Glass Lewis is changing its peer submission process and peer group methodology for 2020, making it important for companies to stay up-to-date. Here’s what you need to know.
Glass Lewis recently announced that their peer submission window is now open until January 31, 2020, for companies with proxy filings through July 31, 2020. The peer submission process allows companies to submit their peer group used for 2019 pay decisions prior to disclosure in the proxy statement. This information will be considered by Glass Lewis when developing and selecting peers for use in their proprietary pay-for-performance model. Institutional Shareholder Services (ISS) follows a similar process and closed their peer submission window on December 6, 2019.
This process is a change from years past when peer group submissions were directed to Equilar. This year, submissions will be sent directly to Glass Lewis. The proxy advisory firm ended its partnership with Equilar and formed a partnership with data and analytics partner CGLytics for 2020.
Glass Lewis’ peer methodology and the selected peers are a critical input that greatly informs the pay-for-performance letter grades it assigns to public companies. With the new partnership with CGLytics, the peer selection methodology is being changed. While full details have not been disclosed yet, Glass Lewis has stated that it will use a company's self-disclosed peers as a starting point. From there, Glass Lewis intends to include both industry-based and country-based peers, in addition to the company’s peer-of-peers. The new methodology then scrutinizes this larger pool of potential peers by introducing additional screens based on corporate revenue, market capitalization and assets; weightings for peers based on the source and frequency of confirmation; and peer rankings based on a strength-of-connection approach that considers all potential peers.
According to Glass Lewis, back-testing of the new peer selection methodology has found a 14% reduction in overlap with company peers. While submitting self-selected peers does not guarantee they will be included in Glass Lewis’ peer group, submission can lead to at least some of the peers being included and helps ensure Glass Lewis does not base their analysis on former peers. Submission can be particularly important if a company had a significant change in market capitalization (or assets, for financial firms) in the past year, or otherwise significantly changed their peer group. If peers are not submitted, Glass Lewis will rely on the peers disclosed in the proxy filed prior to January 30, 2020.
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