By Andrew Ackerman
WASHINGTON--Proxy advisory firm Glass, Lewis & Co. is
considering recommending shareholders vote against management's
preferred directors when firms ignore certain shareholder proposals
on their proxies in favor of their own diluted alternatives.
Glass Lewis said Friday it may recommend shareholders dissent
from management-backed candidates if companies block
shareholder-submitted proposals on the grounds that they "conflict"
with the companies' own proposals.
Glass Lewis said it may take such steps in situations where a
company's proposal "varies materially" from the shareholder-backed
measure and management fails to provide "sufficient rationale."
At issue are so-called proxy-access proposals that allow
qualifying shareholders to print the names of candidates for
corporate boards of directors directly onto company ballots.
Friday's move by Glass Lewis is significant, because a "no"
recommendation from an adviser can make the difference in close
votes over director elections, which are among the issues often
pushed by activist hedge funds in contentious corporate elections.
Proxy advisers such as Glass Lewis analyze corporate proxies, make
voting recommendations and offer software that lets investors cast
votes at hundreds or even thousands of companies efficiently,
according to policies set by the investors.
"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," Glass Lewis said in a statement released by Robert
McCormick, its chief policy officer.
Business groups like the Business Roundtable had urged proxy
advisers firms to stay out of the fight while the Securities and
Exchange Commission reviews its rules. It was unclear if
Institutional Shareholder Services Inc., another large proxy
advisory firm, would recommend similar dissents. A spokesman
declined to comment Friday.
The SEC sparked a furor in December when it allowed Whole Foods
Market Inc.'s decision to ignore a proxy-access measure allowing
investors owning 3% of the company's shares for three years to
nominate their own candidates. The high-end grocer said it planned
to advance a similar proposal of its own with a 9% threshold, even
though no single shareholder owns more than about 5% of its stock.
Whole Foods subsequently lowered that threshold to 5%, though
investor advocates warned that bar was still too high.
In response to questions over its earlier decision, the SEC last
week reversed its Whole Foods decision and said it would take "no
views" for the remainder of proxy season on whether companies could
leave such proposals out of their proxy materials. It plans to
review a rule that allows firms to exclude shareholder proposals if
management plans to offer similar changes to its governing
documents.
Write to Andrew Ackerman at andrew.ackerman@wsj.com
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