board refreshment and diversity

Question 1

Glass Lewis strongly supports routine director evaluation, including

Answer 1

independent external reviews, and periodic board refreshment to foster the sharing of diverse perspectives in the boardroom and the generation of new ideas and business strategies.

Question 2

we believe the board should evaluate the need for changes to board
composition based on

Answer 2

an analysis of skills and experience necessary for the company, as well as the results of the director evaluations, as opposed to relying solely on age or tenure limits. When necessary, shareholders can address concerns regarding proper board composition through director elections.

Question 3

In our view, a director’s experience can be a

Answer 3

valuable asset to shareholders because of the complex, critical issues that boards face. This said, we recognize that in rare circumstances, a lack of refreshment can contribute to a lack of board responsiveness to poor company performance.

Question 4

Beginning in 2021, we will note as a potential concern instances where the average tenure of

Answer 4

non-executive directors is 10 years or more and no new directors have joined the board in the past five years. While we will be highlighting this as a potential area of concern, we will not be making voting recommendations strictly on this basis in 2021.

Question 5

While we understand that age limits can aid board succession planning, the long-term impact of age limits

Answer 5

restricts experienced and potentially valuable board members from service through an arbitrary means. We believe that shareholders are better off monitoring the board’s overall composition, including the diversity of its members, the alignment of the board’s areas of expertise with a company’s strategy, the board’s approach
to corporate governance, and its stewardship of company performance, rather than imposing inflexible rules that don’t necessarily correlate with returns or benefits for shareholders.

Question 6

if a board adopts term/age limits, it should follow through and not waive such limits. If the board waives its term/age limits,

Answer 6

Glass Lewis will consider recommending shareholders vote against the nominating
and/or governance committees, unless the rule was waived with sufficient explanation, such as consummation of a corporate transaction like a merger.

Question 7

Glass Lewis recognizes the importance of ensuring that the board is comprised of directors

Answer 7

who have a diversity of skills, thought and experience, as such diversity benefits companies by providing a broad range of perspectives and insights.

Question 8

Glass Lewis closely reviews the composition of the board for representation

Answer 8

of diverse director candidates and will generally recommend against the nominating committee chair of a board that has no female members. Beginning in 2021, we will note as a concern boards consisting of fewer than two female directors. Beginning with shareholder meetings held after January 1, 2022, we will generally recom-
mend voting against the nominating committee chair of a board that has fewer than two female directors.

Question 9

For boards with six or fewer total directors

Answer 9

our existing voting policy requiring a minimum of one female director
will remain in place.

Question 10

diversity voting reccomenations may be extended

Answer 10

to additional members of the nominating committee in cases where the
committee chair is not standing for election due to a classified board, or based on other factors, including the company’s size and industry, applicable laws in its state of headquarters, and its overall governance profile.

Question 11

when making these diversity voting recommendations

Answer 11

we will carefully review a company’s disclosure of its diversity considerations and may refrain from recommending that shareholders vote against directors of
companies outside the Russell 3000 index, or when boards have provided a sufficient rationale or plan to address the lack of diversity on the board.

Question 12

Several states have begun to encourage board diversity through legislation. For example, Companies headquartered in California are now subject to board composition requirements

Answer 12

Glass Lewis will recommend in accordance with board composition requirements set forth in applicable state laws when they come into effect.

Question 13

In September 2018, Senate Bill 826 was signed into law, requiring all companies headquartered in Cali to have

Answer 13

at least one woman on their board by the end of 2019.

Question 14

by the end of 2021, California companies must have at least

Answer 14

two women on boards of five members and at least three women on boards with six or more directors.

Question 15

Accordingly, during the 2021 proxy season, if a company headquartered in California does not have at least one woman on its board,

Answer 15

we will generally recommend voting against the chair of the nominating
committee unless the company has disclosed a clear plan for addressing this issue. For meetings held after December 31, 2021, Glass Lewis will base such recommendations upon compliance with the applicable thresholds then in effect.

Question 16

for meetings held after December 31, 2021, if a company headquartered in California does not have at least one director from anunderrepresented community on its board, or does not provide adequate
disclosure to make this determination

Answer 16

we will generally recommend voting against the chair of the nominating committee.

Question 17

In September 2020, Assembly Bill 979 was signed into law, requiring companies headquartered in California to have

Answer 17

one director from an “underrepresented community” on their board by the end of 2021 (defined as an individual who self-identifies as Black, African American, Hispanic, Latino, Asian, Pacific Islander, Native American, Native Hawaiian, or Alaska Native, or who self-identifies as gay, lesbian, bisexual, or transgender). And, by the end of 2022, California companies must have at least two such individuals on boards of five to eight members, and three such individuals on boards of nine or more members.

Question 18

Because company disclosure is critical when measuring the mix of diverse attributes and skills of directors,

Answer 18

Glass Lewis will begin tracking the quality of such disclosure in companies’ proxy statements.

Question 19

Beginning with the 2021 proxy season, we will reflect how a company’s proxy statement presents:

Answer 19

explicitly includes gender and/or race/ethnicity; (iii) whether the board has adopted a policy requiring women and minorities to be included in the initial pool of candidates when selecting new director nominees (aka “Rooney Rule”); and (iv)
board skills disclosure. We will not be making voting recommendations solely on the basis of this assessment in 2021; however, such ratings will help inform our assessment of a company’s overall governance and may be a contributing factor in our recommendations when additional board-related concerns have been identified.

Question 20

Because company disclosure is a critical aspect of assessing the mix of diverse attributes and skills of directors

Answer 20

Glass Lewis will begin tracking the quality of board diversity disclosures in company proxy statements.

Question 21

Our assessment of race and ethnicity disclosure will consider
the following:

Answer 21

• Individual – Racial/ethnic diversity of directors is disclosed on an individual basis.
• Aggregate – Racial/ethnic diversity of directors is disclosed on an aggregate basis but does not identify specific directors.
• Combo/Individual – Diversity disclosure is provided on an individual basis but it is not clear what measures of diversity are represented.
• Combination – Diversity disclosure is provided on an aggregate basis and it is not clear what measures of diversity are represented.
• None – No data is provided in the proxy statement regarding racial/ethnic backgrounds of directors.

Question 22

Item 407(c)(2)(vi) of the U.S. Securities and Exchange Commission’s Regulation S-K requires a description of how a board implements any policies that it follows regarding the consideration of diversity in identifying director nominees. In part because many boards of U.S. public companies do not have formal diversity policies and no regulatory requirement compels boards to adopt such a policy

Answer 22

compliance with this disclosure requirement has for years been achieved by many issuers with a small amount of relatively boiler-plate disclosure in the proxy
statement. However, companies have begun including more specific disclosure about what measures of diversity and background characteristics are considered

Question 23

We believe that gender and race/ethnicity are important diversity considerations in the director nomination process nomination process.

Answer 23

Gender and Race/Ethnicity – Both are expressly included in the definition of diversity that is considered in the director search process.
• Gender – Gender, but not race/ethnicity, is included in the definition of diversity that is considered in the director search process.
• None – Neither gender nor race/ethnicity are expressly included in the definition of diversity that is considered in the director search process.

Question 24

Some of the largest U.S. public companies have begun to include proxy statement disclosure highlighting the considerations they employ to ensure that women and racial/ethnic minorities are included in the initial pool of director candidates when nominating new directors, also known as the Rooney Rule. We will

Answer 24

generally note that a company has adopted such a rule where a formal commitment is included in the proxy statement or otherwise enshrined in the charter of a board’s nominating committee. This may take the form of an official Rooney Rule or equivalent policy that ensures women and minorities are included in the initial pool of director candidates considered when nominating new directors.
• Yes – The company discloses in its proxy statement that it utilizes a formal Rooney Rule in its director search process, or otherwise, the nominating committee is bound by a committee charter which expressly states a commitment to include diverse candidates in its director search pool.
• Not disclosed – No such disclosure is provided in the proxy statement or relevant committee charter.

Question 25

A growing priority for many investors in recent years has been standardized disclosure of director skills. Shareholder campaigns and initiatives like the Boardroom Accountability Project have pushed companies to provide clear, concise representations of key knowledge and expertise that individual directors exemplify. These efforts have had an impact on proxy statement disclosure as it has become increasingly commonplace for many U.S. public companies to now disclose a director skills matrix. Our categorization for a skills disclosure assessment will consider the following:

Answer 25

Skills Matrix – A single table which identifies each director’s knowledge and proficiency in specified skills.
• Individual – Individual director biographies contain standardized skills disclosure which could be tabulated into a single table.
• Aggregate – Aggregated information that indicates how many directors have a particular skill but does not identify which directors have those skills.
• None – No standardized, tabulatable skills data is provided in the proxy statement.