Proxy Advisors Update Voting Guidelines for 2022

David Bell and Dean Kristy are partners and Ron Llewellyn is counsel at Fenwick & West LLP. This post is based on their Fenwick memorandum.

Institutional Shareholder Services (ISS) and Glass Lewis, the leading proxy advisors in the United States, have announced updates and clarifications for their voting guidelines for the 2022 proxy season. Their voting recommendations on annual meeting proposals influence many institutional investors and play an important role in voting outcomes. This post summarizes the key changes to their respective guidelines and suggests actions that companies can take to address them. We also discuss a recent U.S. Securities and Exchange Commission rule proposal that would partially unwind new federal proxy rule provisions governing the activities of proxy advisors that were adopted in 2020.


On December 7, 2021, ISS announced its benchmark voting policy changes for 2022, which will generally take effect for meetings on or after February 1, 2022. The most notable changes to its policy are outlined here.

Board Diversity

The requirement that Russell 3000 and S&P 1500 companies have at least one racially/ethnically diverse director, which was announced last year, will become effective for 2022. In addition, after a one-year grace period ending January 31, 2023, ISS’s policy requiring at least one woman on a company’s board of directors will expand beyond the current requirement for Russell 3000 and S&P 1500 companies to most listed companies in the U.S. ISS will recommend voting against the chair of the nominating committee (or other directors) where there are no women on a company’s board.

Unequal Voting Rights

In 2023, after a one-year grace period, ISS will recommend against the responsible directors at companies with unequal voting rights for its common stock where there is no sunset provision or other exception regardless of when they first became public companies.

Board Accountability—Climate

ISS will recommend votes against the re-election of the incumbent chair of the responsible committee (or other directors on a case-by-case basis) at the highest greenhouse gas (GHG) emitting companies (i.e., those companies on the current Climate Action 100+ Focus Group) where such companies fail to make appropriate climate-related disclosures (e.g., the TCFD framework) or set quantitative GHG reduction targets. In addition, more information regarding the climate-related disclosures and GHG reduction targets of high emitting companies will be provided in ISS’s benchmark research reports.

Say-on-Climate Proposals

ISS has added new policies disclosing its case-by-case approach for analyzing proposals, whether proposed by management or a shareholder, seeking shareholder approval of companies’ climate transition plans and progress (say-on-climate). For management say-on-climate proposals/plans, ISS will assess the “completeness and rigor” of the plan, including the quality of disclosures, the rigor of targets, whether targets are science-based, external verification, disclosure of lobbying activity alignment and a range of other information. For shareholder say-on-climate proposals, ISS will consider the details of the request and the current level of climate-related disclosures and performance, including whether the company has been subject to recent, significant fines, violations, litigation or controversy related to GHG emissions.

Racial Equity Audit Shareholder Proposals

ISS will make recommendations for proposals seeking companies to conduct independent racial equity and/or civil rights audits on a case-by-case-basis, taking into account factors such as a company’s established process for addressing inequity and discrimination, its statements, engagement with impacted communities, its track record on racial justice issues and outreach, recent controversies and litigation and alignment with market norms.

Glass Lewis

On November 15, 2021, Glass Lewis announced the release of its 2022 Policy Guidelines. The noteworthy changes for 2022 are outlined here.

Board Gender Diversity

Glass Lewis will generally recommend voting against the chair of the nominating committee of a board of a Russell 3000 company with less than two gender diverse directors, or the entire nominating committee of a board with no gender diverse directors. Glass Lewis has replaced references to “female directors” with “gender diverse directors,” which encompasses women and directors that identify as a gender other than male or female. Boards of companies outside of the Russell 3000 or with less than six total directors should have at least one gender diverse director. However, beginning with meetings held in 2023, Glass Lewis will generally recommend voting against the nominating committee chair of a Russell 3000 company’s board if it lacks at least 30 percent gender diversity.

Underrepresented Community Diversity

Glass Lewis states that it will recommend in accordance with mandated board diversity requirements under state law, but generally will not recommend voting against directors for boards lacking diversity if it is not mandated by applicable state laws. Presumably, Glass Lewis would recommend voting against directors at companies that do not comply with state-mandated board ethnic/racial diversity requirements such as California’s A.B. 979 (see our prior post).

Nasdaq Board Diversity Disclosure Requirement

In accordance with Nasdaq’s board diversity rules, for annual meetings held after August 8, 2022, Glass Lewis will recommend voting against the governance committee chair at a Nasdaq company that does not provide the required board diversity disclosure.

Disclosure of Board Diversity and Skills

Beginning in 2022, Glass Lewis will recommend against the chair of the nominating and/or governance committee for S&P 500 companies that fail to provide certain disclosure regarding board racial and/or ethnic diversity and skills. Beginning in 2023, if an S&P 500 company does not provide any disclosure of individual or aggregate racial/ethnic minority demographic information, Glass Lewis will generally recommend against voting for the governance committee chair.

Environmental and Social Risk Oversight

Glass Lewis will note as a concern when Russell 1000 company boards do not provide clear disclosure regarding board oversight of environmental and/or social issues. However, for S&P 500 companies, Glass Lewis will generally recommend against the governance committee chair if the company fails to provide explicit disclosure concerning the board’s role in overseeing environmental and/or social issues. Glass Lewis does not require a particular form of oversight (e.g., specific directors, the entire board, a key committee or separate committee).

Committee Chairs

Where the guidelines recommend a vote against a designated committee chair, but the chair is not up for election because the board is staggered, beginning in 2022, if Glass Lewis has identified multiple concerns, it will generally recommend voting against other members of the committee who are up for election, on a case-by-case basis.


If the board of a company adopts a multi-class share structure or anti-takeover provisions prior to a merger with a special purpose acquisition company (SPAC), Glass Lewis will generally recommend voting against all board members of the company serving as directors at the time of the company becoming publicly traded if it did not:

  • submit such provisions to a shareholder vote at the time of the business combination;
  • commit to submitting these provisions to a shareholder vote at the company’s first shareholder meeting after becoming publicly traded; or
  • provide for a reasonable sunset of these provisions (generally three to five years for classified boards or poison pills; or no more than seven years for multi-class share structures).

In addition, in recognition of the nature of the role of SPAC executives compared to executives at operating companies, Glass Lewis will generally recommend that shareholders vote against a director who only serves as a SPAC executive while serving on more than five public company boards.

Waiver of Age and Tenure Policies

Beginning in 2022, where a company’s board waives its term/age limits for two or more consecutive years, Glass Lewis will generally recommend shareholders vote against the nominating and/or governance committee chair, unless the company provides a compelling rationale for doing so.

In addition, the 2022 guidelines clarify Glass Lewis’s policies on the following topics:

  • Environmental, Social and Governance (ESG). Glass Lewis adds details regarding its process for evaluating ESG.
  • Shareholder Proposals. Glass Lewis includes a shareholder proposal section to discuss its approach for analyzing these proposals.
  • Environmental and Social Metrics for Executive Compensation. The current approach for assessing the use of environmental and social metrics for executive compensation is outlined.
  • Incentives. Glass Lewis clarifies that it will consider adjustments to generally accepted accounting principles in its assessments of short- and long-term incentives.
  • Grants of Front-Loaded Awards. Glass Lewis clarifies that it will examine the quantum of such awards on an annualized basis for the full vesting period and will consider their impact on dilution of shareholders.
  • Authorizations/Increases in Preferred Stock. Glass Lewis specifies that it will generally recommend voting against such proposals unless the company commits to not use such shares as an anti-takeover defense or commits to seeking shareholder approval of any rights plan prior to adoption.
  • Federal Forum Provisions. Glass Lewis clarifies that it will treat federal exclusive forum provisions similarly to state forum provisions.
  • Governance Following an IPO, Spin-off or Direct Listing. The same approach for IPOs and spin-offs will be applied to direct listings when Glass Lewis makes recommendations for directors based on post-IPO governance concerns.
  • Director Independence. Glass Lewis adds a three-year and five-year look back period for material financial transactions and former employment relationships, respectively, in assessing independence.
  • Related Party Transactions. Glass Lewis adds language clarifying that the $50,000 threshold for materiality for individual transactions also applies to directors who are the majority or principal owner of a firm that receives such payments.

Key Takeaways

Companies should assess how the changes to these voting guidelines and policies may impact shareholder voting for any proposals on the agenda or the election of their directors for their annual meetings.

If a company identifies any issues that may result in negative recommendations from ISS or Glass Lewis, it should consider engaging with its key shareholders on these issues prior to the proxy season. If applicable, companies should also look to expand upon their last proxy statement disclosure on key topics to address some of these concerns.

In particular, companies should examine their disclosure of board diversity, climate risk and oversight of ESG and make any necessary enhancements to avoid adverse recommendations to their nominating and corporate governance committee chairs or other board members.

Companies may also wish to engage with shareholder proponents on any proposals that may garner support based on proxy advisor recommendations.

Recent Regulatory Actions Affecting Proxy Advisors

In June 2021, the SEC announced that it was re-examining the federal proxy rules governing proxy voting advice (the proxy advisor rules) and related guidance, which were adopted in 2020, and would not enforce them pending the outcome of its regulatory review.

On November 17, 2021, the SEC proposed amendments to the proxy advisor rules which would remove a condition to the availability of certain exemptions from the information and filing requirements for proxy advisors and a related note that provides examples of material misstatements or omissions.

Specifically, under the proposed amendments, proxy advisors would no longer be required to provide copies of their reports to the companies on whose proposals they were providing voting advice nor make their clients aware of such companies’ responses. The release announcing the proposed rules also discusses the application of that prohibition on material misstatements and omissions to proxy voting advice, particularly with respect to statements of opinion. The proposed amendments are subject to a 30-day comment period which expires on December 27, 2021.

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