Updated institutional investor voting guidelines

Institutional Shareholder Services (ISS) has published its UK Proxy Voting Guidelines for 2021 and Glass Lewis has published its 2021 Proxy Paper Guidelines.

ISS Proxy Voting Guidelines

The key changes to the current UK proxy voting guidelines are set out in a policy updates document and include:

• Board gender diversity – ISS will generally recommend voting against the chair of the nomination committee, or other directors on a case by case basis, if the board of a FTSE 350 company (excluding investment trusts) does not comprise at least 33% women, in line with the Hampton-Alexander Review recommendations (see our corporate update 2019/22). For 2021 only, a public commitment to comply with the Hampton-Alexander recommendations by the company's 2022 AGM will not result in a vote against recommendation. A similar ‘vote against’ recommendation will generally be applied to AIM companies with a market capitalisation of over £500 million and FTSE Small Cap companies if there is not least one woman on the board.
• Overboarding – The guidelines have been amended to reflect ISS's current practice that it may take a more lenient view when applying its director overboarding criteria if a director serves on the board of a less complex company.

The 2021 proxy voting guidelines apply to shareholder meetings taking place on or after 1 February 2021.

Glass Lewis Guidelines

The key changes to the Glass Lewis Guidelines this year include:

• Board diversity – Glass Lewis will generally recommend voting against the chair of the nomination committee of any FTSE 350 company that has failed to meet the 33% board gender diversity recommendation in the Hampton-Alexander Review. A similar ‘vote against’ recommendation will be applied to any other company listed on the Main Market of the London Stock Exchange if there is not least one woman on the board. The guidelines have also been updated to reflect Glass Lewis’s expectation that FTSE 350 companies provide meaningful disclosure against the board ethnic diversity targets set out in the Parker Review (see our corporate update 2020/3).
• Hybrid and virtual shareholder meetings – The guidelines discuss Glass Lewis’s approach to amendments to articles of association to permit virtual meetings or hybrid meetings and the confirmations that it expects from companies in order to support such amendments. The guidelines also set out Glass Lewis’s expectations when companies are convening shareholder meetings at which attendance in person is limited (for example, meetings held under the Corporate Insolvency and Governance Act relaxations discussed at item 1 above).
• Directors’ remuneration – The guidelines clarify Glass Lewis’s expectation that remuneration committees should retain a level of discretion to ensure that remuneration outcomes for executive directors align with company performance, as well as shareholder and employee experiences.
• Environmental and social issues – From 2021, Glass Lewis will note as a concern when boards of FTSE 100 companies do not provide clear disclosure concerning the board-level oversight afforded to environmental and social issues. There is also discussion on how Glass Lewis approaches its assessment of resolutions proposed by shareholders on environmental and social issues.
• Human capital – The guidelines include a new section on human capital management and diversity.