Upcoming Glass Lewis proxy changes will split 2027 AGM recommendations
Key Takeaways
- Effective September 2027, Glass Lewis aims to replace the “one-size-fits-all” benchmark policy that informs its recommendations with four distinct proxy research perspectives: Business Fundamentals, Foundational Governance, Global Stewardship, and Sustainability Focused.
- These perspectives have different focus areas to cater to differing investor views.
- Investors were asked to consult on the new model. The results of the consultation will be released sometime this month and market specific guidelines will be released soon thereafter.
One proxy guideline splits into 4
Glass Lewis announced a year ago a shift away from providing one recommendation for each listed company in favour of developing tailored benchmark policies for clients from 2027.
Glass Lewis has now unveiled a consultation paper describing a model for differentiated proxy voting guidelines based on 4 perspectives. From September 2027, Glass Lewis clients could choose to receive analysis and policy outcomes (i.e. recommendations) based on the guidelines for one or more of the 4 perspectives.
The shift is driven by the growing disparity in how investors approach fiduciary duty and stewardship, particularly those in Europe and the US, and technological advances (primarily AI) that now enable greater customisation of proxy voting.
The 4 new Glass Lewis policy guideline perspectives were based on a review of public voting policies, stewardship disclosures and voting records for major institutional investors and registered funds.
Glass Lewis 4 new Proxy Guideline perspectives – the differences
The 4 perspectives provide a continuum for investors focused on financials and preferring good governance, to investors focused mainly on sustainability and impact on all stakeholders regardless of financial performance.
Table 1: Comparison of the four perspectives
|
Perspective |
Company assessed on |
Financial performance impact |
Sustainability performance impact |
|
Business Fundamentals |
Traditional governance, audit, capital, and remuneration expectations. No minimum board diversity quotas expectations. |
Top quartile relative TSR performance can earn added latitude on governance expectations (including pay). If aligned to GL current P4P peer group methodology, this will be GL chosen, and may be bespoke or broad index. |
An environmental or social matter is only considered where harm to the company is demonstrable through regulatory costs, penalties, or comparable sanctions, regardless of industry. |
|
Foundational Governance |
TSR performance may inform analyst judgment, but there is no formal threshold that provides leniency on pay or other governance expectations. |
||
|
Global Stewardship |
Traditional considerations plus financially material sustainability risks, including the governance of non-financial risks, sustainability performance, and the completeness and quality of non-financial reporting. |
Consideration of company performance is case-by-case only. |
Industry-based consideration with higher expectations set in sectors where an issue is more likely to be financially material, among them mining, oil and gas, utilities, apparel, agriculture, and food. |
|
Sustainability Focused |
The above considerations plus system-level sustainability considerations, the company’s impact on the environment and society, board-level environmental and social expertise, responsible tax practice, assurance over non-financial reporting, the intended use of proceeds at emission-intensive issuers, the environmental and social implications of a proposed transaction, and a wider Stakeholder Alignment Test for remuneration. |
Not used; financial performance is not a mitigating factor to non-financial issues. |
Considers whether a matter is material in the company’s industry, but also whether it is material to the environment and society as a whole. ESG factors are expected to be included in performance measurement. |
Some expectations of companies are the same across 4 perspectives
All companies are expected to meet expectations from a set of 18 principles. Examples include:
- timely and sufficient disclosures,
- independent boards and appropriately structured committees,
- accountable directors who are responsive to meaningful dissent,
- pay that is aligned to the long term and justifiable,
- fairness to unaffiliated shareholders.
Why does this proxy voting guideline change matter?
While Glass Lewis will use the same benchmarking and pay for performance methodology and will measure companies against the same expectations around incentives (deferral, performance periods, discretion in the face of governance issues etc), each of the 4 perspectives may lead to different recommendations depending on how the company is performing, managing material risk and governance issues, and what metrics it uses to measure executive performance.
For example, as in the Glass Lewis 2026 benchmark policy guidelines, the primary tool to assess financial performance under Business Fundamentals is Total Shareholder Return (TSR). Under this perspective, a “high-performing” determination where a company ranks in the top quartile of TSR against its peer group will generally mean either an exemption from specific governance ‘best-practice’ expectations or greater tolerance for higher executive remuneration. However, that exact same remuneration report may trigger an “against” recommendation under the Sustainability Focused model if the remuneration framework does not feature explicit environmental and social metrics. The Business Fundamentals and Foundational Governance perspectives will generally oppose requests to tie remuneration to sustainability measures, while Global Stewardship and Sustainability Focused may support them.
Additional Glass Lewis updates
This announcement coincides with the strategic merger of Clarity AI and Glass Lewis. Clarity AI provides a Software as a Service (SaaS) platform that leverages AI to deliver ESG datasets. This integration provides Glass Lewis with the AI infrastructure and ESG data required to execute the policy refresh.
What should boards do next?
To secure majority shareholder support, Remuneration Committees will need to understand which of the 4 perspectives their investors align with and give more weight to those perspectives.