Glass Lewis providing advisory services to listed companies

It had to happen. Presumably the hefty price that Peloton Capital Management and Stephen Smith paid Canadian pension funds for ownership of Glass Lewis late last year (see HERE) could only be justified if they leveraged the proxy adviser firm’s influence with institutional investors into making money from issuers. We have seen how well this has worked for ISS which has realised astounding returns across multiple PE owners before settling into the arms of stock exchange operator and data engine Deutsche Börse (see HERE).

On 18 October, Glass Lewis announced that, through its new affiliate, Glass Lewis Corporate, it will now offer public companies an advisory solution to enhance their understanding of how proxy advisors and institutional investors evaluate equity plans, helping them to develop equity plans that are in alignment with shareholder perspectives (see HERE).

A Glass Lewis spokesperson said that “By delivering clearly-defined guidance and an understanding of a company’s unique scenario, the Equity Plan Advisory service helps companies anticipate shareholder concerns and design equity plans that are likely to meet shareholder expectations.”

The service will be offered initially to U.S. and Canadian companies. Presumably it will expand to other geographies over time.

To those who would say that this creates a conflict of interest, others would respond that such a conflict was always there. That is, Glass Lewis sold its proxy reports to issuers. It reasoned that the cost to research, report and recommend on issuer resolutions should not be borne exclusively by their “primary” customers, being investors. Why should issuers get reports for free when their “customers” had to pay for them?

Arguably, the new service and presumably the others that will follow will change the balance of income sources for Glass Lewis to be weighted away from institutional investors and more towards issuers prepared to pay a lot to receive support from proxy advisors and institutional investors. ISS revenues from issuers dwarfs that received from investors. This, some say, would greatly exacerbate the conflicts of interest that were already there.

© Guerdon Associates 2024
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