Glass Lewis Policy Changes for 2025: US Edition

In November 2024, Glass Lewis released their policy changes for the upcoming 2025 US Proxy Season. The policy is available here. The updates focused on AI-Related Risks and Executive Compensation. The updated Voting Policy Guidelines will take effect after January 1, 2025. Below are the Glass Lewis changes that will affect US issuers for the 2025 proxy season: 

1. Board Oversight of Artificial Intelligence (AI): There is an emphasis on AI's potential efficiency and productivity benefits, alongside its associated risks. Although AI can potentially make companies’ operations and systems more efficient and productive, boards are advised to be aware of and mitigate any material risks from AI use or development.  

Glass Lewis generally will not make voting recommendations based on AI oversight unless there is evidence of material harm to shareholders due to insufficient oversight or management of AI technologies.  

2. Change-In-Control Provisions: Glass Lewis updated its change-in-control policy, noting that companies allowing committee discretion related to the treatment of unvested equity awards during a change in control must provide a clear rationale for that treatment. 

3. Board Responsiveness to Shareholder Proposals: Glass Lewis changed the threshold of support from a majority to just 30% support of a shareholder proposal as the point at which Glass Lewis believes boards should engage with shareholders and provide disclosure when shareholder proposals receive significant support.   

4. Reincorporation: Based on revised guidelines on proposals to reincorporate, Glass Lewis will review these proposals on a case-by-case basis, considering changes in corporate governance provisions, shareholder rights (differences in corporate statutes and legal precedents), and financial benefits.  

5. Approach to Executive Pay Program: Glass Lewis clarified their approach to evaluating executive compensation programs. Glass Lewis noted that few program features may cause an unfavorable recommendation for a say-on-pay proposal, their analysis is conducted on a case-by-case basis. They do not generalize their analysis when evaluating elements such as the balance between performance-based and time-based long-term incentives. Instead, Glass Lewis assesses unfavorable factors in a pay program within a broader context of rationale, overall structure, overall disclosure quality, alignment of executive pay with performance, and the shareholder impact resulting from changes made by the compensation committee. 

The Sodali & Co team will continue monitoring market developments and promptly provide necessary updates.

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