On 4 November 2019, Glass Lewis published its 2020 proxy paper guidelines for the UK. These guidelines incorporate global corporate governance best practice and are reviewed annually to ensure they reflect current market practice, regulations and governance codes.
Changes from the previous 2019 version of these guidelines include amendments to the following policies:
- Gender diversity: it will consider recommending against the chair of the nomination committee of any FTSE 350 board which has not met the 33% gender diversity target set out by the Hampton-Alexander Review where no explanation nor plan to address the issue is given.
- Board skills: it will include board skills matrices in its analysis of director election proposals of all FTSE 350 companies (previously FTSE 100), excluding externally managed investments trusts. It also may recommend voting against the chair of the nomination committee if a board has not addressed major issues of board composition.
- Audit committee meetings: it will consider recommending against the election of the chair of the audit committee at any FTSE 350 company (excluding investment trusts) where the audit committee has not held a minimum of three meetings during the year under review without explanation.
- Smaller premium listed companies: in line with the latest UK Corporate Governance Code, it expects boards at premium-listed companies outside the FTSE 350 to be at least 50% (rather than 33%) independent and to hold annual, rather than staggered, director elections. Where the board has failed but still intends to meet the enhanced board independence elections, it will generally accept explanations in lieu of compliance.
- Salaries and pensions: the guidelines have been updated to reflect current best practice in relation to salaries and pensions. It generally expects salary increases and pension contribution levels to be in line with those of the company's wider workforce.
- Incentive plan limits: it expects all incentive plans to include clear and transparent award limits, preferably expressed as a multiple of base salary per employee.
- Post-exit shareholding requirements: post-employment shareholding requirements are included among the best practice features generally expected of remuneration policies.
- Threshold vesting under LTI plans: it expects that long-term incentive plans will allow for no more than 25% vesting for threshold performance.
- Remuneration committee discretion: remuneration committees should consider exercising downward discretion where a company has suffered an exceptional negative event, even if formulaic targets have been met.
The 2020 Proxy Paper Guidelines can be found here.
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