CGI Glass Lewis updates its New Zealand 2022-2023 Policy Guidelines

Glass Lewis has updated its New Zealand 2022-2023 Policy Guidelines. Notable policies are below:

  1. Remuneration

Glass Lewis will recommend voting against a remuneration committee chair who is up for election or re- election if  any one of the following occurred:

    • If the committee is not comprised of a majority of independent NEDs with an independent chair.
    • If the remuneration committee has failed to demonstrate adequate competence in the handling of its remit on remuneration matters.
    • If the remuneration committee did not meet during the year, but should have (e.g., executive remuneration was restructured).
    • If an executive or NED who has a relationship with the executive is a member of the remuneration committee.

If the remuneration committee chair is not up for election or re-election, Glass Lewis will note the breach of CGI Glass Lewis policy in the Proxy Paper and indicate that they will monitor this issue going forward.

In effect, do not do bad remuneration things especially in the year you are coming up for election.

  1. Environmental and Social Risk Oversight:

Beginning in 2023, a failure by companies within the NZX50 to “provide explicit disclosure concerning the board’s role in overseeing material environmental and social issues”, may result in CGI Glass Lewis voting against those companies. If this sounds familiar to Australian directors on NZ boards you would be right. It echoes Recommendation 7.4 of the ASX Corporate Governance Council Principles.

Where a company within the NZX50 is believed to have failed to “properly manage or mitigate environmental and social risks to the detriment of shareholder value” Glass Lewis  may recommend voting against members of the board to whom responsibility of oversight fell.

  1. Board Diversity:

Beginning 1 January 2022, Glass Lewis has increased pressure for Board Diversity as a requirement of NZX50 companies.  Where the guideline previously was aiming to have at least 1 female director, they have lifted expectations to have 2 female directors for boards with six or more directors.  They may provide an exception to those companies with a high number of women in senior management or which discloses its intentions to improve diversity.  It would appear expectations of NZ board diversity is building from a low base.

  1. Say on Climate:

Glass Lewis has indicated an update to its approach to Say on Climate votes in its ESG initiatives guideline paper.

For New Zealand directors seeking to stay on the right side of the Glass Lewis list, there is a guideline of ‘what not to do’s’ for directors within the 2022/23 New Zealand Policy.

In summary…

Beware of poor policies and practices throughout an election year, Glass Lewis is watching. It lists Audit, Remuneration, Nomination and Risk Management practices as important for director elections.

Where a director has a track record of poor performance in fulfilling their responsibilities to shareholders at any company either as an executive or in a non-executive role, a ‘no’ vote recommendation from CGI Glass Lewis is warranted.

Poor attendance without reasonable explanation and poor management of ESG are other listed factors which Glass Lewis note as a mark in a director’s track record.

Also if the company share price or financial performance has been poor (independent of market forces) CGI Glass Lewis may recommend against the re-election of a director.

The 2022-2023 CGI Glass Lewis New Zealand Policy can be found HERE .

© Guerdon Associates 2024
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