Glass Lewis & ISS Provide Policy Updates for 2025 Proxy Season: What This Means for You

Board Oversight of Artificial Intelligence (AI)

• “The benchmark policy takes the view that boards should be cognizant of, and take steps to mitigate exposure to, any material risks that could arise from their use or development of AI.”
• “In the absence of material incidents related to a company’s use or management of AI-related issues, our benchmark policy will generally not make voting recommendations on the basis of a company’s oversight of, or disclosure concerning, AI-related issues.”
• “However, in instances where there is evidence that insufficient oversight and/or mismanagement of AI technologies has resulted in material harm to shareholders, Glass Lewis will review a company’s overall governance practices and identify which directors or board-level committees have been charged with oversight of AI-related risks.”
• “We will also closely evaluate the board’s response to, and management of, this issue as well as any associated disclosures, and the benchmark policy may recommend against appropriate directors should we find the board’s oversight, response or disclosure concerning AI-related issues to be insufficient.”

• This is a new area for Glass Lewis in 2025 that has become particularly relevant as companies continue to develop and adopt AI technologies and address corresponding risks.
• Registrants should ensure that their operational controls and policies are sufficient to minimize the risk of AI-related material incidents and to ensure swift, thorough responses to decrease the potential of adverse voting recommendations. 
• Board education regarding AI remains advisable, along with ensuring proper management-level and operational training and staffing for any AI initiatives, and clarity with respect to responsibility for oversight of AI-related risk at the board level, and approach to AI-related disclosure. 
• In 2024, Glass Lewis supported seven out of nine AI-related shareholder proposals. Over half were requests for a transparency report on the company’s use of AI in its business operations, board oversight, and any related ethical guidelines.

Board Responsiveness to Shareholder Proposals

• “When shareholder proposals receive significant shareholder support (generally more than 30% but less than majority of votes cast), the benchmark policy generally takes the view that boards should engage with shareholders on the issue and provide disclosure addressing shareholder concerns and outreach initiatives.” 

• Glass Lewis also clarified that the compensation committee's response to low Say-on-Pay support—defined as less than 80%—should be discussed in the proxy statement (as opposed to other SEC filings or external communications).

This is a revision to Glass Lewis’ policy. This is emblematic of a continued expectation for companies to either implement shareholder proposals receiving significant support or to provide appropriate disclosure concerning shareholder engagement, even with respect to advisory votes.

Reincorporation

“We review all proposals to reincorporate to a different state or country on a case-by-case basis. Our review includes the changes in corporate governance provisions, especially those relating to shareholder rights, material differences in corporate statutes and legal precedents, and relevant financial benefits, among other factors, resulting from the change in domicile.”

This is a revision to Glass Lewis’ policy and in part a response to (i) Tesla’s 2024 proposal to reincorporate from Delaware to Texas and (ii) the Delaware Court of Chancery’s February 2024 decision in a lawsuit challenging the reincorporation of TripAdvisor. Glass Lewis will evaluate how independent board members came to their recommendations regarding a change in domicile by “controlled companies” as well as the existence of a disinterested shareholder vote.

Changes-in-Control and Unvested Equity Awards

“Our benchmark policy view [is] that companies that allow for committee discretion over the treatment of unvested awards should commit to providing a clear rationale for how such awards are treated in the event a change-in-control occurs.”

This is an update to Glass Lewis’ discussion of its benchmark policy view for 2025, and underscores the importance of clear disclosure regarding equity awards. Glass Lewis expects companies to at least commit to providing future disclosure on committee rationale underlying vesting and/or acceleration decisions should a change-in-control occur.

Say-On-Pay & Executive Compensation Programs

• “There are few program features that, on their own, lead to an unfavorable recommendation… for a say-on-pay proposal.” Glass Lewis delineated two additional program features it views negatively: (i) egregious or excessive perquisites; and (ii) adjustments to performance results that lead to problematic pay outcomes.
• “Our analysis reviews pay programs on a case-by-case basis. We do not utilize a pre-determined scorecard approach when considering individual features such as the allocation of the long-term incentive between performance-based awards and time-based awards.”
• “Unfavorable factors in a pay program are reviewed in the context of rationale, overall structure, overall disclosure quality, the program’s ability to align executive pay with performance and the shareholder experience and the trajectory of the pay program resulting from changes introduced by the compensation committee.”
• A favorable design element for executive compensation programs includes “additional post-vesting holding periods to encourage long-term executive share ownership.”
• In the context of say-on-pay recommendations, Glass Lewis added that misalignment between incentive payouts and the shareholder experience will result in a vote against say-on-pay in cases where they find deficiencies in a company’s compensation program’s design, implementation, or management.
• If performance-based awards are reduced or removed from a company’s long-term incentive plan, such actions will be viewed negatively, except in extraordinary circumstances.

This is a clarification of Glass Lewis’ previous policy, serving as a reminder of the firm’s “holistic approach” to analyzing executive compensation programs. 

In its 2024 policy survey, Glass Lewis noted that in recent years the value of CEO perquisites has increased dramatically. Over half (55.8%) of investor respondents viewed perquisites as indicative of broader pay issues. 

Even smaller reporting companies subject to scaled disclosure requirements should ensure that their proxy disclosure contains sufficient information to support informed shareholder voting.

Anti-Takeover Defenses (Poison Pills)

ISS updated its policy concerning “poison pills” – shareholder rights plans designed to prevent hostile takeovers. 

Specifically, ISS revised its policy to increase transparency surrounding the factors considered in its case-by-case evaluation of poison pills. Newly highlighted factors include:

• “Other” terms” of the poison pill (beyond the triggering event);
• Context in which the poison pill was adopted (e.g., company size, stage of development, existence of sudden changes in market capitalization, extraordinary macroeconomic or industry events, etc.); and
• Company track record on corporate governance and shareholder responsiveness.

ISS’s policy on poison pills remains largely similar to 2024, undertaking a case-by-case evaluation to recommending a withhold or against vote from all nominees if a poison pill plan has certain features. However, because most poison pills are now short-term plans having a duration of one year or less that companies rarely submit to shareholders for approval, ISS believed further clarification of the factors used in assessing the plans was warranted.

Natural Capital

ISS updated its policies to replace references to “General Environmental Proposals” with “Natural Capital-Related and/or Community Impact Assessment Proposals.” In addition, ISS revised one of its factors for the case-by-case consideration of these proposals. 

ISS will now consider “alignment of current disclosure, applicable policies, metrics, risk assessment report(s), and risk management procedures with relevant broadly accepted reporting frameworks.”

ISS made this change due to a recent increase in shareholder proposals focused on biodiversity, deforestation, and water pollution that are commonly grouped under the concept of “natural capital” for investors and to better reflect the variety of nature-related and community impact assessment proposals companies may receive in coming years. The change also aims to keep ISS policy cognizant of the development of reporting frameworks, such as the Taskforce on Nature-related Financial Disclosures (TNFD) and Kunming-Montreal Global Biodiversity Framework (GBF).

SPAC Extensions

ISS updated its voting policy with respect to SPAC termination dates and extension requests. In 2025, ISS will recommend support for extension requests of up to one year from the original termination date (inclusive of any built-in extension options, and accounting for prior extension requests). 

ISS may also consider (i) any added incentives, (ii) business combination status, (iii) other amendment terms, and (iv) the use of money in the trust account to pay excise taxes on redeemed shares.

This is a shift from ISS’s previous “case-by-case” approach to SPAC extensions. Since the pandemic-era SPAC boom, there has been a rise in “zombie SPACs” that have experienced heavy shareholder redemptions that leave minimal funds in the trust account. These SPACs have failed to consummate a business combination and have sought extensions to their termination dates, sometimes on multiple occasions and for multiple years. The 2025 shift in ISS policy reflects that the purpose of SPACs is to identify and acquire a target within a specified period. Failure to achieve this objective despite multiple extensions over multiple years “calls into question management’s ability to execute its primary objective.”