In July CGI Glass Lewis (CGIGL) released its guidelines for the coming voting season, adopting an ‘if not, why not’ approach.

The most significant changes relate to ESG. The headline changes for the coming season are:

1. Environmental and social (E&S) risk oversight: Beginning in FY23 CGIGL will generally recommend voting against an ASX300 company governance committee chair or equivalent where disclosures fail to be explicit in regards to the board’s role in overseeing material environmental and social issues.  CGIGL believes it should be a board role. While most resources and the major banks have already elevated responsibilities to the board level, many other listed companies are found wanting.
2. E&S performance measures in remuneration: Their inclusions should be predicated on each company’s unique circumstance i.e. CGIGL is supportive of their inclusion but notes that they should be used ‘appropriately’ to provide clear line of sight into a company’s ESG strategy, ambitions and targets.
3. Say on climate votes: These are a new and developing feature, and CGIGL has concerns about the implications of such votes and the potential for a board to abdicate some of its responsibility for the long-term climate strategy. CGIGL will evaluate each proposal on its merits. As this is a developing area CGIGL will provide updates on its approach to say on climate in the separate ESG initiatives guideline paper. CGIGL’s scepticism is not dissimilar to that of some other major stakeholders and say on climate is not necessarily a panacea to appease activist shareholders.

Other changes include virtual shareholder meeting provisions, CGIGL will support constitutional amendments to allow such meetings only where:

• there is a reasonable assurance that virtual meetings will allow for reasonable shareholder participation,
• they are not intended to replace in-person meetings where practical, and
• the board is majority independent and free of governance concerns providing comfort in relying on their recommendation

It seems there is concern that virtual meetings may be used as a means to avoid full shareholder participation.

The guidelines are comprehensive and underpin the voting recommendations contained in individual company proxy papers. The full guidelines for 2022-2023 can be found HERE.

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