Glass Lewis has published its 2024 Benchmark Policy Guidelines for the UK and Ireland, which outline its views on current market practices in both jurisdictions and its voting recommendations for the 2024 AGM season.
2024 Benchmark Policy Guidelines for the UK
The UK Guidelines apply to companies listed in the UK and are supplemented by the Irish Guidelines, as outlined below. Notable changes and clarifications in the UK Guidelines relate to director attendance, interlocking directorships, director accountability for climate-related issues and cyber risk oversight.
Glass Lewis has clarified that exceptions may apply to a director who has failed to attend at least 75% of board meetings, or an aggregate of 75% of board and applicable committee meetings. While the recommendation is usually to vote against the re-appointment of such a director, Glass Lewis has clarified that exceptions apply to directors who are serving their first year on the board or where the company discloses mitigating circumstances for a director’s poor attendance record.
Glass Lewis has expanded its policy on interlocking directorships to include both public and private companies. It will also evaluate other types of interlocking relationships on a case-by-case basis, including board interlocks which occur when top executives serve on each other’s boards. Glass Lewis has specified that such relationships cause particular concern where the executives cross-serve on each other’s remuneration committees. It will review multiple board interlocks among non-insiders for evidence of a pattern of poor oversight.
Director Accountability for Climate-related Issues
Glass Lewis may recommend voting against directors of companies whose greenhouse gas (GHG) emissions represent a financially material risk. While this policy was applied to the largest, most significant emitters in 2023, Glass Lewis will apply this policy in 2024 to FTSE 100 companies operating in industries where the Sustainability Accounting Standards Board has determined that the companies’ GHG emissions represent a financially material risk.
Glass Lewis will also assess whether these companies have disclosed explicit and clearly defined board-level oversight responsibilities for climate related issues. In circumstances where directors charged with such oversight are not standing for election, Glass Lewis may instead recommend shareholders vote against other matters that are up for a vote, such as the accounts and reports proposal.
Cyber Risk Oversight
Glass Lewis acknowledges that companies and consumers are exposed to a growing risk of cyber-attacks. It therefore has expanded its policy on cyber risk oversight to outline the belief that, where a company has been materially impacted by a cyber-attack, shareholders can reasonably expect periodic updates communicating the company’s ongoing process towards resolving and remediating the impact of the attack.
Where a company has been materially impacted by a cyber-attack, Glass Lewis may recommend voting against directors charged with cyber risk oversight where their response or disclosures concerning the attack and other cyber security-related issues were not provided to shareholders or were found to be insufficient.
2024 Benchmark Policy Guidelines for Ireland
The Irish Guidelines are intended to supplement the UK Guidelines and highlight the key policies applicable to companies listed in Ireland and the regulatory background to which such companies are subject, where they differ from the UK. The key changes for 2024 under the Irish Guidelines promote board diversity, oversight of ESG-related risks and integrity in financial reporting.
The Irish Guidelines have been updated to clarify that Glass Lewis will generally recommend voting against the chair of the nomination committee at any ISEQ 20 board that has failed to meet the 33% board gender diversity target. This target was set out in the 2022 review of Balance for Better Business, an independent review group established by the Irish government to improve gender balance in senior leadership in Irish companies (see also its 2023 review here). Where the proposed composition of the board does not align with this target, Glass Lewis expects companies to provide disclosure to address this. There are limited exceptions to this policy which include:
- where a board consists of four or fewer directors;
- where a company discloses a credible plan to address the gender imbalance on the board in the near term (e.g. by the time of the next AGM);
- where a company otherwise demonstrates its commitment to diversity through an exceptionally diverse board; and/or
- other exceptional and company-specific cases (e.g. unexpected director resignation, recent uplisting etc.).
With regards to ethnic diversity, Glass Lewis believes that the composition of the board should be representative of a company’s workforce and other key stakeholders. It may recommend that shareholders vote against the re-election of the chair of the nomination committee where a board of any Irish-listed company has failed to address legitimate shareholder concerns regarding diversity of ethnicity and national origin at board level.
Oversight of ESG-related Risks
The environmental, social and governance (ESG) risks faced by Irish issuers will undoubtedly be scrutinized by investors in the upcoming AGM season. Glass Lewis will generally recommend voting against the chair of the governance committee of ISEQ 20 companies that fail to provide explicit disclosure concerning the board’s role, and specifically, the role of independent directors, in overseeing material environmental and social issues.
For large-cap companies and in cases where Glass Lewis identifies a material oversight concern, it will review a company’s overall governance practices to identify which directors or board sub-committees have been charged with oversight of environmental and/or social issues.
Integrity in Financial Reporting
Glass Lewis generally supports the proposals for shareholders to approve or acknowledge a company’s financial statements at its AGM, which is a routine requirement under Irish company law. However, the 2024 Guidelines have been updated to include an exception whereby Glass Lewis may, on a case-by-case basis, recommend that shareholders vote against these proposals where the company’s auditor has not provided an unqualified opinion on the financial statements. In these instances, Glass Lewis will assess the reasoning provided by the statutory auditor in conjunction with any relevant disclosure from the company.
Other updates include clarifying amendments to existing policies on director classification, particularly the guidelines on director “independence”, such that uncles, aunts, cousins, nieces and nephews are now considered as being relevant familial relationships. In line with the UK Guidelines, Glass Lewis also included provisions on the impact of director tenure and interim management positions on director independence.
See also the 2024 Benchmark Policy Guidelines for the US here.
Companies listed in Ireland and the UK should align themselves with the above updates from Glass Lewis and should be aware of the persuasive impact the benchmark policy guidelines are likely to have on the voting decisions of institutional investors. If you are planning for the 2024 AGM season and have any questions, including on the Glass Lewis 2024 Benchmark Policy Guidelines, please contact Mark Talbot, Brian Butterwick or another member of the Corporate team.
Contributed by Lulu Trainor