Half-yearly corporate update – our latest briefing

We have published our half-yearly update briefing which summarises the major developments in UK corporate law and regulation that have occurred over the last six months, that is from July to December 2022, and which are of relevance to UK listed companies.

The briefing is available here.

Julie Farley
Julie Farley
+44 20 7466 2109

Mike Flockhart
Mike Flockhart
+44 20 7466 2507

Sarah Hawes
Sarah Hawes
+44 20 7466 2953

Updated proxy voting guidelines

Institutional Shareholder Services (ISS) and Glass Lewis have published updates to their proxy voting guidelines for the 2023 AGM season.

Both ISS and Glass Lewis support the updated 2022 Pre-Emption Group Statement of Principles on the disapplication of pre-emption rights and will not recommend votes against resolutions for authorities sought and used in line with these principles (see our corporate blog post for more information on the 2022 Statement of Principles).

ISS Proxy Voting Guidelines

The key changes to the ISS UK proxy voting guidelines are set out in a policy updates document. The changes include:

  • Audit committees – In light of the increased focus on the work of audit committees as part of the reform of audit in the UK (see our briefing on audit and corporate governance reform), ISS will note where there have been four or fewer meetings of the audit committee of FTSE 350 companies in the financial year. For FTSE All-Share companies, ISS will highlight where there have been three or fewer meetings; and
  • Board diversity – For financial years beginning on or after 1 April 2022, ISS may consider recommending votes against the chair of the nomination committee, or other director on a case-by-case basis, of premium and standard listed companies that have not met the new board diversity and inclusion targets introduced by the FCA (see our corporate blog post for further details on these changes to the Listing Rules and the Disclosure Guidance and Transparency Rules).

The ISS Proxy Voting Guidelines 2023 are effective for meetings held on or after 1 February 2023.

ISS is expected to publish the full updated policy guidelines reflecting these changes later this month.

Glass Lewis 2023 Policy Guidelines

The key changes set out in the Glass Lewis 2023 Policy Guidelines include:

  • Overboarding – Glass Lewis has clarified what it considers to be an excessive level of commitments and it will generally recommend voting against the election of an executive director who is serving on more than one public board or taking on more than one non-executive directorship of a FTSE 100 company (or similar level of appointment);
  • Employee representatives – Glass Lewis does not include directors serving as representatives of employees when calculating what proportion of the board is independent;
  • Director accountability for climate-related issues – Glass Lewis may recommend voting against the chair of the committee (or board) responsible for oversight of climate-related issues (or the chair of the governance committee if no such committee is responsible) if companies fail to make disclosures in line with the Recommendations of the Task Force on Climate-related Financial Disclosures or if they have not clearly and explicitly defined board oversight responsibility for climate-related issues; and
  • Combined incentive plans – Glass Lewis will generally recommend voting against combined incentive plans (in lieu of more traditional structures which have both short- and long- term plans) unless certain conditions are met.

Glass Lewis is also monitoring how companies approach a number of other issues, including board diversity and cyber risk oversight, with a view to taking action should companies not respond appropriately to these developments.

The revised Glass Lewis guidelines will apply to meetings from 1 January 2023.

Sarah Hawes
Sarah Hawes
+44 20 7466 2953

Robert Moore
Robert Moore
+44 20 7466 2918

James Palmer
James Palmer
+44 20 7466 2327

Investment Association Principles of Remuneration for 2023

The Investment Association (IA) has published its annual letter to remuneration committee chairs setting out shareholder expectations for 2023, as well as an updated version of its Principles of Remuneration.

In its letter to remuneration committee chairs, the IA highlights the key areas of focus for its members when considering the remuneration practices of companies in the forthcoming AGM season. Topics covered include salary levels and the cost of living, windfall gains and the use of ESG metrics in executive remuneration.

It also notes that IVIS (the Institutional Voting Information Service, which is part of the IA) will red top any remuneration policy or report where executive pension contributions are not aligned to the majority of the workforce.

There are no significant changes to the Principles of Remuneration for this year.

For further information see this post on our Remuneration and Incentives blog.

Mark Bardell
Mark Bardell
+44 20 7466 2575

Antonia Kirkby
Antonia Kirkby
+44 20 7466 2700

Caroline Rae
Caroline Rae
+44 20 7466 2916

Consolidated corporate update January to June 2022

We have published our half-yearly update briefing which summarises the major developments in UK corporate law and regulation that have occurred over the last six months, that is from January to June 2022, and which are of relevance to UK listed companies.

Please click here to see the full briefing.

Mark Bardell
Mark Bardell
+44 20 7466 2575

Mike Flockhart
Mike Flockhart
+44 20 7466 2507

Sarah Hawes
Sarah Hawes
+44 20 7466 2953

Investment Association’s updated statement on shareholder priorities

The Investment Association (IA) has published a document discussing its listed company shareholder priorities for 2022.

First published in January 2020, the IA Shareholder Priorities document outlines investors’ expectations for the coming year and sets out how the Institutional Voting Information Service (IVIS), which is part of the IA, will analyse these issues for companies with year-ends on or after 31 December 2021 (including its “colour-top” approach).

Three key areas covered by the 2022 Guidelines are:

  • Climate change – The IA expects companies to be taking action now on climate change and encourages companies to publish net-zero transition plans before it becomes mandatory to do so.  IVIS will amber-top all companies that do not make disclosures against all four pillars of the Task Force on Climate-related Financial Disclosures (TCFD) Recommendations.
  • Diversity – The IA supports the proposals contained in the FCA’s consultation on additional diversity targets and reporting (see our blog post here for further detail) and the recommendations recently announced by the FTSE Women Leaders Review (see our blog post here). The IA expects companies to explain the approach they are taking to meet the new targets and is encouraging companies to disclose against the new reporting template proposed by the FCA. IVIS will red-top FTSE 350 companies where women represent 33% or less of the board, or 28% or less of the executive committee and their direct reports. It will also red-top FTSE 100 companies that do not have at least one director from a minority ethnic group on the board, in line with the Parker Review recommendation.
  • Stakeholder engagement – The IA expects disclosures on stakeholder engagement to include the impact of increases to the cost of living and inflationary pressures on consumers and suppliers, as well as the impact of the Covid-19 pandemic.
Isobel Hoyle
Isobel Hoyle
+44 20 7466 2725

Gareth Sykes
Gareth Sykes
+44 20 7466 7631

Ben Ward
Ben Ward
+44 20 7466 2093

PLSA Stewardship Guide and Voting Guidelines 2022

The Pensions and Lifetime Savings Association (PLSA) has issued its Stewardship Guide and Voting Guidelines for 2022. The 2022 Guidelines set out the PLSA’s views on current best practice and its voting recommendations for AGMs in 2022.

Three key areas covered by the 2022 Guidelines are:

  • Climate change – The PLSA wants to see all listed companies refer to the TCFD framework and include better disclosure on the company’s impact on the environment.
  • Executive remuneration – Restraint should be shown on executive pay proposals in light of the increasing cost of living, and especially where companies benefitted from Government support during the pandemic.
  • Diversity – The PLSA says it is seeing significant progress on diversity on boards and welcomes the direction of travel. It calls for a continued focus on ensuring diversity, and says that investors should vote against re-election of the Chair and/or Chair of the Nominations Committee of FTSE 100 companies that are consistently failing to move closer to the Parker Review target of ‘no white boards’ by 2021.

The Guidelines also contain the PLSA’s voting recommendations summary chart, which sets out its recommendations on particular issues including executive remuneration, audit, company leadership and dividends.

Alex Kay
Alex Kay
+44 20 7466 2447

Antonia Kirkby
Antonia Kirkby
+44 20 7466 2700

Gareth Sykes
Gareth Sykes
+44 20 7466 7631

Half-yearly corporate update – our latest briefing

We have published our half-yearly update briefing which summarises the major developments in UK corporate law and regulation that have occurred over the last six months, that is from July to December 2021, and which are of relevance to UK listed companies.

The briefing is available here.

Sarah Hawes
Sarah Hawes
+44 20 7466 2953

Roddy Martin
Roddy Martin
+44 20 7466 2255

Ben Ward
Ben Ward
+44 20 7466 2093

Updated Glass Lewis voting guidelines for 2022 AGM season

Glass Lewis has published its 2022 Policy Guidelines and 2022 Environmental, Social and Governance Initiatives Policy Guidelines. The documents set out its views on current market best practice and its voting recommendations for AGMs in 2022.

Key updates to the Glass Lewis Guidelines for 2022 include:

  • Board diversity – In line with the recommendation of the Parker Review (see our blog post here), Glass Lewis will generally recommend against the re-election of the nomination committee chair of any FTSE 100 board that has failed to appoint at least one director from a minority ethnic group and failed to provide a clear and persuasive explanation as to why this is the case. Glass Lewis’s recommendations on gender diversity continue to apply (see our blog post here).
  • Executive remuneration – It may recommend that shareholders vote against the re-election of the remuneration committee chair where there are substantial concerns with the remuneration policy and/or pay practices outlined in the directors’ remuneration report. The Guidelines include substantive amendments to the sections on remuneration reporting, incentive plan formats and linking executive pay to environmental and social criteria.
  • Committee chairs – Where the guidelines would indicate a recommendation to vote against a committee chair, but that chair is not up for re-election, it may instead recommend that shareholders vote against the re-election of one or more long serving committee members.
  • Approach to ‘Say on Climate’ votes – Glass Lewis will generally oppose shareholder proposals requesting that companies adopt a Say on Climate vote, on the basis that a company’s business strategy is best determined by the board. However, where management is asking shareholders to vote on a climate transition plan or similar, it will evaluate such resolutions and plans on a case by case basis.
  • Disclosure of environmental and social risks – It will generally recommend that shareholders vote against the re-election of the governance committee chair (or the chair or senior independent director) for FTSE 100 companies that fail to include disclosures on the board’s role in overseeing material environmental and social risks in the annual report.
Sarah Hawes
Sarah Hawes
+44 20 7466 2953

Gareth Sykes
Gareth Sykes
+44 20 7466 7631

Ben Ward
Ben Ward
+44 20 7466 2093

Corporate governance – PLSA Stewardship Guide and Voting Guidelines 2021

The Pensions and Lifetime Savings Association (PLSA) has issued its Stewardship Guide and Voting Guidelines for 2021. The document sets out the PLSA’s views on current market best practice and its voting recommendations for AGMs in 2021.

The key changes contained in the 2021 Guidelines are:

  • Virtual shareholder meetings – The Guidelines state that, in light of concerns that virtual shareholder meetings may reduce investor engagement, the PLSA would recommend voting against a proposal to allow virtual shareholder meetings, unless the proposal is time limited.
  • Executive remuneration – The Guidelines state that maximum pay-outs to executives must remain in line with the expectations of shareholders and other stakeholders and should take into account the impact of Covid-19, any taxpayer-funded support that the company has received from government and the treatment of the wider workforce.
  • Climate-related reporting – As the largest pension schemes will likely be required to report in line with the recommendations of the Taskforce for Climate Related Financial Disclosures (TCFD) from October 2021, there is increasing focus on listed company disclosures in relation to climate change and TCFD-aligned reporting.

The Guidance also incorporates the PLSA’s voting recommendations summary chart, which sets out its voting recommendations on certain issues including executive remuneration, audit, company leadership and dividends.

Antonia Kirkby
Antonia Kirkby
+44 20 7466 2700

Greg Mulley
Greg Mulley
+44 20 7466 2771

Gareth Sykes
Gareth Sykes
+44 20 7466 7631

Updated institutional investor voting guidelines

Institutional Shareholder Services (ISS) has published its UK Proxy Voting Guidelines for 2021 and Glass Lewis has published its 2021 Proxy Paper Guidelines.

ISS Proxy Voting Guidelines

The key changes to the current UK proxy voting guidelines are set out in a policy updates document and include:

  • Board gender diversity – ISS will generally recommend voting against the chair of the nomination committee, or other directors on a case by case basis, if the board of a FTSE 350 company (excluding investment trusts) does not comprise at least 33% women, in line with the Hampton-Alexander Review recommendations (see our corporate update 2019/22). For 2021 only, a public commitment to comply with the Hampton-Alexander recommendations by the company’s 2022 AGM will not result in a vote against recommendation. A similar ‘vote against’ recommendation will generally be applied to AIM companies with a market capitalisation of over £500 million and FTSE Small Cap companies if there is not least one woman on the board.
  • Overboarding – The guidelines have been amended to reflect ISS’s current practice that it may take a more lenient view when applying its director overboarding criteria if a director serves on the board of a less complex company.

The 2021 proxy voting guidelines apply to shareholder meetings taking place on or after 1 February 2021.

Glass Lewis Guidelines

The key changes to the Glass Lewis Guidelines this year include:

  • Board diversity – Glass Lewis will generally recommend voting against the chair of the nomination committee of any FTSE 350 company that has failed to meet the 33% board gender diversity recommendation in the Hampton-Alexander Review. A similar ‘vote against’ recommendation will be applied to any other company listed on the Main Market of the London Stock Exchange if there is not least one woman on the board. The guidelines have also been updated to reflect Glass Lewis’s expectation that FTSE 350 companies provide meaningful disclosure against the board ethnic diversity targets set out in the Parker Review (see our corporate update 2020/3).
  • Hybrid and virtual shareholder meetings – The guidelines discuss Glass Lewis’s approach to amendments to articles of association to permit virtual meetings or hybrid meetings and the confirmations that it expects from companies in order to support such amendments. The guidelines also set out Glass Lewis’s expectations when companies are convening shareholder meetings at which attendance in person is limited (for example, meetings held under the Corporate Insolvency and Governance Act relaxations discussed at item 1 above).
  • Directors’ remuneration – The guidelines clarify Glass Lewis’s expectation that remuneration committees should retain a level of discretion to ensure that remuneration outcomes for executive directors align with company performance, as well as shareholder and employee experiences.
  • Environmental and social issues – From 2021, Glass Lewis will note as a concern when boards of FTSE 100 companies do not provide clear disclosure concerning the board-level oversight afforded to environmental and social issues. There is also discussion on how Glass Lewis approaches its assessment of resolutions proposed by shareholders on environmental and social issues.
  • Human capital – The guidelines include a new section on human capital management and diversity.

 

Gareth Sykes
Gareth Sykes
+44 20 7466 7631

Sarah Hawes
Sarah Hawes
+44 20 7466 2953

Stephen Wilkinson
Stephen Wilkinson
+44 20 7466 2038