March 25, 2019
Glass Lewis recently launched a new 2019 pilot program to allow companies and shareholder proposal proponents to review and respond to the advisor’s recommendations. The announcement comes after months of unprecedented scrutiny of proxy advisors from the Securities and Exchange Commission (SEC), Congress, companies and retail investors – all of whom are concerned about companies’ inability to weigh in on recommendations.
Glass Lewis claims the program will facilitate “informed dialogue among all stakeholders.” Unfortunately, once explained in more detail, the program sounds like a ploy to extort more cash from companies who simply want to ensure recommendations are based on accurate information.
During a webinar on the new program, Glass Lewis CEO KT Rabin unconvincingly stated that this is a legitimate way for the advisor to respond to concerns:
“Since the 2010 SEC concept release on the proxy system, Glass Lewis has focused on finding ways to be better understood by all stakeholders in the proxy process globally. Being more transparent and accessible in an appropriate manner is important for our investor clients and for the capital markets in general, I think.”
According to Glass Lewis the program will provide:
“…a unique opportunity for public companies and shareholder proposal proponents – the subjects of our research – to submit feedback on the analysis of their proposals, and have comments directly delivered to our investor clients.”
The program will certainly be unique for the companies who pay for the privilege to participate, as the service will be limited to 12 companies or shareholder proponents per week this proxy season (a seemingly arbitrary number that Glass Lewis notes is “subject to change”).
In order to participate, companies must first, “Purchase the relevant annual general meeting report directly from Glass Lewis.” Glass Lewis further warns, “Subscribers that only use third parties (e.g. solicitors, law firms and other advisors) to get information about Glass Lewis’ analysis are not eligible to subscribe to the Report Feedback Statement service.” In addition to buying the report, companies must pay an additional $2,000 to distribute the report for each statement they wish to submit.
While Glass Lewis may believe this is a helpful way to allow companies to weigh in – the newly announced program ultimately furthers the case for new SEC regulations that ensure actual, no-strings-attached transparency. This transparency should not emerge as another scheme to increase proxy advisor profits, but should instead provide companies and shareholders with the rationale behind recommendations and to give them an efficient way to respond to these recommendations should they disagree.