This year we have seen a change in Glass Lewis’ application of its Post-IPO Governance policy. Historically, Glass Lewis has been more lenient than ISS in issuing automatic holdback recommendations on directors based on governance arrangements adopted at the time of the IPO.
We have seen several companies that went public last year receive retainer recommendations from Glass Lewis for all of their directors due to their post-IPO governance. Glass Lewis specifically cited a combination of the following governance arrangements as problematic: a classified board; plurality voting standard for director elections; removal of a director only “for cause” and by qualified majority vote; supermajority voting requirements for amendments to the Company’s constitutional documents; exclusive forum provisions; no rights for shareholders to call special meetings or to act by written consent; and an equity plan with an “evergreen” provision. It seems to us, from the Glass Lewis reports, that we’ve looked at that having a classified board without committing to a shareholder vote or providing a reasonable pre-determined date by which the classified board takes end is the most problematic of the above referenced governance arrangements in Glass Lewis’ view.
Obviously, we are nearing the end of the annual meeting season for companies at the end of the calendar year. However, if a company that went public last year has yet to hold its annual meeting, it should be aware of this development. It will also be important going forward for companies that are going through the IPO process or are newly public to know that all of their directors are likely to receive a retainer recommendation from ISS and Glass Lewis at their first meeting. annual. if they put in place certain governance arrangements when they go public.
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