November 27, 2023


Glass Lewis’ 2024 Policy Guidelines: Executive Compensation and Governance Updates

Glass Lewis recently released its 2024 policy guidelines, with new amendments and clarifications on executive compensation, board diversity, oversight of environmental and social areas, and board responsiveness. This article discusses key executive compensation and governance updates.

Executive Compensation-Related Updates

Non-GAAP to GAAP Reconciliation Disclosure

Glass Lewis expanded the discussion of its approach to the use of non-GAAP metrics in incentive programs to emphasize the need for thorough and transparent disclosure in the proxy statement. The disclosure will assist shareholders in reconciling the difference between non-GAAP results used for incentive payout determinations and reported GAAP results. In situations where significant adjustments were applied and materially impacted incentive pay outcomes, the lack of such disclosure will affect Glass Lewis’ assessment of the quality of executive pay disclosure and may be a factor in the say-on-pay recommendation.

SEC Pay-Versus-Performance Disclosure

Glass Lewis revised the discussion of the pay-for-performance analysis to note that the pay-versus-performance disclosure mandated by the SEC may be used as part of the supplemental quantitative assessments supporting Glass Lewis’ primary pay-for-performance grade.

Clawback Provisions

Glass Lewis updated their views on clawback provisions. In addition to meeting the SEC’s requirements, in Glass Lewis’ view effective clawback policies should provide companies with the ability to recoup incentive compensation (whether time-based or performance-based) from an executive or former executive when there is evidence of problematic decisions or actions, such as material misconduct, a material reputational failure, material risk management failure, or a material operational failure. Such ability to recoup should be provided regardless of whether the employment of the executive officer was terminated with or without cause.

In situations where the company determines not to follow through with the recovery, Glass Lewis will assess the appropriateness of such determination for each case. In these circumstances, rationale should be provided if the company determines to refrain from recouping compensation as well as disclosure of alternative measures that are instead pursued, such as the exercise of negative discretion on future payments. The absence of enhanced disclosure may impact Glass Lewis’ assessment of the quality of disclosure and, in turn, may play a role in Glass Lewis’ overall say-on-pay recommendation.

Executive Ownership Guidelines

Glass Lewis added a discussion to formally outline the approach to executive ownership guidelines. In the CD&A, companies should clearly disclose their executive ownership requirements and how the various types of outstanding equity awards are counted or excluded from the ownership level calculation. In determining whether executives have met the requirements or not, the inclusion of unearned performance-based full value awards and/or unexercised stock options without rationale may be viewed as problematic.

Proposals for Equity Awards for Shareholders

Glass Lewis added new discussion of provisions that require a non-vote, or vote of abstention, from a shareholder that owns significant equity in the company if that same shareholder is also the recipient of the proposed grant. These provisions help to address potential conflict of interest issues and provide shareholders that do not hold a significant percentage of company stock with more meaningful say over the proposal. The inclusion of such provisions will be viewed positively by Glass Lewis, especially when a vote from the recipient of the proposed grant would materially influence the passage of the proposal.

Company Responsiveness (for Say-on-Pay Analysis)

Glass Lewis clarified that in calculating whether a say-on-pay proposal has opposition of at least 20%, both AGAINST and ABSTAIN votes will be counted as opposing votes.

Board Governance-Related Highlights

Underrepresented Community Diversity

Glass Lewis revised the definition of “underrepresented community director” to replace the reference to an individual who self-identifies as gay, lesbian, bisexual, or transgender with an individual who self-identifies as a member of the LGBTQIA+ community.

Board Oversight of Environmental and Social Issues (E&S)

Glass Lewis updated the discussion of board oversight of E&S issues. Glass Lewis believes that these responsibilities should be formally designated and codified in the appropriate committee charters or governing documents. When evaluating the board’s role in overseeing E&S issues, such as climate change, human capital management, diversity, stakeholder relations and social risk, Glass Lewis will examine a company’s committee charters and governing documents to determine if the company has codified a meaningful level of oversight of and accountability for a company’s material environmental and social impacts.

For companies in the Russell 3000 and in instances where material oversight concerns are identified, Glass Lewis will review a company’s overall governance practices and identify which directors or board-level committees have been charged with oversight of environmental and/or social issues. Glass Lewis will generally recommend voting against the governance committee chair of a company in the Russell 1000 index that fails to provide explicit disclosure concerning the board’s role in overseeing these issues.

Board Responsiveness

Glass Lewis has removed a reference when 20% or more of shareholders vote contrary to management for a shareholder proposal. Glass Lewis will no longer expect Boards to be responsive to shareholders and engage on the issue. In addition, Glass Lewis clarified that the calculation of opposition for all proposals includes votes cast as either AGAINST and/or ABSTAIN.

Board Accountability for Climate-Related Issues

Glass Lewis has updated how their policy on board accountability for climate-related issues is applied. In last year’s update, the policy was applied to the largest, most significant emitters; however beginning in 2024, Glass Lewis will apply this policy to S&P 500 index companies operating in industries where the Sustainability Accounting Standards Board (SASB) has determined that the companies’ GHG emissions represent a financially material risk, and companies where Glass Lewis believes emissions or climate impacts, or stakeholder scrutiny thereof, represent an outsized, financially material risk.

Glass Lewis will evaluate whether such companies have produced disclosures in line with the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD). Glass Lewis also clarified that they will also evaluate whether these companies have disclosed clearly defined board-level oversight responsibilities for climate-related issues. In instances where these disclosures are absent or significantly lacking, they may recommend voting against responsible directors.


This article highlights changes to Glass Lewis’ policies and is not intended to be exhaustive. For information related to Glass Lewis‘ voting policies, please visit 2024 US Policy Guidelines.