Goodwin advised post-IPO companies that have not yet held their annual meetings to be aware of Glass Lewis’s more stringent-than-historical approach to what it perceives to be problematic post-IPO governance practices that may elicit its recommended withhold or against vote against directors. The post identifies a classified board without a pre-determined sunset or a commitment to submit the structure to a shareholder vote as the seemingly most problematic governance scenario that will likely trigger a negative vote recommendation; however, it notes Glass Lewis’s identification of a combination of these provisions as problematic: “a classified board; plurality voting standard for director elections; director removal from office only ‘for cause’ and by a supermajority vote; supermajority vote requirements for amendments to the Company’s governing documents; exclusive forum provisions; no right for shareholders to call special meetings or act by written consent; and an equity plan with an ‘evergreen’ provision.”
In its 2022 US Voting Guidelines (at 34), Glass Lewis indicates it generally provides leeway to new public companies on their governance standards for one year following their IPO; however, in certain cases, it will recommend a vote against the members of the governance committee (or other director nominees depending on who is up for election) at new IPO or newly listed companies if it believes shareholder rights are overly restricted.
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This post first appeared in the weekly Society Alert!