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Preparing For The AGM Season

Preparing For The AGM Season – Proxy Advisor Policy Updates

Monday, 30 January 2023

Revised 2023 policy guidelines

All of the main Proxy Advisors (PAs) evaluate their respective guidelines on an ongoing basis and formally update them on an annual basis. This year they have made noteworthy revisions throughout their guidelines. The current status of the updated guidelines is below. We have summarised key topics where notable changes have been made to the guidelines, to draw your attention. These include the topics of: executive remuneration, climate accountability, cyber risk oversight and board diversity. For full details of the policy wording, please use the links provided below.

Glass Lewis (GL), applicable to meetings held from 1 January 2023, 2023 Policy Guidelines.  

Institutional Shareholder Services (ISS), applicable for meetings held on or after 1 February 2023, key changes to ISS's UK Proxy Voting Guidelines can be found here, with the full UK & Ireland guidelines found here.

The Investment Association (IA) and IVIS: The IA has published its annual guidelines ‘Principles of Remuneration’ (the Principles), together with a letter to Remuneration Committee Chairs, highlighting changes to the Principles and their focus for the upcoming AGM season. We are expecting the release of the 2023 IA Shareholder Priorities and IVIS approach shortly.

Executive remuneration

The Investment Association (IA) and IVIS

The review of revised guidelines around executive compensation, an important area in which the board’s priorities and effectiveness are revealed, will not be complete without consideration of The Investment Association's (IA) remuneration principles. The recently published Principles together with a letter to Remuneration Committee Chairs highlighted changes to the Principles and confirmed the focus will be concentrated on

  • Remuneration outcomes in the context of the cost of living, inflation and the stakeholder experience;
  • 2020 Long Term Incentive Grants and Windfall Gains; and
  • ESG metrics in executive remuneration

The Principles call for companies to show restraint on overall executive pay levels and consider the overall quantum in the context of pay levels and conditions across the entire workforce. Given the cost of living crisis, executive directors’ experience should be commensurate with that of wider stakeholders’ (employees, customers, suppliers and shareholders). The IA note that they consider that salary increases for executive directors should, in normal circumstances, be limited to the level of inflation or the salary increases given to all employees. They further note that in a period of significantly higher inflation, they consider that additional restraint should be shown for executive director salary increases.

In 2020 companies were warned by the IA against taking advantage of falls in share prices as a result of the pandemic, to grant long-term incentive awards over a larger number of shares than usual. 2023 will see the maturity of awards made during the pandemic for many companies. There is an expectation amongst investors that companies will take steps to prevent executives benefitting from windfall gains. Remuneration committees should explain whether they have adjusted vesting outcomes to remove windfall gains and, if not, why not.

On ESG metrics the IA recognises that many companies are still considering how to reflect this element of corporate strategy into remuneration. As such it will be increasingly important that companies clearly articulate the journey they are on to incorporate ESG metrics into variable pay and how they will evolve this approach in future years. The IA expect these to be linked to company strategy, quantifiable and avoid unnecessary complexity. They note that investors expect companies to explain how progress against the ESG metrics is measured and for performance against these goals to be disclosed.

On the subject of Non-Executive Director fees, the IA acknowledges that there has been more complexity in the role of non-executive directors in recent years. Any increases in non-executive director remuneration to reflect the additional complexity will be supported, provided that an adequate explanation of the increase is given.

To conclude, we note that on the subject of pensions IVIS will ‘red-top’ any remuneration policy or report where executive pension contributions are not aligned to the majority of the workforce.

Glass Lewis

  • Linking Executive Pay to Environmental and Social Criteria – “shareholders of companies that have not included explicit environmental or social indicators in their incentive plans would benefit from additional disclosure on how the company’s executive pay strategy is otherwise aligned with its sustainability strategy”.
  • Combined incentive plans – Glass Lewis will generally recommend voting against a remuneration policy that includes a combined incentive plans (in lieu of more traditional structures which have both short- and long- term plans) unless certain conditions are met.
  • Pensions - Glass Lewis generally expects pension provisions for executive directors, both those newly appointed and incumbent executives, to be in line with those available to the majority of the wider workforce by the end of 2022, absent a cogent rationale.
  • Discretion – Glass Lewis is seeking better explanation of discretion around incentive outcomes.


  • Remuneration report – Base salaries, benefits and pensions - ISS has stated in its policy under good market practice that annual increases in salary are expected to be low and ideally lower proportionally than general increases across the broader workforce.

Climate accountability

Glass Lewis

A new section on director accountability for climate-related issues, where Glass Lewis, in summary, states:  

  • “Where companies with increased climate risk exposure have not provided thorough Task Force on Climate-related Financial Disclosures (TCFD)-aligned climate-related disclosure and/or have not explicitly and clearly defined board oversight responsibilities for climate-related issues, we may recommend voting against a responsible member of the board or other relevant agenda item(s)”.


  • For companies that are significant greenhouse gas (GHG) emitters, through their operations or value chain, generally vote against the board chair in cases where ISS determines that the company is not taking the minimum steps needed to understand, assess, and mitigate risks related to climate change to the company and the larger economy.

Minimum steps to understand and mitigate those risks are considered to be the following. Both minimum criteria will be required to be in alignment with the policy:

  • Detailed disclosure of climate-related risks, such as according to the framework established by the Task Force on Climate-related Financial Disclosures (TCFD), including:
    • Board governance measures;
    • Corporate strategy;
    • Risk management analyses; and
    • Metrics and targets.
  • Appropriate GHG emissions reduction targets.

At this time, “appropriate GHG emissions reductions targets” will be medium-term GHG reduction targets or Net Zero-by-2050 GHG reduction targets for a company's operations (Scope 1) and electricity use (Scope 2). Targets should cover the vast majority of the company’s direct emissions

Cyber risk oversight

Glass Lewis

A new section outlines Glass Lewis’s belief that cyber risk is material for all companies and they state:

  • “that a company’s stakeholders would benefit from clear disclosure regarding the role of the board in overseeing issues related to cybersecurity. Further, we have clarified that, while we will generally not make recommendations on the basis of a company’s oversight or disclosure concerning cyber-related issues, we may recommend against appropriate directors in instances where cyber-attacks have caused material risk to shareholders and we find the company’s disclosure or oversight to be insufficient.”

Board diversity

Glass Lewis

  • In line with the updated FCA Listing rules and the FTSE Women Leaders Review (February 2022) Glass Lewis is monitoring progress towards best practice prevalent in the market for 2023, noting that FTSE 350 board should strive for 40% female representation by 2025 and that all main market boards with a reporting period starting on or after April 1, 2022 should report on a ‘comply or explain’ basis against the targets of 40% of the board are women, and that at least one of the senior board positions is a woman. Glass Lewis will consider recommending against the nomination committee chair in subsequent years in cases where a board has made insufficient progress and has not disclosed any cogent explanation or plan to address the issue.


  • For standard and premium listed companies, for financial years beginning on or after 1 April 2022, ISS may consider recommending votes against the chair of the nomination committee (or other directors on a case-by-case basis) for companies that have not met the reporting requirements of the FCA Listing Rules which require
  • Gender diversity: at least 40% of the board are women, and at least one of the senior board positions is a woman;
  • Ethnic diversity: at least one board member is from a minority ethnic background.

For AIM-listed companies with a market capitalisation of over £500 million, ISS will generally recommend against the chair of the nomination committee (or other directors on a case-by-case basis) if there is not at least one woman on the board, and (from 2024) if there is not at least one board member from an ethnic minority background. 

Authorisation of equity

Glass Lewis

  • Authority to issues shares without pre-emptive rights: the guidelines have been updated to reflect the updated recommendations of the Pre-emption Group.
  • Specific authority to issue shares: Glass Lewis has clarified that it analyses each case individually regarding proposals to issue shares for a specific purpose outside of routine authorities normally proposed on an annual basis, considering the total number of shares to be issued and the dilutive impact; the issuance price and discount or premium; and the intended uses of proceeds in the context of the company’s financial position and business strategy.


  • Authority to issues shares without pre-emptive rights: given the Pre-Emption Group’s recently revised Statement of Principles, ISS has updated its guidelines and will generally support resolutions seeking authorities in line with the updated principles.

Board and committee governance

Glass Lewis

  • Employee representatives are not included in calculations of whether half the board is independent.


  • Audit Committees: In light of the audit and corporate governance reforms and increased focus on the work of audit committees, ISS will note where there have been four or fewer meetings of the audit committee of FTSE 350 companies in the financial year. This recognises the importance and complexity of the Audit Committee’s role, and the likely increased focus on Audit Committee oversight of the external auditor.