Glass Lewis mulls move to counter proxy access evasion

Possible change comes as SEC considers overhauling policy on conflicting proposals

Proxy advisory firm Glass Lewis is considering recommending that shareholders vote against board candidates when a company counters a shareholder proposal for proxy access with its own ‘diluted alternative’, according to media reports.

The possible policy change, disclosed by Glass Lewis in an email to the Wall Street Journal, would represent an escalation in the proxy adviser’s push for proxy access. The move would basically threaten to punish companies through negative votes if they seek to block shareholder-submitted proposals that ‘conflict’ with the companies’ own.

The vote against management-backed candidates would likely apply when companies present a ‘conflicting proposal’, or counter-proposal, that Glass Lewis determines is meant to offset and weaken a proxy access proposal by shareholders.

‘Glass Lewis will evaluate the reasonableness and rationale of a company’s response to a proxy access shareholder proposal, including when the company submits an alternative access proposal and excludes the shareholder proposal, based on the differences in the terms of the proposals as well as analysis of the company, its governance, performance, board independence and responsiveness to shareholders,’ the firm says in its note to the WSJ.

The notice comes a week after Mary Jo White, chairman of the SEC, said she ordered her staff to study possible changes to its policies regarding conflicting proposals.

‘Proxy rules enable shareholders to submit proposals for inclusion in a company’s proxy materials for a vote at a shareholder meeting, subject to certain procedural and substantive exclusions,’ White said in a statement on January 19. ‘One of the exclusions, Exchange Act Rule 14a-8(i)(9), allows a company to exclude a shareholder proposal that directly conflicts with a management proposal. Due to questions that have arisen about the proper scope and application of Rule 14a-8(i)(9), I have directed the staff to review the rule and report to the commission on its review.’

She added, however, that the SEC will ‘express no views’ on the rule in the current proxy season.


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