November 30, 2018
Authored by: Denise Erwin and Lisa Van Fleet
On October 24th, Glass Lewis published its updated proxy voting guidelines for 2019. Some key compensation-related changes for reporting companies to keep in mind are highlighted below:
Excise Tax Gross-ups
When any new excise tax gross-ups are provided for in executive employment agreements, Glass Lewis may recommend against members of the compensation committee, particularly where a company previously committed not to provide gross-ups in the future. Glass Lewis is particularly opposed to gross-ups related to excise taxes on excess parachute payments. New gross-up provisions with respect to these excise taxes may lead to negative recommendations for a company’s say-on-pay proposal.
Contractual Payments and Arrangements
The new guidelines clarify the terms that may contribute to a negative voting recommendation on say-on-pay proposals. When evaluating sign-on and severance arrangements, Glass Lewis will consider the size and design of any payments as well as U.S. market practice. Glass Lewis will consider the executive’s regular target compensation level, the sums paid to other executives and, in special cases, whether the sums paid to departing executives were appropriate given the circumstances of the executive’s departure. Excessive sign-on awards and multi-year guaranteed bonuses may result in negative recommendations. In addition, key man clauses, board continuity conditions and excessively broad change in control triggers are also terms that could result in a negative recommendation.
Executive Compensation Disclosure for Smaller Reporting Companies
When assessing the performance of compensation committees, Glass Lewis indicates that it will consider the impact of materially decreased CD&A disclosure for smaller reporting companies when