Gender Diversity
Glass Lewis has incorporated new gender diversity targets whilst Institutional Shareholder Services (ISS) does not have any specific guidelines on this matter. Glass Lewis will now recommend against members of NZX50 boards if:
- a company board with six or more directors (including the Managing Director) has less than two female directors;
- a company board has five directors and no female representation (Glass Lewis expects at least one director that is a woman).
Exceptions may include companies with a high representation of women in key management roles or a plan to address the lack of diversity.
Although ISS has not published updated guidelines for gender diversity in 2022, ISS generally vote case-by-case including a wide range of topics such as workplace and board diversity.
Georgeson Insights
- Gender diversity is a growing expectation at the board and management levels. This trend indicates that gender diversity is also becoming relevant for companies outside the NZX50 in the medium term.
Environmental & Social
Proxy advisors intend to hold directors accountable for E&S performance, disclosure and oversight. Glass Lewis will recommend voting against:
- the governance committee chair (or equivalent) if the company fails to provide explicit disclosure concerning the board's role in overseeing material E&S issues;
- board members responsible for E&S oversight or members of the audit committee if mismanagement incurred to the detriment and/or threatening of shareholder value.
ISS generally vote against directors individually, committee members, or the entire board, due to:
- failure to act in the best interests of all shareholders;
- material failures of governance, stewardship, and risk oversight including E&S issues such as climate change; amongst others.
Georgeson Insights
- Director re-elections are at risk without adequate demonstration of board oversight and strategic progress on a wide range of E&S issues, especially climate change.
- E&S issues differ for each company, reinforcing the usefulness of a materiality analysis to guide strategic thinking on E&S risks and opportunities.
Say on Climate (SoC)
Although SoC proposals are yet to be seen in the New Zealand market, both proxy advisors state that they will evaluate each proposal on a case-by-case basis.
Glass Lewis supports robust disclosure of climate strategy but has concerns regarding the implications associated with company ‘Say on Climate’ votes. Considerations include:
- climate strategy aligned to the company’s long-term business strategy;
- how the board intends to interpret the vote results;
- recommend TCFD-aligned reporting;
- assess if GHG are reasonable given industry, size, operation an risk;
- progress on climate reporting.
Amongst other considerations, ISS contemplates the following:
- alignment with TCFD recommendations;
- disclosure of GHG (Scopes 1, 2, and 3) including targets for reduction;
- third-party assurance and science-based approval;
- commitment to net-zero by 2050 including a plan;
- how the company’s lobbying activities align with strategy;
- specific industry decarbonisation challenges;
- company’s performance compared to its industry peers
Georgeson Insights
- The pending Aotearoa New Zealand Climate Standards aim to be TCFD-aligned and are therefore reasonably aligned to the expectations of both Glass Lewis and ISS.
Stakeholder engagement is a key component of securing shareholder support and responding to dissenting votes. That way companies can respond to negative recommendations from proxy advisors ensuring they fully articulate management’s position, address concerns and have the “final say” before voting.
If you would like to know how the recommendations of Glass Lewis, ISS, or other proxy advisors, impact the voting decisions of your shareholders, please contact the Georgeson team.
Andrew Thain
Country Head & Managing Director – Australia
Georgeson
+61 466 813 428
andrew.thain@georgeson.com
Jamie Cameron
General Manager
+61 466 463 135
jamie.cameron@georgeson.com
Mariana Marabini
Corporate Governance Associate
+61 487 581 315
mariana.marabini@georgeson.com