Glass Lewis’ “2023 Proxy Season Briefing”

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Here’s an excerpt from the “Key Findings” in the “2023 Proxy Season Briefing” for the United States from Glass Lewis:

Glass Lewis continues to overwhelmingly support director elections, recommending in favor of nearly 85% of directors during the most recent proxy season:

• A sharp drop in recommendations related to IPO governance concerns signals the recent IPO boom may have temporarily subsided, yet many of these newly public companies contributed to a rise in other governance concerns typically seen at less established companies, such as insufficient board independence and audit-related issues.

Problematic accounting and poor internal control over financial reporting at companies has put a strain on audit committees:

• After several years of companies going public via IPO or SPAC-mergers, we observed a more than 2.5x increase in companies with concerning material weaknesses or restatements; likely due, in part, to many such companies in the early stages of developing strong internal controls.

In response to the SEC’s adoption of universal proxy and the State of Delaware allowing corporations to limit the personal liability of certain officers through “officer exculpation” provisions, a slew of companies amended governing documents:

• More than 685 companies in our coverage amended advance notice bylaws in response to universal proxy, and 250 companies proposed amendments to their certificates of incorporation to adopt officer exculpation provisions.
• During proxy season, we recommended against directors at 5 companies based on egregious disclosure requirements in advance notice provisions. We initially recommended on that same basis against directors at 4 additional companies which later removed egregious disclosure requirements, leading us to update our recommendation.

More shareholder proposals, but lower shareholder support:

• There was a 12% increase in the number of shareholder proposals that went to a vote in 2023, which followed a 30% increase the previous year. The increase has been driven by both regulatory changes allowing more proposals to go to a vote and by an increasing focus from investors on ESG- related issues.
• Average investor support for shareholder proposals has dropped significantly in recent years, to 23% in 2023, down from 31% last year and 36% in 2021. The decline in shareholder support was seen
across all categories of proposals.