Many institutions have made changes to proxy voting guidelines in alignment with governance codes 

governance codes

2019 was an important year for governance with changes to many corporate governance codes which brought with them increased reporting requirements, many of which companies will begin to report on in 2020.

The end of 2019 also saw changes to the proxy voting guidelines of many agencies and institutions to align with these governance codes. In this article, we provide a brief overview of changes to the proxy voting guidelines as well as some tips on how company secretaries can prepare for the AGM season.

Ahead of the AGM season it is always a good idea to familiarise yourself with the updated guidelines (applicable to all shareholder meetings on or after 1 February 2020).

Gender Diversity

Both ISS and Glass Lewis will consider recommending a vote against the chair of the Nomination Committee of any FTSE 350 Company with no female directors or a company which is yet to meet the Hampton-Alexander Review’s 33% gender diversity target. Voting agencies will however take into consideration any explanations or disclosures addressing how the board is progressing towards achieving its gender diversity target.

Director Elections

It has already been firmly established within the Code that Non-Executive Directors (including the chair of the board) should not hold their position for more than nine years from the date of their first appointment as this could impair independence. Directors with lengthy tenures may find themselves under increased scrutiny by proxy voting agencies and investors and may receive a recommended vote against their re-election. The Code does however allow for this nine year period to be extended specifically for the chair in limited circumstances and “ISS will consider the re-election of the chair on a case-by-case basis, taking into account factors such as succession planning, diversity, and board independence, in addition to tenure”.

Glass Lewis adopts a similar approach and will analyse the overall tenure of the board and may recommend a vote against where there is a “lack of board refreshment” which could have contributed to or impacted the financial performance of the company or resulted in “lax risk oversight, misaligned remuneration practices, lack of shareholder responsiveness, diminution of shareholder rights or other concerns”.

Board and Committee Composition

In order to align with the Code, many guidelines have removed certain exemptions previously applicable to smaller companies outside the FTSE 350. All premium listed companies must now comply with the code provision requiring at least 50% of the board (excluding the chair) to be independent. Smaller companies will need to take note of these changes, as this may be an area that may take longer to comply with given that they may need to refresh the Board to achieve the required level of independence.

In its guidelines, Glass Lewis will consider voting against the audit chair of any FTSE 350 company (excluding investment trusts) where the committee has held fewer than three committee meetings during the financial year with no sufficient/adequate explanation provided. This is consistent with the Financial Reporting Council’s recommendations in its Guidance on Audit Committees published in April 2016.


A number of changes relating to remuneration have been made to the guidelines including the need for pension contributions to reflect those of the workforce. In addition, the remuneration committee is required to disclose “how it has taken into account any relevant environmental, social, and governance matters when determining remuneration outcomes”.

Things to Consider

Engaging with investors

It is always good practice to engage with investors regularly, and it is crucial if you have an item of business which may be contentious or if you are yet not in full compliance with your chosen code of governance.

Review the voting recommendation reports

Proxy voting reports are produced for most companies. Request these reports in advance and check them closely for factual accuracy. Review the voting recommendations for each resolution and see if there is an “abstain” or “against” recommendation for any resolution so that you are prepared ahead of the meeting.

Monitor the proxy voting

The majority of proxy votes are usually lodged very late – typically three to five days ahead of the AGM. Continuously watching these figures throughout the notice period helps to keep on top of any shareholder issues that may arise. Your registrars will be able to provide proxy voting updates on request or via access to a shareholder portal.

What to do if an emergency arises?

If an issue occurs with unfavourable figures after the proxy deadline has passed, it is best to analyse the voting reports. At this point, the board will have a small window of opportunity prior to the AGM to contact large shareholders who may not have voted to ask them to vote their shares. In addition, the board may choose to engage with shareholders who have voted against certain resolutions to understand their issues and the remedial action required.

Any corporate investor wishing to submit a vote after the proxy voting period has closed will need to issue a letter of appointment of a corporate representative. This allows a corporate investor to send an individual to the AGM to vote on its behalf.

What to do when the vote is lost?

Many codes of governance state that the company should explain, when announcing voting results, “what actions it intends to take to consult shareholders in order to understand the reasons behind the result. An update on the views received from shareholders and actions taken should be published no later than six months after the shareholder meeting. The board should then provide a final summary in the annual report and, if applicable, in the explanatory notes to resolutions at the next shareholder meeting on what impact the feedback has had on the decisions the board has taken and any actions or resolutions now proposed”.

Details of significant votes against and related company updates are available on the public register maintained by The Investment Association.

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