e., derivative actions).

Under Section 102(b)(7), a corporation must affirmatively elect to include an exculpation provision in its

certificate of incorporation. We will closely evaluate proposals to adopt officer exculpation provisions on a case-

by-case basis. We will generally recommend voting against such proposals eliminating monetary liability for

breaches of the duty of care for certain corporate officers, unless compelling rationale for the adoption is

provided by the board, and the provisions are reasonable.

Reincorporation

In general, Glass Lewis believes that the board is in the best position to determine the appropriate jurisdiction of

incorporation for the company. We review all proposals to reincorporate to a different state or country on a

case-by-case basis. Our review includes the changes in corporate governance provisions, especially those

relating to shareholder rights, material differences in corporate statutes and legal precedents, and relevant

financial benefits, among other factors, resulting from the change in domicile.

Glass Lewis closely examines the impact on shareholder rights arising from a change in domicile and governing

law, including the following:

•Will shareholders gain/retain certain rights (i.e. the right to call special meetings, the right to act by

written consent, the ability to remove directors)?

•Does the proposed new jurisdiction allow for director and officer exculpation and/or exclusive forum

provisions?

•What are the fiduciary duties (if any) of directors, officers, and majority shareholders under the new

jurisdiction’s statutes?

•What are the material differences in corporate statutes, case law, and judicial systems?

•Is the company proposing to reincorporate to a jurisdiction considered to be a “tax haven”?

In addition, when examining a proposal to reincorporate, we will also consider the overall governance of the

company, including, but not limited to, the following:

•Does the company have anti-takeover protections such as a poison pill or classified board in place?


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•Does the company have a significant shareholder or is the company otherwise considered controlled?45

•Has the board been previously unresponsive to shareholders (such as failing to implement a shareholder

proposal that received majority shareholder support)?

•Does the company have an independent chair and is the board sufficiently independent?

•Are there other material governance issues of concern at the company? Has the company’s

performance matched or exceeded its peers in the past one and three years?

•How has the company ranked in Glass Lewis’ pay-for-performance analysis during the last three years?

Where there is a decline in shareholder rights, the financial benefits are de minimis, and the proposed

jurisdiction has significantly worse shareholder protections, we will generally recommend voting against the

transaction.

In addition, costly, shareholder-initiated reincorporations are typically not the best route to achieve the

furtherance of shareholder rights. We believe shareholders are generally better served by proposing specific

shareholder resolutions addressing pertinent issues which may be implemented at a lower cost, and perhaps

even with board approval. However, when shareholders propose a shift into a jurisdiction with enhanced

shareholder rights, Glass Lewis examines the significant ways the company would benefit from shifting

jurisdictions including an evaluation of the criteria listed above. We note, however, that we will only support

shareholder proposals to change a company’s place of incorporation in exceptional circumstances.

Exclusive Forum and Fee-Shifting Bylaw Provisions

Glass Lewis recognizes that companies may be subject to frivolous and opportunistic lawsuits, particularly in

conjunction with a merger or acquisition, that are expensive and distracting. In response, companies have

sought ways to prevent or limit the risk of such suits by adopting bylaws regarding where the suits must be

brought or shifting the burden of the legal expenses to the plaintiff, if unsuccessful at trial.

Glass Lewis believes that charter or bylaw provisions limiting a shareholder’s choice of legal venue are not in the

best interests of shareholders. Such clauses may effectively discourage the use of shareholder claims by

increasing their associated costs and making them more difficult to pursue. As such, shareholders should be

wary about approving any limitation on their legal recourse including limiting themselves to a single jurisdiction

(e.g., Delaware or federal courts for matters arising under the Securities Act of 1933) without compelling

evidence that it will benefit shareholders.

For this reason, we recommend that shareholders vote against any bylaw or charter amendment seeking to

adopt an exclusive forum provision unless the company: (i) provides a compelling argument on why the

provision would directly benefit shareholders; (ii) provides evidence of abuse of legal process in other, non-

favored jurisdictions; (iii) narrowly tailors such provision to the risks involved; and (iv) maintains a strong record

of good corporate governance practices.

45 In cases where a controlled company is seeking to change its domicile, we will closely evaluate how the independent

members of the board came to its recommendation, if the controlling shareholder had any ability to influence the board, and if

the proposal is also put to a vote of disinterested shareholders.


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Moreover, in the event a board seeks shareholder approval of a forum selection clause pursuant to a bundled

bylaw amendment rather than as a separate proposal, we will weigh the importance of the other bundled

provisions when determining the vote recommendation on the proposal. We will nonetheless recommend

voting against the chair of the governance committee for bundling disparate proposals into a single proposal

(refer to our discussion of nominating and governance committee performance in Section I of the guidelines).

Similarly, some companies have adopted bylaws requiring plaintiffs who sue the company and fail to receive a

judgment in their favor pay the legal expenses of the company. These bylaws, also known as “fee-shifting” or

“loser pays” bylaws, will likely have a chilling effect on even meritorious shareholder lawsuits as shareholders

would face an strong financial disincentive not to sue a company. Glass Lewis therefore strongly opposes the

adoption of such fee-shifting bylaws and, if adopted without shareholder approval, will recommend voting

against the governance committee. While we note that in June of 2015 the State of Delaware banned the

adoption of fee-shifting bylaws, such provisions could still be adopted by companies incorporated in other

states.

Authorized Shares

Glass Lewis believes that adequate capital stock is important to a company’s operation. When analyzing a

request for additional shares, we typically review four common reasons why a company might need additional

capital stock:

1.Stock Split — We typically consider three metrics when evaluating whether we think a stock split is likely

or necessary: The historical stock pre-split price, if any; the current price relative to the company’s most

common trading price over the past 52 weeks; and some absolute limits on stock price that, in our view,

either always make a stock split appropriate if desired by management or would almost never be a

reasonable price at which to split a stock.

2.Shareholder Defenses — Additional authorized shares could be used to bolster takeover defenses such

as a poison pill. Proxy filings often discuss the usefulness of additional shares in defending against or

discouraging a hostile takeover as a reason for a requested increase. Glass Lewis is typically against such

defenses and will oppose actions intended to bolster such defenses.

3.Financing for Acquisitions — We look at whether the company has a history of using stock for

acquisitions and attempt to determine what levels of stock have typically been required to accomplish

such transactions. Likewise, we look to see whether this is discussed as a reason for additional shares in

the proxy.

4.Financing for Operations — We review the company’s cash position and its ability to secure financing

through borrowing or other means. We look at the company’s history of capitalization and whether the

company has had to use stock in the recent past as a means of raising capital.

Issuing additional shares generally dilutes existing holders in most circumstances. Further, the availability of

additional shares, where the board has discretion to implement a poison pill, can often serve as a deterrent to

interested suitors. Accordingly, where we find that the company has not detailed a plan for use of the proposed

shares, or where the number of shares far exceeds those needed to accomplish a detailed plan, we typically

recommend against the authorization of additional shares. Similar concerns may also lead us to recommend


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against a proposal to conduct a reverse stock split if the board does not state that it will reduce the number of

authorized common shares in a ratio proportionate to the split.

With regard to authorizations and/or increases in preferred shares, Glass Lewis is generally against such

authorizations, which allow the board to determine the preferences, limitations and rights of the preferred

shares (known as “blank-check preferred stock”). We believe that granting such broad discretion should be of

concern to common shareholders, since blank-check preferred stock could be used as an anti-takeover device or

in some other fashion that adversely affects the voting power or financial interests of common shareholders.

Therefore, we will generally recommend voting against such requests, unless the company discloses a

commitment to not use such shares as an anti-takeover defense or in a shareholder rights plan, or discloses a

commitment to submit any shareholder rights plan to a shareholder vote prior to its adoption.

While we think that having adequate shares to allow management to make quick decisions and effectively

operate the business is critical, we prefer that, for significant transactions, management come to shareholders

to justify their use of additional shares rather than providing a blank check in the form of a large pool of

unallocated shares available for any purpose.

Advance Notice Requirements

We typically recommend that shareholders vote against proposals that would require advance notice of

shareholder proposals or of director nominees.

These proposals typically attempt to require a certain amount of notice before shareholders are allowed to

place proposals on the ballot. Notice requirements typically range between three to six months prior to the

annual meeting. Advance notice requirements typically make it impossible for a shareholder who misses the

deadline to present a shareholder proposal or a director nominee that might be in the best interests of the

company and its shareholders.

We believe shareholders should be able to review and vote on all proposals and director nominees.

Shareholders can always vote against proposals that appear with little prior notice. Shareholders, as owners of a

business, are capable of identifying issues on which they have sufficient information and ignoring issues on

which they have insufficient information. Setting arbitrary notice restrictions limits the opportunity for

shareholders to raise issues that may come up after the window closes.

Virtual Shareholder Meetings

A growing contingent of companies have elected to hold shareholder meetings by virtual means only. Glass

Lewis believes that virtual meeting technology can be a useful complement to a traditional, in-person

shareholder meeting by expanding participation of shareholders who are unable to attend a shareholder

meeting in person (i.e., a “hybrid meeting”). However, we also believe that virtual-only meetings have the

potential to curb the ability of a company’s shareholders to meaningfully communicate with the company’s

management.

Prominent shareholder rights advocates, including the Council of Institutional Investors, have expressed

concerns that such virtual-only meetings do not approximate an in-person experience and may serve to reduce


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the board’s accountability to shareholders. When analyzing the governance profile of companies that choose to

hold virtual-only meetings, we look for robust disclosure in a company’s proxy statement which assures

shareholders that they will be afforded the same rights and opportunities to participate as they would at an in-

person meeting.

Examples of effective disclosure include: (i) addressing the ability of shareholders to ask questions during the

meeting, including time guidelines for shareholder questions, rules around what types of questions are allowed,

and rules for how questions and comments will be recognized and disclosed to meeting participants; (ii)

procedures, if any, for posting appropriate questions received during the meeting and the company’s answers,

on the investor page of their website as soon as is practical after the meeting; (iii) addressing technical and

logistical issues related to accessing the virtual meeting platform; and (iv) procedures for accessing technical

support to assist in the event of any difficulties accessing the virtual meeting.

We will generally recommend voting against members of the governance committee where the board is

planning to hold a virtual-only shareholder meeting and the company does not provide such disclosure.

Voting Structure

Multi-Class Share Structures

Glass Lewis believes multi-class voting structures are typically not in the best interests of common shareholders.

Allowing one vote per share generally operates as a safeguard for common shareholders by ensuring that those

who hold a significant minority of shares are able to weigh in on issues set forth by the board.

Furthermore, we believe that the economic stake of each shareholder should match their voting power and that

no small group of shareholders, family or otherwise, should have voting rights different from those of other

shareholders. On matters of governance and shareholder rights, we believe shareholders should have the power

to speak and the opportunity to effect change. That power should not be concentrated in the hands of a few for

reasons other than economic stake.

We generally consider a multi-class share structure to reflect negatively on a company’s overall corporate

governance. Because we believe that companies should have share capital structures that protect the interests

of non-controlling shareholders as well as any controlling entity, we typically recommend that shareholders vote

in favor of recapitalization proposals to eliminate dual-class share structures. Similarly, we will generally

recommend against proposals to adopt a new class of common stock. We will generally recommend voting

against the chair of the governance committee at companies with a multi-class share structure and unequal

voting rights when the company does not provide for a reasonable sunset of the multi-class share structure

(generally seven years or less).

In the case of a board that adopts a multi-class share structure in connection with an IPO, spin-off, or direct

listing within the past year, we will generally recommend voting against all members of the board who served at

the time of the IPO if the board: (i) did not also commit to submitting the multi-class structure to a shareholder

vote at the company’s first shareholder meeting following the IPO; or (ii) did not provide for a reasonable sunset

of the multi-class structure (generally seven years or less). If the multi-class share structure is put to a


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shareholder vote, we will examine the level of approval or disapproval attributed to unaffiliated shareholders

when determining the vote outcome.

At companies that have multi-class share structures with unequal voting rights, we will carefully examine the

level of approval or disapproval attributed to unaffiliated shareholders when determining whether board

responsiveness is warranted. In the case of companies that have multi-class share structures with unequal

voting rights, we will generally examine the level of approval or disapproval attributed to unaffiliated

shareholders on a “one share, one vote” basis. At controlled and multi-class companies, when at least 20% or

more of unaffiliated shareholders vote contrary to management, we believe that boards should engage with

shareholders and demonstrate some initial level of responsiveness, and when a majority or more of unaffiliated

shareholders vote contrary to management we believe that boards should engage with shareholders and

provide a more robust response to fully address shareholder concerns.

Cumulative Voting

Cumulative voting increases the ability of minority shareholders to elect a director by allowing shareholders to

cast as many shares of the stock they own multiplied by the number of directors to be elected. As companies

generally have multiple nominees up for election, cumulative voting allows shareholders to cast all of their votes

for a single nominee, or a smaller number of nominees than up for election, thereby raising the likelihood of

electing one or more of their preferred nominees to the board. It can be important when a board is controlled

by insiders or affiliates and where the company’s ownership structure includes one or more shareholders who

control a majority-voting block of company stock.

Glass Lewis believes that cumulative voting generally acts as a safeguard for shareholders by ensuring that those

who hold a significant minority of shares can elect a candidate of their choosing to the board. This allows the

creation of boards that are responsive to the interests of all shareholders rather than just a small group of

large holders.

We review cumulative voting proposals on a case-by-case basis, factoring in the independence of the board and

the status of the company’s governance structure. But we typically find these proposals on ballots at companies

where independence is lacking and where the appropriate checks and balances favoring shareholders are not in

place. In those instances we typically recommend in favor of cumulative voting.

Where a company has adopted a true majority vote standard (i.e., where a director must receive a majority of

votes cast to be elected, as opposed to a modified policy indicated by a resignation policy only), Glass Lewis will

recommend voting against cumulative voting proposals due to the incompatibility of the two election methods.

For companies that have not adopted a true majority voting standard but have adopted some form of majority

voting, Glass Lewis will also generally recommend voting against cumulative voting proposals if the company has

not adopted anti-takeover protections and has been responsive to shareholders.

Where a company has not adopted a majority voting standard and is facing both a shareholder proposal to

adopt majority voting and a shareholder proposal to adopt cumulative voting, Glass Lewis will support only the

majority voting proposal. When a company has both majority voting and cumulative voting in place, there is a

higher likelihood of one or more directors not being elected as a result of not receiving a majority vote. This is

because shareholders exercising the right to cumulate their votes could unintentionally cause the failed election

of one or more directors for whom shareholders do not cumulate votes.


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Supermajority Vote Requirements

Glass Lewis believes that supermajority vote requirements impede shareholder action on ballot items critical to

shareholder interests. An example is in the takeover context, where supermajority vote requirements can

strongly limit the voice of shareholders in making decisions on such crucial matters as selling the business. This

in turn degrades share value and can limit the possibility of buyout premiums to shareholders. Moreover,

we believe that a supermajority vote requirement can enable a small group of shareholders to overrule the will

of the majority shareholders. We believe that a simple majority is appropriate to approve all matters presented

to shareholders.

Transaction of Other Business

We typically recommend that shareholders not give their proxy to management to vote on any other business

items that may properly come before an annual or special meeting. In our opinion, granting unfettered

discretion is unwise.

Anti-Greenmail Proposals

Glass Lewis will support proposals to adopt a provision preventing the payment of greenmail, which would serve

to prevent companies from buying back company stock at significant premiums from a certain shareholder.

Since a large or majority shareholder could attempt to compel a board into purchasing its shares at a large

premium, the anti-greenmail provision would generally require that a majority of shareholders other than the

majority shareholder approve the buyback.

Mutual Funds: Investment Policies and Advisory Agreements

Glass Lewis believes that decisions about a fund’s structure and/or a fund’s relationship with its investment

advisor or sub-advisors are generally best left to management and the members of the board, absent a showing

of egregious or illegal conduct that might threaten shareholder value. As such, we focus our analyses of such

proposals on the following main areas:

•The terms of any amended advisory or sub-advisory agreement;

•Any changes in the fee structure paid to the investment advisor; and

•Any material changes to the fund’s investment objective or strategy.

We generally support amendments to a fund’s investment advisory agreement absent a material change that is

not in the best interests of shareholders. A significant increase in the fees paid to an investment advisor would

be reason for us to consider recommending voting against a proposed amendment to an investment advisory

agreement or fund reorganization. However, in certain cases, we are more inclined to support an increase in

advisory fees if such increases result from being performance-based rather than asset-based. Furthermore, we


2024 Benchmark Policy Guidelines — United States	80

generally support sub-advisory agreements between a fund’s advisor and sub-advisor, primarily because the

fees received by the sub-advisor are paid by the advisor, and not by the fund.

In matters pertaining to a fund’s investment objective or strategy, we believe shareholders are best served

when a fund’s objective or strategy closely resembles the investment discipline shareholders understood and

selected when they initially bought into the fund. As such, we generally recommend voting against amendments

to a fund’s investment objective or strategy when the proposed changes would leave shareholders with stakes

in a fund that is noticeably different than when originally purchased, and which could therefore potentially

negatively impact some investors’ diversification strategies.

Real Estate Investment Trusts

The complex organizational, operational, tax and compliance requirements of Real Estate Investment Trusts

(REITs) provide for a unique shareholder evaluation. In simple terms, a REIT must have a minimum of 100

shareholders (the 100 Shareholder Test) and no more than 50% of the value of its shares can be held by five or

fewer individuals (the “5/50 Test”). At least 75% of a REITs’ assets must be in real estate, it must derive 75% of

its gross income from rents or mortgage interest, and it must pay out 90% of its taxable earnings as dividends. In

addition, as a publicly traded security listed on a stock exchange, a REIT must comply with the same general

listing requirements as a publicly traded equity.

In order to comply with such requirements, REITs typically include percentage ownership limitations in their

organizational documents, usually in the range of 5% to 10% of the REITs outstanding shares. Given the

complexities of REITs as an asset class, Glass Lewis applies a highly nuanced approach in our evaluation of REIT

proposals, especially regarding changes in authorized share capital, including preferred stock.

Preferred Stock Issuances at REITs

Glass Lewis is generally against the authorization of "blank-check preferred stock." However, given the

requirement that a REIT must distribute 90% of its net income annually, it is inhibited from retaining capital to

make investments in its business. As such, we recognize that equity financing likely plays a key role in a REIT’s

growth and creation of shareholder value. Moreover, shareholder concern regarding the use of preferred stock

as an anti-takeover mechanism may be allayed by the fact that most REITs maintain ownership limitations in

their certificates of incorporation. For these reasons, along with the fact that REITs typically do not engage in

private placements of preferred stock (which result in the rights of common shareholders being adversely

impacted), we may support requests to authorize shares of blank-check preferred stock at REITs.

Business Development Companies

Business Development Companies (BDCs) were created by the U.S. Congress in 1980; they are regulated under

the Investment Company Act of 1940 and are taxed as regulated investment companies (RICs) under the Internal

Revenue Code. BDCs typically operate as publicly traded private equity firms that invest in early stage to mature

private companies as well as small public companies. BDCs realize operating income when their investments are

sold off, and therefore maintain complex organizational, operational, tax and compliance requirements that are


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similar to those of REITs—the most evident of which is that BDCs must distribute at least 90% of their taxable

earnings as dividends.

Authorization to Sell Shares at a Price Below Net Asset Value

Considering that BDCs are required to distribute nearly all their earnings to shareholders, they sometimes need

to offer additional shares of common stock in the public markets to finance operations and acquisitions.

However, shareholder approval is required in order for a BDC to sell shares of common stock at a price below

Net Asset Value (NAV). Glass Lewis evaluates these proposals using a case-by-case approach, but will

recommend supporting such requests if the following conditions are met:

•The authorization to allow share issuances below NAV has an expiration date of one year or less from

the date that shareholders approve the underlying proposal (i.e., the meeting date);

•The proposed discount below NAV is minimal (ideally no greater than 20%);

•The board specifies that the issuance will have a minimal or modest dilutive effect (ideally no greater

than 25% of the company’s then-outstanding common stock prior to the issuance); and

•A majority of the company’s independent directors who do not have a financial interest in the issuance

approve the sale.

In short, we believe BDCs should demonstrate a responsible approach to issuing shares below NAV, by

proactively addressing shareholder concerns regarding the potential dilution of the requested share issuance,

and explaining if and how the company’s past below-NAV share issuances have benefitted the company.

Auditor Ratification and Below-NAV Issuances

When a BDC submits a below-NAV issuance for shareholder approval, we will refrain from recommending

against the audit committee chair for not including auditor ratification on the same ballot. Because of the

unique way these proposals interact, votes may be tabulated in a manner that is not in shareholders’ interests.

In cases where these proposals appear on the same ballot, auditor ratification is generally the only “routine

proposal,” the presence of which triggers a scenario where broker non-votes may be counted toward

shareholder quorum, with unintended consequences.

Under the 1940 Act, below-NAV issuance proposals require relatively high shareholder approval. Specifically,

these proposals must be approved by the lesser of: (i) 67% of votes cast if a majority of shares are represented

at the meeting; or (ii) a majority of outstanding shares. Meanwhile, any broker non-votes counted toward

quorum will automatically be registered as “against” votes for purposes of this proposal. The unintended result

can be a case where the issuance proposal is not approved, despite sufficient voting shares being cast in favor.

Because broker non-votes result from a lack of voting instruction by the shareholder, we do not believe

shareholders’ ability to weigh in on the selection of auditor outweighs the consequences of failing to approve an

issuance proposal due to such technicality.


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Special Purpose Acquisition Companies

Special Purpose Acquisition Companies (SPACs), also known as “blank check companies,” are publicly traded

entities with no commercial operations and are formed specifically to pool funds in order to complete a merger

or acquisition within a set time frame. In general, the acquisition target of a SPAC is either not yet identified or

otherwise not explicitly disclosed to the public even when the founders of the SPAC may have at least one target

in mind. Consequently, IPO investors often do not know what company they will ultimately be investing in.

SPACs are therefore very different from typical operating companies. Shareholders do not have the same

expectations associated with an ordinary publicly traded company and executive officers of a SPAC typically do

not continue in employment roles with an acquired company.

Extension of Business Combination Deadline

Governing documents of SPACs typically provide for the return of IPO proceeds to common shareholders if no

qualifying business combination is consummated before a certain date. Because the time frames for the

consummation of such transactions are relatively short, SPACs will sometimes hold special shareholder meetings

at which shareholders are asked to extend the business combination deadline. In such cases, an acquisition

target will typically have been identified, but additional time is required to allow management of the SPAC to

finalize the terms of the deal.

Glass Lewis believes management and the board are generally in the best position to determine when the

extension of a business combination deadline is needed. We therefore generally defer to the recommendation

of management and support reasonable extension requests.

SPAC Board Independence

The board of directors of a SPAC’s acquisition target is in many cases already established prior to the business

combination. In some cases, however, the board’s composition may change in connection with the business

combination, including the potential addition of individuals who served in management roles with the SPAC. The

role of a SPAC executive is unlike that of a typical operating company executive. Because the SPAC’s only

business is identifying and executing an acquisition deal, the interests of a former SPAC executive are also

different. Glass Lewis does not automatically consider a former SPAC executive to be affiliated with the acquired

operating entity when their only position on the board of the combined entity is that of an otherwise

independent director. Absent any evidence of an employment relationship or continuing material financial

interest in the combined entity, we will therefore consider such directors to be independent.

Director Commitments of SPAC Executives

We believe the primary role of executive officers at SPACs is identifying acquisition targets for the SPAC and

consummating a business combination. Given the nature of these executive roles and the limited business

operations of SPACs, when a directors’ only executive role is at a SPAC, we will generally apply our higher limit

for company directorships. As a result, we generally recommend that shareholders vote against a director who

serves in an executive role only at a SPAC while serving on more than five public company boards.


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Shareholder Proposals

Glass Lewis believes that shareholders should seek to promote governance structures that protect shareholders,

support effective ESG oversight and reporting, and encourage director accountability. Accordingly, Glass Lewis

places a significant emphasis on promoting transparency, robust governance structures and companies’

responsiveness to and engagement with shareholders. We also believe that companies should be transparent on

how they are mitigating material ESG risks, including those related to climate change, human capital

management, and stakeholder relations.

To that end, we evaluate all shareholder proposals on a case-by-case basis with a view to protecting long-term

shareholder value. While we are generally supportive of those that promote board accountability, shareholder

rights, and transparency, we consider all proposals in the context of a company’s unique operations and risk

profile.

For a detailed review of our policies concerning compensation, environmental, social, and governance

shareholder proposals, please refer to our comprehensive Proxy Paper Guidelines for Shareholder Proposals &

ESG-Related Issues, available at www.glasslewis.com/voting-policies-current/.


2024 Benchmark Policy Guidelines — United States	84

Overall Approach to Environmental, Social &

Governance Issues

Glass Lewis evaluates all environmental and social issues through the lens of long-term shareholder value. We

believe that companies should be considering material environmental and social factors in all aspects of their

operations and that companies should provide shareholders with disclosures that allow them to understand

how these factors are being considered and how attendant risks are being mitigated. We also are of the view

that governance is a critical factor in how companies manage environmental and social risks and opportunities

and that a well-governed company will be generally managing these issues better than one without a

governance structure that promotes board independence and accountability.

We believe part of the board’s role is to ensure that management conducts a complete risk analysis of company

operations, including those that have material environmental and social implications. We believe that directors

should monitor management’s performance in both capitalizing on environmental and social opportunities and

mitigating environmental and social risks related to operations in order to best serve the interests of

shareholders. Companies face significant financial, legal and reputational risks resulting from poor

environmental and social practices, or negligent oversight thereof. Therefore, in cases where the board or

management has neglected to take action on a pressing issue that could negatively impact shareholder value,

we believe that shareholders should take necessary action in order to effect changes that will safeguard their

financial interests.

Given the importance of the role of the board in executing a sustainable business strategy that allows for the

realization of environmental and social opportunities and the mitigation of related risks, relating to

environmental risks and opportunities, we believe shareholders should seek to promote governance structures

that protect shareholders and promote director accountability. When management and the board have

displayed disregard for environmental or social risks, have engaged in egregious or illegal conduct, or have failed

to adequately respond to current or imminent environmental and social risks that threaten shareholder value,

we believe shareholders should consider holding directors accountable. In such instances, we will generally

recommend against responsible members of the board that are specifically charged with oversight of the issue

in question.

When evaluating environmental and social factors that may be relevant to a given company, Glass Lewis does so

in the context of the financial materiality of the issue to the company’s operations. We believe that all

companies face risks associated with environmental and social issues. However, we recognize that these risks

manifest themselves differently at each company as a result of a company’s operations, workforce, structure,

and geography, among other factors. Accordingly, we place a significant emphasis on the financial implications

of a company’s actions with regard to impacts on its stakeholders and the environment.

When evaluating environmental and social issues, Glass Lewis examines companies’:

Direct environmental and social risk — Companies should evaluate financial exposure to direct environmental

risks associated with their operations. Examples of direct environmental risks include those associated with oil

or gas spills, contamination, hazardous leakages, explosions, or reduced water or air quality, among others.

Social risks may include non-inclusive employment policies, inadequate human rights policies, or issues that


2024 Benchmark Policy Guidelines — United States	85

adversely affect the company’s stakeholders. Further, we believe that firms should consider their exposure to

risks emanating from a broad range of issues, over which they may have no or only limited control, such as

insurance companies being affected by increased storm severity and frequency resulting from climate change

Risk due to legislation and regulation — Companies should evaluate their exposure to changes or potential

changes in regulation that affect current and planned operations. Regulation should be carefully monitored in all

jurisdictions in which the company operates. We look closely at relevant and proposed legislation and evaluate

whether the company has responded proactively.

Legal and reputational risk — Failure to take action on important environmental or social issues may carry the

risk of inciting negative publicity and potentially costly litigation. While the effect of high-profile campaigns on

shareholder value may not be directly measurable, we believe it is prudent for companies to carefully evaluate

the potential impacts of the public perception of their impacts on stakeholders and the environment. When

considering investigations and lawsuits, Glass Lewis is mindful that such matters may involve unadjudicated

allegations or other charges that have not been resolved. Glass Lewis does not assume the truth of such

allegations or charges or that the law has been violated. Instead, Glass Lewis focuses more broadly on whether,

under the particular facts and circumstances presented, the nature and number of such concerns, lawsuits or

investigations reflects on the risk profile of the company or suggests that appropriate risk mitigation measures

may be warranted.

Governance risk — Inadequate oversight of environmental and social issues carries significant risks to

companies. When leadership is ineffective or fails to thoroughly consider potential risks, such risks are likely

unmitigated and could thus present substantial risks to the company, ultimately leading to loss of shareholder

value.

Glass Lewis believes that one of the most crucial factors in analyzing the risks presented to companies in the

form of environmental and social issues is the level and quality of oversight over such issues. When

management and the board have displayed disregard for environmental risks, have engaged in egregious or

illegal conduct, or have failed to adequately respond to current or imminent environmental risks that threaten

shareholder value, we believe shareholders should consider holding directors accountable. When companies

have not provided for explicit, board-level oversight of environmental and social matters and/or when a

substantial environmental or social risk has been ignored or inadequately addressed, we may recommend voting

against members of the board. In addition, or alternatively, depending on the proposals presented, we may also

consider recommending voting in favor of relevant shareholder proposals or against other relevant

management-proposed items, such as the ratification of auditor, a company’s accounts and reports, or

ratification of management and board acts.


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Connect with Glass Lewis

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Email| info@glasslewis.com

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2024 Benchmark Policy Guidelines — United States	87

DISCLAIMER

This document is intended to provide an overview of Glass Lewis’ proxy voting guidelines. It is not intended to

be exhaustive and does not address all potential voting issues. Glass Lewis’ proxy voting guidelines, as they apply

to certain issues or types of proposals, are further explained in supplemental guidelines and reports that are

made available on Glass Lewis’ website – http://www.glasslewis.com. These guidelines have not been set or

approved by the U.S. Securities and Exchange Commission or any other regulatory body. Additionally, none of

the information contained herein is or should be relied upon as investment advice. The content of this

document has been developed based on Glass Lewis’ experience with proxy voting and corporate governance

issues, engagement with clients and issuers, and review of relevant studies and surveys, and has not been

tailored to any specific person or entity.

Glass Lewis’ proxy voting guidelines are grounded in corporate governance best practices, which often exceed

minimum legal requirements. Accordingly, unless specifically noted otherwise, a failure to meet these guidelines

should not be understood to mean that the company or individual involved has failed to meet applicable legal

requirements.

No representations or warranties express or implied, are made as to the accuracy or completeness of any

information included herein. In addition, Glass Lewis shall not be liable for any losses or damages arising from or

in connection with the information contained herein or the use, reliance on, or inability to use any such

information. Glass Lewis expects its subscribers possess sufficient experience and knowledge to make their own

decisions entirely independent of any information contained in this document and subscribers are ultimately

and solely responsible for making their own decisions, including, but not limited to, ensuring that such decisions

comply with all agreements, codes, duties, laws, ordinances, regulations, and other obligations applicable to

such subscriber.

All information contained in this report is protected by law, including, but not limited to, copyright law, and

none of such information may be copied or otherwise reproduced, repackaged, further transmitted, transferred,

disseminated, redistributed or resold, or stored for subsequent use for any such purpose, in whole or in part, in

any form or manner, or by any means whatsoever, by any person without Glass Lewis’ prior written consent.

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2025 Benchmark Policy Guidelines

An Overview of Glass Lewis’ Approach to Proxy Advice

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2024 International Benchmark Policy Guidelines	2

Table of Contents

Introduction8

Summary of Changes for 20258

Board Oversight of Artificial Intelligence8

Appointment of Auditor for Sustainability Reporting8

Board Responsiveness to Shareholder Proposals8

Clarifying Amendments9

Committee Performance10

Overall Approach to Executive Compensation10

Election of Directors10

Election of Directors12

Board and Committee Composition and Performance12

Board Composition12

Committee Composition13

Board Diversity14

Board Tenure and Refreshment14

Separation of the Roles of Chair and CEO14

Board Responsiveness15

Election Procedures15

Slate Elections15

Classified Boards16

Board Oversight of Material Issues16

Review of Risk Management Controls16

Board Oversight of Environmental and Social Issues17

Board Accountability for Climate-Related Issues18

Board Oversight of Technology18


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Financial Reporting21

Accounts and Reports21

Income Allocation (Distribution of Dividends)21

Appointment of Auditors and Authority to Set Fees21

Compensation22

Compensation Report/Compensation Policy22

Long-Term Incentive Plans23

Performance-Based Equity Compensation23

Director Compensation24

Retirement Benefits for Directors24

Governance Structure24

Amendments to the Articles of Association25

Virtual Meetings25

Anti-Takeover Measures26

Multi-Class Share Structures26

Poison Pills (Shareholder Rights Plans)26

Supermajority Vote Requirements26

Increase in Authorized Shares27

Issuance of Shares27

Repurchase of Shares27

Shareholder Proposals28

Overall Approach to Environmental, Social & Governance29

Connect with Glass Lewis31


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About Glass Lewis

Glass Lewis is the world’s choice for governance solutions. We enable institutional investors and publicly

listed companies to make informed decisions based on research and data. We cover 30,000+ meetings each year,

across approximately 100 global markets. Our team has been providing in-depth analysis of companies since

2003, relying solely on publicly available information to inform its policies, research, and voting

recommendations.

Our customers include the majority of the world’s largest pension plans, mutual funds, and asset

managers, collectively managing over $40 trillion in assets. We have teams located across the United States,

Europe, and Asia-Pacific giving us global reach with a local perspective on the important governance issues.

Investors around the world depend on Glass Lewis’ Viewpoint platform to manage their proxy voting, policy

implementation, recordkeeping, and reporting. Our industry leading Proxy Paper product provides

comprehensive environmental, social, and governance research and voting recommendations weeks ahead of

voting deadlines. Public companies can also use our innovative Report Feedback Statement to deliver their

opinion on our proxy research directly to the voting decision makers at every investor client in time for voting

decisions to be made or changed.

The research team engages extensively with public companies, investors, regulators, and other industry

stakeholders to gain relevant context into the realities surrounding companies, sectors, and the market in

general. This enables us to provide the most comprehensive and pragmatic insights to our customers.

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Introduction

These guidelines provide a general overview of Glass Lewis’ Benchmark Policy approach to proxy advice globally.

Glass Lewis publishes separate, detailed guidelines for all major global markets, which are publicly available on

the Glass Lewis website. Glass Lewis' regional Benchmark Policy guidelines are largely based on the regulations,

listing rules, codes of best practice and other relevant standards set in each country. While these guidelines

provide a high-level overview of our general policy approach, implementation varies in accordance with relevant

requirements or best practices in each market. For detailed information on the implementation of the policy

approach described below, refer to the Glass Lewis Benchmark Policy guidelines for the relevant country.

Summary of Changes for 2025

Board Oversight of Artificial Intelligence

In a new section of these guidelines, we have outlined our belief that boards should be cognizant of, and take

steps to mitigate exposure to, any material risks that could arise from their use or development of AI. Companies

that use or develop AI technologies should adopt strong internal frameworks that include ethical considerations

and ensure effective oversight of AI. Clear disclosure on how boards are overseeing AI and expanding their

collective expertise and understanding in this area is likely to be of value to shareholders.

In instances where there is evidence that insufficient oversight and/or management of AI technologies has

resulted in material harm to shareholders, we may recommend that shareholders vote against the re-election of

accountable directors, or other matters up for a shareholder vote, as appropriate, should we find the board’s

oversight, response or disclosure concerning AI-related issues to be insufficient.

Please refer to the “Board Oversight of Artificial Intelligence” section of these guidelines for further information.

Appointment of Auditor for Sustainability Reporting

We have introduced wording to outline that when a company provides a shareholder vote on the appointment

of an auditor for sustainability reporting, the Benchmark Policy will generally recommend that shareholders

support the company’s proposed choice, subject to our general policies on the company providing sufficient

information on the identity of and fees paid to the auditor, as well as to the independence and performance of

the auditor.

Please refer to the “Appointment of Auditors and Authority to Set Fees” section of these guidelines for further

information.

Board Responsiveness to Shareholder Proposals

We have expanded our commentary on board responsiveness to outline that when shareholder proposals

receive significant shareholder support (generally more than 30% of votes cast), the Benchmark Policy generally

takes the view that boards should engage with shareholders on the issue and provide disclosure addressing

shareholder concerns and outreach initiatives.

Please refer to the “Board Responsiveness” section of these guidelines for further information.


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Clarifying Amendments

The following clarifications of our existing policies are included this year:

Director Accountability

We have clarified that the Benchmark Policy may recommend a vote against the chair, or all members, or key

board committees when there are material performance concerns with the committee in question. Further, we

have clarified that the Benchmark Policy may recommend a vote against a director in a board leadership position

(e.g. board chair or vice chair, lead independent director, committee chair) when we conclude that this director

holds primary accountability on the board for a certain issue.

Please refer to the “Board Composition” and “Committee Composition” sections of these guidelines for further

information.

Overall Approach to Executive Compensation

We have expanded the discussion of Glass Lewis’ overall nuanced approach to reviewing executive

compensation proposals. In particular, we have highlighted that we conduct a holistic review of all relevant

factors and take a case-by-case approach to our analysis of pay programs, with a negative recommendation

being based on an individual factor only in particularly egregious cases.

Please refer to the “Compensation Report/Compensation Policy” section of these guidelines for further

information.

Election of Directors

We have restructured this section of the guidelines to group policy areas under the headings “Board and

Committee Composition and Performance”, “Election Procedures”, and “Board Oversight of Material Issues”.


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Election of Directors

Board and Committee Composition and Performance

Boards are put in place to represent shareholders and protect their interests. Glass Lewis seeks boards with a

proven record of protecting shareholders and delivering value over the medium- and long-term. In our view,

boards working to protect and enhance the best interests of shareholders should include some independent

directors (the percentage will vary by local market practice and regulations), boast a record of positive

performance, have directors with diverse backgrounds, and appoint directors with a breadth and depth of

experience.

Board Composition

We look at each individual on the board and examine their relationships with the company, the company’s

executives, and with other board members. The purpose of this inquiry is to determine whether pre-existing

personal, familial, or financial relationships are likely to impact the decisions of that board member.

Where the company does not disclose the names or backgrounds of director nominees with sufficient time in

advance of the shareholder meeting to evaluate their independence, performance or skills the Benchmark Policy

will generally recommend voting against or abstaining from voting on the election.

We recommend voting in favor of governance structures that will drive positive performance and enhance

shareholder value. The most crucial test of a board’s commitment to the company and to its shareholders is the

performance of the board and its members. The performance of directors in their capacity as board members

and as executives of the company, when applicable, and in their roles at other companies where they serve is

critical to this evaluation. We generally believe that a board will be most effective in protecting shareholders'

interests when a majority of shareholder representatives on the board are independent, although we set higher

and lower thresholds in some markets on the basis of local best practice recommendations and prevailing

market practice. We typically accept the presence of representatives of a company's major shareholder(s) on the

board in line with their stake in a company's issued share capital or voting rights, so long as there is a sufficient

number of independent directors to represent free-float shareholders and allow for the formation of sufficiently

independent board committees.

We believe a director can be considered independent if they have no material financial, familial, or other current

relationships with the company, its executives or other board members except for service on the board and

standard fees paid for that service. Relationships that have existed within the three to five years, dependent on

the nature of the relationship, prior to the inquiry are usually considered to be “current” for purposes of this

test.

We consider a director to be affiliated if they have a material financial, familial or other relationship with the

company or its executives, but are not an employee of the company. This includes directors whose employers

have a material financial relationship with the company. This also includes a director who owns or controls,

directly or indirectly, 10% or more of the company’s voting stock (except where local regulations or best practice

set a different threshold).


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We define an inside director as one who simultaneously serves as a director and as an employee of the

company. This category may include a board chair who acts as an employee of the company or is paid as an

employee of the company.

Although we typically recommend that shareholders support the election of independent directors, we will

recommend voting against directors for the following reasons:

•A director who attends less than 75% of the board and applicable committee meetings.

•A director who is also the CEO of a company where a serious restatement has occurred after the CEO

certified the pre-restatement financial statements.

•An affiliated director where the board is not sufficiently independent in accordance with market best

practice standards.

•There are substantial concerns regarding the performance and/or skills and experience of a director.

•The director can be considered to hold primary accountability for an issue due to their leadership

position on the board1.

We also feel that the following conflicts of interest may hinder a director’s performance and will therefore

recommend voting against a:

•Director who sits on an excessive number of boards.

•Director who, or a director whose immediate family member, currently provides material professional

services to the company.

•Director who, or a director whose immediate family member, engages in airplane, real estate or other

similar deals, including perquisite type grants from the company.

•Director with an interlocking directorship.

Committee Composition

We believe that independent directors should serve on a company’s audit, compensation, nominating and

governance committees. We will support boards with such a structure and encourage change where this is not

the case. We generally recommend that shareholders oppose the presence of executive directors on the audit

and compensation committee given the risks for conflicts of interest. We generally believe that the majority of

shareholder representatives on key board committees should be independent, although we set higher and lower

thresholds in some markets on the basis of local best practice recommendations and prevailing market practice.

The Benchmark Policy may recommend that shareholders vote against the chair, or all members, of key

committees when there are material performance concerns2.

1In some cases, the Benchmark Policy will consider directors in leadership positions on the board to hold primary

accountability for an issue and recommend against their re-election to the board. Depending on this issue, this could apply

to the chair or vice chair of the board, the lead independent director (if applicable), or the chair of key board committees.

2For instance, the Benchmark Policy will generally recommend a vote against the audit committee chair for ongoing

excessive non-audit fees or when a company fails to disclose audit fees, and may recommend a vote against all members of

the compensation committee for ongoing egregious compensation policies and practices. Please refer to local market

guidelines for further information on how committee members are held accountable for poor committee performance in

each market.


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Board Diversity

Glass Lewis values the importance of board diversity, believing there are a number of benefits from having

individuals with a variety of backgrounds serving on boards. We consider the diversity of gender, backgrounds,

skills and experience of directors when evaluating board diversity. If a board has failed to address material

concerns regarding the mix of skills and experience of the non-executive directors or when it fails to meet legal

requirements or the best practice standard prevalent in the market for gender quotas and has not disclosed any

cogent explanation or plan regarding its approach to board diversity, we will consider recommending voting

against the chair of the nominating committee. We expect boards of main market companies listed in most

major global markets (e.g. Australia, Canada, Europe, Japan, United Kingdom and United States), to comprise at

least one gender diverse director (women, or directors that identify with a gender other than male or female).

For European and North American companies listed on a blue-chip or mid-cap index (e.g. Russell 3000, TSX, FTSE

350, etc.), we expect at least 30% of the board to be composed of gender diverse directors. We apply a higher

standard where best practice recommendations or listing regulations set a higher target.

We also monitor company disclosure on diversity of ethnicity and other underrepresented communities at board

level. We expect large companies in markets with legal requirements or best practice recommendations in this

area (e.g. United States; United Kingdom) to provide clear disclosure on the board's performance or transition

plans.

Board Tenure and Refreshment

Glass Lewis strongly supports routine director evaluation, including independent external reviews, and periodic

board refreshment to foster the sharing of diverse perspectives in the boardroom and the generation of new

ideas and business strategies. In our view, a director’s experience can be a valuable asset to shareholders

because of the complex, critical issues that boards face. This said, we recognize a lack of refreshment can

contribute to a lack of board responsiveness to poor company performance. We may consider recommending

voting against directors with a lengthy tenure (e.g. over 12 years) when we identify significant performance or

governance concerns indicating that a fresh perspective would be beneficial and we find no evidence of board

refreshment.

Where a board has established an age or term limit, we believe these should generally be applied equally for all

members of the board. If a board waives its age/term limits, the Benchmark Policy will consider recommending

shareholders vote against the chair of the nominating committee or equivalent, unless compelling rationale is

provided for why the board is proposing to waive this rule through an election/re-election.

Separation of the Roles of Chair and CEO

Glass Lewis believes that separating the roles of corporate officers and the chair of the board is a better

governance structure than a combined executive/chair position. The role of executives is to manage the

business on the basis of the course charted by the board. Executives should be in the position of reporting and

answering to the board for their performance in achieving the goals set out by such board. This becomes much

more complicated when management actually sits on, or chairs, the board.

We view an independent chair as better able to oversee the executives of the company and set a pro-

shareholder agenda without the management conflicts that a CEO and other executive insiders often face. This,


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in turn, leads to a more proactive and effective board of directors that is looking out for the interests of

shareholders above all else.

In the absence of an independent chair, we support the appointment of a presiding or lead director with

authority to set the agenda for the meetings and to lead sessions outside the presence of the insider chair.

We may recommend voting against the chair of the nominating committee when the chair and CEO roles are

combined and the board has not appointed an independent presiding or lead director.

Board Responsiveness

Glass Lewis believes that any time 20% or more of shareholders vote contrary to the recommendation of

management, the board should, depending on the issue, demonstrate some level of responsiveness to address

the concerns of shareholders, particularly in the case of a compensation or director election proposal. While the

20% threshold alone will not automatically generate a negative vote recommendation from Glass Lewis on a

future proposal (e.g., to recommend against a director nominee, against a remuneration proposal, etc.), it will

be a contributing factor to recommend a vote against management's recommendation in the event we

determine that the board did not respond appropriately. Additionally, when shareholder proposals receive

significant support (generally more than 30% of votes cast), we believe that boards should engage with

shareholders on the issue and provide disclosure addressing shareholder concerns and outreach initiatives.

In the case of companies with a controlling shareholder and/or with a multi-class share structure, we will

carefully examine the level of disapproval attributable to minority shareholders. As a general framework, our

evaluation of board responsiveness involves a review of the publicly available disclosures released following the

date of the company's last annual meeting up through the publication date of our most current Proxy Paper.

Election Procedures

Slate Elections

In some countries, companies elect their board members as a slate, whereby shareholders are unable to vote on

the election of each individual director, but rather are limited to voting for or against the board as a whole. In

countries where slate elections are common market practice, we will not recommend that shareholders oppose

an election on the basis of this election method alone.

We will generally recommend that shareholders support a director slate, unless we have identified

independence or performance concerns. When the proposed slate raises concerns regarding board or

committee independence, we will generally recommend that shareholders vote against the slate. In egregious

cases where we have identified concerns regarding the performance and/or experience of the board, its

committees, and/or individual directors, we will similarly recommend that shareholders vote against the director

slate.

Classified Boards

The Benchmark Policy favors the repeal of staggered boards in favor of the annual election of directors. We

believe that staggered boards are less accountable to shareholders than annually elected boards. Furthermore,

we feel that the annual election of directors encourages board members to focus on protecting the interests of

shareholders.


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Board Oversight of Material Issues

Board Oversight of Risk Management Controls

We believe companies, particularly financial firms, should have a dedicated risk committee, or a committee of

the board charged with risk oversight, as well as a chief risk officer who reports directly to that committee, not

to the CEO or another executive. In cases where a company has disclosed a sizable loss or write-down, and

where a reasonable analysis indicates that the company’s board-level risk committee should be held

accountable for poor oversight, we would recommend that shareholders vote against such committee members

on that basis. In addition, in cases where a company maintains a significant level of financial risk exposure but

fails to disclose any explicit form of board-level risk oversight (committee or otherwise), we will consider

recommending to vote against the board chair on that basis.

Board Oversight of Environmental and Social Issues

Glass Lewis recognizes the importance of ensuring the sustainability of companies’ operations. We believe that

insufficient oversight of material environmental and social issues can present direct legal, financial, regulatory

and reputational risks that could serve to harm shareholder interests. Therefore, we believe that these issues

should be carefully monitored and managed by companies, and that companies should have an appropriate

oversight structure in place to ensure that they are mitigating attendant risks and capitalizing on related

opportunities to the best extent possible. The Benchmark Policy will generally recommend that shareholders

vote against the chair of the governance committee (or equivalent) of companies listed on a major blue-chip

index in key global markets that do not provide clear disclosure concerning the board-level oversight afforded to

material environmental and/or social issues. In general, we believe that shareholders are best served when this

responsibility is formally designated and codified in the appropriate committee charters or other governing

documents.

Board Accountability for Climate-Related Issues

Given the exceptionally broad impacts of a changing climate on companies, the economy, and society in general,

we view climate risk as a material risk for all companies. We therefore believe that boards should be considering

and evaluating their operational resilience under lower-carbon scenarios. While all companies maintain

exposure to climate-related risks, we believe that additional consideration should be given to, and that

disclosure should be provided by, those companies whose GHG emissions represent a financially material risk.

We believe that companies with this increased risk exposure should provide clear and comprehensive disclosure

regarding these risks, including how they are being mitigated and overseen. We believe such information is

crucial to allow investors to understand the company’s management of this issue, as well as the impact of a

lower carbon future on the company’s operations.

In line with this view, Glass Lewis will carefully examine the climate-related disclosures provided by large-cap

companies in developed capital markets3 with material exposure to climate risk stemming from their own

3E.g., S&P 500, FTSE 100, Nikkei 225, etc.


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operations4 as well as companies where we believe emissions or climate impacts, or stakeholder scrutiny

thereof, represent an outsized, financially material risk in order to assess whether they have produced disclosure

that is aligned with the recommendations of the Task Force on Climate-related Disclosures (TCFD) or IFRS S2

Climate-related Disclosures. We will also assess whether these companies have disclosed explicit and clearly

defined board-level oversight responsibilities for climate-related issues.

In instances where we find either (or both) of these disclosures to be absent or significantly lacking, we may

recommend voting against the chair of the committee (or board) charged with oversight of climate-related

issues, or if no committee has been charged with such oversight, the chair of the governance committee.

Further, we may extend our recommendation on this basis to additional members of the responsible committee

in cases where the committee chair is not standing for election due to a classified board, or based on other

factors, including the company’s size and industry and its overall governance profile. In instances where

appropriate directors are not standing for election, we may instead recommend shareholders vote against other

matters that are up for a vote, such as the ratification of board acts, or the accounts and reports proposal.