Yesterday Glass Lewis & Co. announced that it will pilot a new Report Feedback Statement (RFS) service to a limited number of U.S. public companies and shareholder proponents during the 2019 proxy season. According to Glass Lewis, the purpose of the RFS service is to allow companies and shareholder proponents to “more fully and directly express their views on any differences of opinion they may have with Glass Lewis’ research.”
The RFS service is to be used to report on differences of opinion — not factual errors, which companies should continue to communicate to Glass Lewis here. Companies and shareholder proponents may submit statements noting their differences of opinion with Glass Lewis’ analysis of their proposals to Glass Lewis’ research and engagement team. That team will then distribute the statements, without editing or modifying the content, directly to Glass Lewis’ 3,000+ investor clients along with Glass Lewis’ response to the RFS.
Participants may submit a request to subscribe to the RFS service here; Glass Lewis will accept requests on a first-come-first-served basis. The maximum number of pilot participants will be 12 companies and/or shareholder proponents per week between March and May 2019 (subject to decrease if the statements received in any week are particularly long or complex).
The deadline for submitting a RFS is four business days after Glass Lewis publishes the relevant proxy paper report, so long as all other applicable prerequisites are met as described below. Companies and shareholder proponents may submit one RFS per annual meeting. However, if a company makes a subsequent public filing that results in Glass Lewis materially revising its report, Glass Lewis may permit the company to submit an additional RFS within two business days after Glass Lewis publishes the revised report.
There are several prerequisites to participate in the RFS service:
- The participant must be a U.S. issuer or a shareholder proponent at a U.S. company’s annual meeting. (The RFS service is not available for special meetings, including mergers and acquisitions and contested meetings.)
- A company must enroll in Glass Lewis’ free Issuer Data Report (IDR) program here and complete the IDR process prior to submitting a RFS. Because enrollment in the IDR program is available on a rolling basis, Glass Lewis does not guarantee enrollment if requested within 30 days of a company’s annual meeting.
- Companies and shareholder proponents must purchase a copy of the relevant proxy paper report directly from Glass Lewis on a one-time basis or via subscription (as opposed to a third party such as a proxy solicitor or law firm) and pay a distribution fee for each RFS submitted. (A company or proponent must submit a request to subscribe to the service to obtain specific details about distribution fees and other pricing information.)
- A company putting a shareholder proposal to a vote at its annual meeting must clearly identify the name of the shareholder proponent(s) in its proxy statement, which – depending on the circumstances – may go beyond the requirements of the securities laws.
- The participant must sign specified RFS terms and conditions.
Glass Lewis does not indicate when a company should register to participate in the RFS service. Companies that want to preserve this option should ensure that they take steps to satisfy the eligibility requirements (e.g., by including a shareholder proponent’s name in the proxy statement) and promptly register here if they plan to submit a RFS to explain differences of opinion identified after review of Glass Lewis’ proxy paper report.
Glass Lewis may reject a RFS for any reason, including if it does not comply with the guidelines set forth in the RFS Etiquette Guide available here. The guide requires the following, among other things, before submitting a RFS to Glass Lewis:
- The participant must have consulted with legal counsel to ensure that the submission of its RFS complies with Regulation FD and any other applicable regulatory requirements.
- All information in the RFS is “publicly available” information.
- A good faith effort has been made to ensure that all information in the RFS is accurate.
- The statements in the RFS do not defame or disparage Glass Lewis or any third party.
- The individual submitting the RFS is an authorized representative of the participant.
Glass Lewis asks that participants refrain from commenting on or comparing the research, analysis and vote recommendations of any proxy advisor other than Glass Lewis in a RFS. Glass Lewis may choose not to publish feedback on information unrelated to its analysis if it believes it falls outside the scope of the purposes of the RFS service.
For more information about the RFS service, see the Glass Lewis FAQs available here.
Sidley Austin LLP provides this information as a service to clients and other friends for educational purposes only. It should not be construed or relied on as legal advice or to create a lawyer-client relationship. Readers should not act upon this information without seeking advice from professional advisers. In addition, this information was not intended or written to be used, and cannot be used, by any person for the purpose of avoiding any U.S. federal, state or local tax penalties that may be imposed on such person.
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