With AGMs in India ramping up, Glass Lewis has new and updated resources to get you ready for proxy season.

  • Updated benchmark policy guidelines highlight key changes to Glass Lewis’ approach and methodology, including in relation to board leadership and treatment of non-retiring directors.
  • Our 2023 Proxy Season Preview provides background on the regulatory changes and governance trends that will impact voting, along with what we’ve seen and heard so far from recent shareholder meetings and engagement discussions with corporate issuers.

Policy guidelines are available here. Our full Proxy Season Preview is currently only available to Glass Lewis clients on Viewpoint and Governance Hub, but you can find an excerpt below.

Regulatory Updates

Recent regulatory changes have had an impact on what proposals are going to vote, and how shareholders are voting. For example:

  • Increased minority voting power on related party transaction proposals has led to more frequent protest and rejection of these transactions, and this increased risk of shareholder opposition is compelling companies to rethink their disclosure strategies. These worries were confirmed in our meetings with corporate issuers, who sought to increase stakeholder engagement around these issues.
  • The complex regulations around executive remuneration in India have spurred an increase in remuneration proposals in recent years, which in turn are attracting more scrutiny from investors. This is evidenced in the level of protest on some remuneration proposals, with some proposals even rejected on occasion.
  • We have also seen a 50% increase in volume of election of director proposals in our India coverage following recent amendments to SEBI’s Listing Obligations that require shareholder approval of new directors within three months of appointment, and of sitting directors seeking reappointment. We believe volumes will hold steady at this upper rate, unless there is some winding back of regulations.

Common Corporate Issuer Concerns

Glass Lewis conducts an extensive engagement programme to better understand the views of all market participants. Here is what we’ve heard in recent discussions with corporate issuers in India:

  1. Boards are continuing to seek to improve their ESG reporting to meet investor expectations. Some boards are seeking clarification on the use of ESG ratings and probe their accuracy.
  2. Boards with combined chair and MD/CEO roles have sought to rationalise and justify the role to stakeholders, as the role comes under greater scrutiny to be separated.
  3. Many boards of multinational and diversified companies are wary of investor views on related party transactions, as recent regulatory changes have given minority shareholders greater power to reject such transactions.

Glass Lewis Policy Guideline Updates

Glass Lewis evaluates our benchmark policy guidelines on an ongoing basis and formally updates them on an annual basis. This year we’ve made noteworthy revisions in the following areas:

Board Chair Designation

We have updated our guidelines to reflect how we assess the appointment of a board chair when the position is held by a CEO/Managing Director. From 2023, we will allow the appointment of a chair who is also a   CEO/Managing Director provided that the Company has either:

  • a leading/senior independent director/independent vice chair; or
  • a sufficiently independent board composition

This change is in contrast with our 2022 guidelines, which suggested opposing the appointment of a  CEO/Managing Director serving as board chair when there are no independent vice chair/lead senior  independent director.

Non-Retiring Directors

We have updated our guidelines to reflect how we will treat directors who are to be appointed to the board and are being sought to be not liable to retire by rotation. We will oppose the appointment of such directors if the proposed term of appointment is more than five years, or in the absence of disclosure regarding the proposed term of appointment. Previously our guidelines suggested opposing all non-retiring directors, however we have introduced the fixed term rule in anticipation of the board permanency provision in the upcoming amendments to the SEBI Listing Obligations and Disclosure Requirements (LODR).

Politically Affiliated Directors

We have updated our guidelines to clarify how we will treat independent directors who are politically affiliated with the ruling party in Indian government-affiliated entities (Public Sector Undertakings or State-Owned Enterprise of the Government of India). From 2023 we will no longer consider individuals who are affiliated with the ruling party and serve as directors on the board of Government affiliated companies to be considered independent.

Stock Options

We have updated our guidelines to clarify our approach to stock option awards when such awards are granted at a discount to the market price.

Looking for More?

Keeping up with India’s proxy season can be a challenge for investors. Glass Lewis’ research team is here to help. Our full Proxy Season Preview provides a comprehensive overview of what to expect in the months ahead, including a roundup of key meetings and topics to focus on, along with background on notable recent meetings that saw significant voting opposition. Our Proxy Papers provide the information you need to make your vote decision well ahead of the vote deadline.

Glass Lewis clients can access our 2023 India Proxy Season Preview, from which this post was excerpted, on Viewpoint and Governance Hub.

Not a Glass Lewis client? Get in touch.

GROW@glasslewis.com (Institutional Investors) | ENGAGE@glasslewis.com (Corporate Issuers)