Glass Lewis to Move Away from a Single “House View”: A New Era in Proxy Advice

In a move that could reshape the proxy voting landscape, Glass Lewis & Co. (Glass Lewis) has announced that it will discontinue its decades-old practice of issuing a single, “house view” recommendation on how institutional investors should vote. Beginning with the 2027 proxy season, the firm will cease issuing proxy voting recommendations based on a single, benchmark approach, and shift instead toward client-customized voting recommendations. The proxy advisory firm notes that its new approach remains “under development,” but is expected to offer research with a “spectrum of perspectives [that] could range from one that leans toward management and others that reflect more governance fundamentals,” with clients being able to use one or more of these perspectives to “inform their proxy voting decisions.”

Since its founding in 2003, Glass Lewis has issued benchmark guidance on thousands of proxy ballot items, covering topics from director elections to executive compensation to environmental and social issues, with many clients following the firm’s recommendations on a broad host of governance and related matters. In its announcement, Glass Lewis acknowledges that investors are increasingly taking varied approaches to proxy voting, and that a “one-size-fits-all model of proxy advice no longer meets the needs of a diverse client base.” The announcement also acknowledges a growing divergence between how U.S. and European investors approach proxy voting decisions, especially in regard to issues such as climate and sustainability.

Glass Lewis will take the next two years to significantly change the way the firm issues its research and recommendations. First, the firm intends to move its clients beyond “standard” voting policies, “guiding them in creating voting frameworks that reflect their individual investment philosophies and stewardship priorities.” Glass Lewis indicates that a majority of its clients are already using customized voting guidelines, so the firm is modifying its approach to enable all of its clients to cast proxy votes in accordance with their own, tailored proxy voting policies. Second, and perhaps more notably, Glass Lewis will cease offering its benchmark voting policy, moving “away from singularly-focused research and vote recommendations based on its house policy and shift to providing multiple perspectives that reflect the varied viewpoints of clients.” The firm expects its modified approach to transform “proxy voting into a more strategic and client-driven experience.”

In the lead-up to this announcement, Glass Lewis has been subject to escalating political pressure, including congressional hearings and investigations by state attorneys general. Indeed, Texas recently enacted SB 2337 which is intended to regulate how proxy recommendations are developed, disclosed and delivered, particularly when they concern nonfinancial considerations such as sustainability matters, environmental, social and governance (ESG) topics and diversity, equity and inclusion (DEI) issues. A district court judge has stayed enforcement of SB 2337; however, the state is appealing that decision. We wrote about SB 2337 here.

Glass Lewis is not alone in rethinking the proxy voting advisory model. Institutional Shareholder Services (ISS) recently announced that it will expand product options for clients, offering advisory services that do not involve voting recommendations, as well as bespoke data and analysis solutions. That said, ISS has not indicated that it will cease publishing its benchmark voting policy. Relatedly, several of the larger asset managers and institutional shareholders have modified their voting guidelines, updating voting policies to offer clients and investors more expansive and tailored voting options.

The recent evolution of how proxy advisors, asset managers and investors approach voting guidelines will impact how stakeholders evaluate potential shareholder voting outcomes. For instance, on the issuer side, the shift away from benchmark policies may complicate efforts to anticipate and influence voting results. Previously, companies could more easily identify which institutional investors they needed to court or persuade, based on a standardized recommendation baseline. Under a distributed, client-customized approach, voting blocs may become fragmented and less predictable. As a result, issuers will likely need to engage with proxy advisory firms and institutional investors earlier and more regularly to ensure that they fully understand how customized voting guidelines are being constructed and to identify potential mismatches or divergences among approaches. Likewise, in the absence of a unified voting benchmark, issuers will need to consider running scenario analyses under different perspectives to understand the sensitivity of certain outcomes (e.g., director elections, say-on-pay, strategic transactions and shareholder proposals).

It is an open question whether the restructuring of proxy advice represents a policy tweak or a larger shift away from advisors toward investors. Whether these changes produce better alignment, enhanced governance and/or greater complexity remains to be seen. Our team of corporate governance and public company practitioners are available to advise clients as they navigate this increasingly complex landscape.