Legal Updates

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Tuesday, April 28, 2020

In light of COVID-19 and its impact on the 2020 proxy season, two leading proxy advisors, Glass Lewis & Co. (“Glass Lewis”) and Institutional Shareholder Services, Inc. (“ISS”), have recently updated their voting policy guidelines. The key take-aways from their recent updates are summarized below.

Virtual-Only Shareholder Meetings Will Not Be Seen Negatively

Glass Lewis and ISS will not react negatively to company boards who opt to hold virtual-only shareholder meetings this proxy season. Glass Lewis recently published an updated version of its 2020 Proxy Paper Guidelines for Canada and stated that for the remainder of the 2020 proxy season (March 1, 2020 to June 30, 2020) where a company holds a virtual-only meeting, it will generally refrain from recommending voting against members of its governance committee as long as the company, at a minimum, discloses its rationale for holding a virtual-only meeting. ISS does not have a policy recommending voting against companies that hold virtual-only shareholder meetings and has confirmed in its recently published policy guidance that ISS will not change its approach this year. However, ISS encourages boards to clearly disclose the reason for holding a virtual-only meeting and to strive to provide shareholders with a meaningful opportunity to participate as fully as possible, including being able to ask questions of directors and senior management and to engage in dialogue if they wish.

Shareholders Should Expect Changes to Executive Compensation Plans

Glass Lewis and ISS have stated they expect to see amendments to existing compensation plans including changes to compensation metrics and a shift in goals and targets for short-term compensation plans. Shareholders are expected to be particularly concerned about repricing, dilution, burn rates, changes in vesting periods, hurdle adjustments and caps and cuts on incentives. Glass Lewis has warned companies against reducing shareholder returns while simultaneously arguing for paying large bonuses, repricing grants and increasing the cost and dilution of future compensation. ISS has encouraged boards to provide shareholders with disclosure of the rationales for revising compensation plans and has warned that any board that undertakes an option repricing action without shareholder approval will face scrutiny.

Boards May Face Reduced Attendance Rates or Sudden Vacancies

Boards may notice reduced attendance rates or sudden vacancies out of health and safety concerns or the possible disability or incapacity of an officer or director. Companies that lack age and gender diversity are especially in high-risk positions to the possible effects of COVID-19. Glass Lewis and ISS will therefore apply their policies with flexibility to provide boards broad discretion to ensure they are able to adapt to urgent situations.

Case-by-Case Approach to Poison Pills

Glass Lewis and ISS will take a case-by-case approach to assessing poison pills (often referred to as shareholder rights plans). However, both Glass Lewis and ISS have intimated that they will not oppose the adoption of a poison pill in response to the economic crisis resulting from COVID-19 provided that (i) it is of limited duration (less than one year); and (ii) the company discloses the rationale for adopting the poison pill as well as any other relevant factors such as a commitment to put any future renewal of the pill to a shareholder vote. ISS has stated that a severe stock price decline as a result of COVID-19 will likely be considered valid justification for adopting a poison pill of less than one year in duration.

If you have any questions with respect to this legal update, please contact Troy Pocaluyko (, Al Wiens (, Mark Coghlan (, Natalie Tershakowec ( or any other member of our Corporate Governance practice group.

This update is intended as a summary only and should not be regarded or relied upon as advice to any specific client or regarding any specific situation.