Blog Public Company Advisory Blog March 01, 2022

E&S Risk Oversight Proxy Statement Disclosure

If S&P 500 and Russell 1000 companies do not provide clear disclosure in their 2022 proxy statement demonstrating board-level oversight of environmental and social issues, Glass Lewis will generally recommend voting against the chair of the company’s governance committee (S&P 500 companies) or note its concern about oversight and disclosure (Russell 1000 companies).

As described in our December 2021 alert, ISS and Glass Lewis Issue 2022 Policy Guidelines, Glass Lewis updated its risk oversight policies for 2022 meetings to include increased focus on board-level oversight of environmental and social (E&S) issues.  The updated Glass Lewis policy requires disclosure that is “clear,” “meaningful” and “explicit” about board-level oversight of E&S issues.

Glass Lewis acknowledges that companies should determine the oversight structure that is most appropriate for the company.  Companies can achieve the effective board-level oversight that Glass Lewis expects through a variety of structures.  For example, board oversight could be exercised by specific directors, by a separate E&S committee, by an existing key committee that has E&S issues as part of its responsibilities, or by the full board.

Glass Lewis will be looking for two things:

  • Oversight of E&S issues through some structure at the board level; and
  • Disclosure that is “clear,” “meaningful” and “explicit.”

Glass Lewis will evaluate the proxy statement and the company’s governing documents, such as committee charters, to determine whether the board has a “meaningful” level of oversight and responsibility for E&S issues.

Glass Lewis specifically cites climate change, human capital management, diversity, stakeholder relations, and health, safety and environmental risks among the E&S issues that could present legal, financial, regulatory and reputational risks that could harm shareholder interests.

Companies, especially those in the S&P 500 or Russell 1000 indices, should review the changes in Glass Lewis policies and evaluate their disclosure about the board’s role in overseeing E&S issues.  For shareholder meetings during 2022, Glass Lewis will do the following if the company’s disclosure doesn’t provide meaningful disclosure of the board’s E&S oversight role and responsibilities:

  • For companies in the S&P 500 index: generally recommend voting against the governance committee chair; and
  • For companies in the Russell 1000 index: note a concern about the company’s disclosure and the board’s oversight.

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