Join us

We are always looking for spirited and skilful people to join our team in London. Contact us if you have a strategic mind, strong track record and the determination to win:

Apply now

Talk to us

  • T. +44 (0) 207 099 2075
  • E.

Mail us

Boudicca Proxy Consultants
PO Box 5214
Lancing, BN99 9EZ
United Kingdom

Let’s connect

Armed with facts and guided by insight

Back to Thought Leadership


COVID-19 Proxy Governance Update 4

Assessing the Policy Updates of ISS, Glass Lewis, PIRC and Investment Association

Plus: Commentary on Recapitalisation by The Deal Team

In this latest Update, we provide you:

  • Boudicca’s latest operational observations of the shareholder engagement landscape;
  • Our Principal Corporate Governance Officer’s assessment of the policy updates of proxy advisers, ISS, Glass Lewis, Investment Association (“IA”) and PIRC, and investor, Federated Hermes.
  • Our brief view of the proxy advisers’ position on remuneration proposals at a time of coronavirus; and
  • “Preparing to Recapitalise” – a special commentary on capital raising by specialist transaction execution consultants, The Deal Team.


Shareholder Engagement Landscape

With the month of May perennially being the busiest time on the corporate calendar for AGMs with around 400 UK companies holding their AGMs in that month alone, we are now very much entering the peak of the 2020 AGM season. Within the cusp that we are in, and effectively, since Boudicca started sending these regular updates over a month ago, we have been astonished by how ‘business as usual’ the shareholder engagement and proxy voting landscape has been during these unprecedented times. This, we believe, is testament to the overall strong IT infrastructures in place market-wide, which has enabled home working with little to no disruption to day-to-day operations. In fact, including at Boudicca, we are seeing an increase in productivity, and arguably, in morale. Despite unprecedented challenges on the emotional front, perhaps not having to deal with the stresses of the commute to the office is having a positive effect. Certainly this will lead to the large-scale reconsideration by many companies of working arrangements, which will likely impact the commercial property industry as we reverse from lockdown.

In terms of shareholder engagement, the Boudicca team continues to engage undisrupted with the top proxy advisers (ISS, Glass Lewis, Investment Association, PIRC), and the corporate governance and proxy voting teams of institutional investors across 50 live proxy solicitation mandates. Although we are having to employ email communications much more in addition to telephone calls to our investor contacts, response rate is in-line with what we would expect if we were operating under normal circumstances.

This week, however, ISS have begun informing that “as we are now in the busy UK AGM season”, all ISS resources are devoted to research production. Accordingly, ISS will not have space for calls at this time, but will reach out should we have any questions. Glass Lewis had already informed in early March that they were calling a moratorium on engagement until after proxy season unless the case in question is absolutely exceptional. With this kind of narrative now in place from the proxy advisers, companies that believe that engagement in relation to their AGM resolutions is essential must approach the likes of ISS and Glass Lewis persistently, and preferably approach senior member of the research team directly (or via Boudicca) in addition going via their electronic platforms.

Where further challenges are being encountered, is with the amendment of proxy votes after the proxy voting deadline has passed. Obtaining letters of corporate representation has also proven to be a complication. Both activities are already normally challenging, as necessary authorities have to be obtained across the custodial chain for action to be effected. Despite the difficult circumstances presented by coronavirus, registered holders, custodians and proxy voting agents are unwilling to relax these processes. In fact, our take is that whilst back offices and proxy voting agents, namely Broadridge, are very much honouring proxy votes up to the proxy voting deadline, they are preferring to steer away from resource-draining bespoke requests, such as vote amendment and issuance of letters of corporate representation. As such, 1) getting the most positive voting recommendations from the likes of ISS and Glass Lewis, and 2) ensuring that investors vote correctly the first time around are even more important during the pandemic.


Assessment of the COVID-19 Policy Updates of ISS, Glass Lewis, IA, PIRC and Hermes

By Karoline Herms, Principal Corporate Governance Officer, Boudicca

Now that we have had a couple of weeks to digest the policy guidance updates of the proxy advisers, and even seen these in action on live situations, Boudicca’s Principal Corporate Governance Officer, Karoline Herms, provides an analysis on the views that we may be able to expect from ISS, Glass Lewis, Investment Association, PIRC, and responsible investment group, Federated Hermes.

On 8 April 2020, ISS published an update to its 2020 voting policies, to take account of how it may apply its policies during the Coronavirus pandemic. ISS notes that the current situation requires understanding and flexibility in many ways, a flexibility which it believes is already built into its voting policies in most cases. As such, ISS has clarified its application of policies around AGM practicalities and Board meeting attendance; board balance and director accountability; poison pills and capital proposals; and remuneration-related amendments following the COVID-19 impact on companies share prices. According to this policy addendum, ISS will (temporarily):

  • AGM media – Positively note when companies and boards use webcasts, conference calls and other mediums of electronic communications to engage with their shareholders and investors, even if meetings have necessarily been postponed;
  • Meeting practicalities – Allow for virtual-only AGMs in countries where such meetings do not require an amendment to the by-laws (where Article amendments are sought to allow for virtual-only meetings in the future, ISS will continue to recommend against such amendments). Boards are encouraged to commit to return to in-person or “hybrid” meetings as soon as practicable;
  • Poison pills – Consider poison pills (i.e. defensive mechanisms against opportunistic acquisitions) with a duration of less than a year, on a case-by-case basis considering the disclosed rationale for adopting the plan and other relevant factors (such as a commitment to put any future renewal of the pill to a shareholder vote);
  • Meeting attendance – Be open to counting telephonic/electronic attendance of Directors at Board and Committee meetings as full attendance, provided appropriate disclosure surrounding the circumstances is available;
  • Board balance – Be flexible in terms of applying their director independence, overboarding or board diversity guidelines. ISS notes that, “If boards need to fill vacancies due to the disability or incapacity of a director or need to urgently add critical expertise to their ranks to address concerns created by the pandemic, appropriate case-by-case consideration will be given, assessing any explanation provided by the company regarding the changes to the boardroom roster”. Similarly, there will be added flexibility where directors may have to temporarily fulfil executive roles;
  • Remuneration – Encourage early disclosure of the rationale behind changes to 2020 short-term pay performance measures. However, it reiterates its general dislike of in-flight changes to long-term variable pay measures and structures, while noting it will continue to assess these on a case-by-case basis. It also reiterates its general opposition to option re-pricing following a share price drop;
  • Dividends – Support broad discretion for boards that seek to set payout ratios that may fall below historic levels or customary market practice. In analysing such proposals, ISS will look for board plans to use any preserved cash from dividend reductions to support and protect their business and workforce;
  • Share buy-backs – While generally continuing to approve authorities to undertake share buy-backs, ISS will more closely review the board’s use of such authorities over 2020 (if any). ISS notes the companies may open themselves up to intense criticism and reputational damage by undertaking repurchases at the current time, especially (although not only) if the company’s workforce has been reduced or has suffered other kind of cutbacks; and
  • Capital raisings – Continue to apply a case-by-case analysis and “For” recommendations for proposals that exceed any normal market-specific limits on size and potential dilution, where appropriate rationale and limits have been provided. The current pandemic is considered to constitute exceptional circumstances.

For more information about ISS and other FAQs, please see: Engagement Process: FAQs – link; UK and Ireland Policy Guidelines (2020) – link; and Impact of the COVID-19 Pandemic (April 2020) – link.

Over the past few weeks, Glass Lewis has regularly updated its blog with articles and statements on its contextual policy approach to issues potentially affected by COVID-19. Similar to ISS, Glass Lewis noted (temporary) policy changes with respect to its policy stance on virtual-only AGMs (predominantly in the US) and notes on the timing and format of meetings more generally, and a ‘pragmatic’ stance on poison pills (see below). Unlike ISS, however, Glass Lewis appears to offer less leeway in terms of board diversity and director accountability, by pointing out that non-diverse boards – in terms of age and diversity – may face a higher risk from COVID impact as “men and those aged 65 and over are much more likely to die or become seriously ill”.

In terms of remuneration-related proposals, it notes that they are already seeing a variety of approaches to changing pay practices. Glass Lewis has acknowledged that some issuers will find securing support more difficult. Those that take a rationalised, ‘proportional approach’ to the impact on shareholders and employees are more likely to be widely supported. GlassLewis further highlights the increasing scrutiny that it expects investors will place on issues such as repricing, dilution and burn rates, hurdle adjustments, changes to vesting periods, caps and cuts on incentives, and the quality of disclosure concerning the limits and exercise of board discretion. As a guide, companies should not expect to receive shareholder support where investor incomes (through dividends) are cut, employees are laid off, but Executive Directors are simultaneously made whole on the pay front through amendments to targets and continuing to provide substantial pay increases.

For more information about Glass Lewis please see: Fact Sheet – link; UK Policy Guidelines for 2020 – link; and Glass Lewis blog – link.

On 7 April 2020, the IA provided a letter of support to FTSE 350 Chairs, laying out the expectations of its members in relation to COVID-19 impacts on the 2020 voting season (link). The IA reiterates its role as custodians of long-term capital, favouring companies that can demonstrate they are well-run, and placing an apparent focus on the treatment of employees, communities, suppliers, pension savers and customers. The letter sets out the IA’s subsequent stance on engagement and communication, AGM practicalities, financial reporting, dividends, executive pay and additional capital, as follows:

  • AGM practicalities and reporting – The IA notes its support for the FCA’s extension on company reporting and encourages companies to take the additional two-month window offered. It also highlights the importance of continued communications with all investor types, including retail, where AGMs may necessarily be undertaken in very restricted form. In this regard, it notes support for the Governance Institute guidance on how to hold a safe AGM. Furthermore, IA members have committed to focus on the most material issues to UK plc during this AGM season;
  • Dividends – These remain a decision to be taken by the board, referring to the FRC’s guidance that companies should consider the suitability and sustainability of dividends not only when they are declared, but when they are due to be paid out. Such considerations should include ensuring employees and suppliers can be paid. Ultimately, shareholders will expect companies to be transparent about their approach to dividends, particularly, if they are seeking additional capital;
  • Remuneration – The IA references its Remuneration Principles, which note that executive pay should be linked to company performance and take account of the shareholder experience, not just financial performance. Therefore, where companies are cancelling dividend payments or making changes to their workforce pay, IA members would expect to support boards and remuneration committees that demonstrate how this is reflected on their approach to executive pay. Please note that on 27 April, IA released detailed guidance specific to their member shareholders’ expectations on executive pay in light of COVID-19. This may be found here link; and
  • Capital raisings – The IA notes its support for the recent Pre-emption Group statement allowing companies additional flexibility under their guidelines on a case-by-case basis, for a limited time period. However, shareholders would expect management to consider their views and would also expect companies to offer the placing to existing long-term shareholders first. While the use of cash-boxes may be necessary in exceptional circumstances, their terms will be scrutinised in the usual way by shareholders at the time of the next AGM.

Policy area – link; Principles of Remuneration for 2020 – link; and COVID-19 Letter – link.

On 19 March 2020, PIRC sent a letter to FTSE Company Secretaries in response to the COVID-19 crisis. In this letter, PIRC argues that business communities should demonstrate their recognition of the challenges many employees face, and that as part of an appropriate response, companies should reconsider their approach to executive pay. PIRC urges all companies to suspend any variable executive pay from April until the end of the financial year, with only salary allowed. While the general sentiment applied to any increases to pay may have received more widespread support, the level of dogmatism displayed in this letter has since been shown to be too much for most shareholders, with many investors showing more understanding for companies in the current situation.

The PIRC 2020 UK Shareholder Voting Guidelines are not made publicly available, but are periodically sent out to issuer companies.

On 15 April 2020, Federated Hermes sent an open letter to CEOs in which it lays out its priorities and policy during the coronavirus pandemic. In particular, the investor has modified its voting policies for this year’s shareholder meeting season, as follows:

  • Dividends – The investor urges companies to strengthen their balance sheets and promises to act in their long-term interest when making capital allocation decisions, including dividend pay-outs. In markets where there is a vote on dividends, companies that are prudent as they navigate the immediate financial impact of the pandemic will be supported;
  • Board elections – Companies facing unprecedented challenges require strong and stable leadership. In certain cases, the investor will therefore be more flexible around the re-election of key directors to avoid unplanned disruption to board composition at this critical time;
  • Remuneration – Management remuneration should be appropriately aligned with the experience of the wider workforce and society and adjusted taking a company’s circumstances into consideration; and
  • Climate change – The approach to shareholder proposals seeking to encourage action to address the climate crisis has not changed.

A Brief View of the Proxy Advisers’ Position on Remuneration at a Time of Coronavirus

Based on our assessments and observations to date, below we forecast the stances that we expect ISS, Glass Lewis and the Investment Association will take as regard to director remuneration in light of COVID-19. You will note that we have taken an uncustomarily bullish and candid view, which largely derives from 1) our generally positive experience engaging with the said proxy advisers since coronavirus hit, and 2) the generally supportive narrative from their policy updates. That said, it is imperative that we do not fall into a false sense of comfort and instead continue to be vigilant in our active engagement with proxy advisers, and importantly, with shareholders.

  • LTIPs – We had first feared that proxy advisers and investors would expect companies to substantially reduce LTIP awards in line with the fallen share price. This has broadly not happened, with proxy advisers and investors having been more understanding of issuers’ challenges and explanations.
  • Bonuses and LTIP vesting – Similar with regard to variable pay awarded in respect of the 2019 financial year: companies, on the whole, did not have to reduce this substantially (using downward discretion) because of what happened following year-end. Companies paying out at maximum for 2019 have largely not been punished. However, we believe investors will expect there to be very little payouts in respect to 2020.
  • Company reactions – Helping the situation is companies proactive voluntarily forgoing of pay increases and even reducing salaries. Such moves have further placated investors.
  • The Perfect Storm – What will be interesting to see, with high potential for proxy adviser and investor dissent, is where companies cut the dividend and asked for large capital increases, while at the same time wanting to offer substantial growth awards to their management. This is the situation against proxy advisers have warned.

Preparing to Recapitalise – Special Commentary by The Deal Team

By Julian Macedo, Managing Director, The Deal Team

The crisis is causing companies to look hard at their balance sheets to decide whether they need deeper cyclical buffers through additional equity, or should shift their debt away from banks to bonds, or prepare speedy disposals of non-core operations – or, get ready to take advantage of new opportunities.

In the UK, several companies including SSP, WH Smith, ASOS, and Informa have raised £3bn of new equity through placings of shares, many using the newly available 20% pre-emption guidance. The Pre-Emption Group has however made it clear that this easing will be considered on a case-by-case basis, and as it will have important implications for shareholder relationships, requires companies to fully explain the company’s circumstances, and demonstrate how they have engaged in consultation prior to the issuance and sought to respect pre-emption rights. The question of retail shareholder participation in these placings has been brought forward last week, with the All Investors Matter open letter signed by notable market participants.

For those companies needing to raise more capital than the 20% limit allows, the FCA’s policy statement on 8 April on recapitalisation issuances has the potential to make the rights issue route easier than before. Even with this regulatory easing, a rights issue will still require preparation of a prospectus and may require EGM permissions, so needs to be a carefully made decision.

It is clear that a Race to Recapitalise could emerge, as other listed companies get more certainty on their new financial position and tap investors for equity. Therefore, listed companies preparing their year-end reporting should weigh up carefully whether to use the additional two months leeway granted by the FCA/PRA/FRC, versus preparing as swiftly as possible.

Whichever route is contemplated, companies will need to consider all angles. The Deal Team is publishing a series of articles on the internal execution steps that companies should consider to help win this Race, summarised as follows:

  • Effective crisis management – take ownership, avoid running out of cash, think beyond the crisis, communicate, and do the right thing.
  • Get to an answer fast – consider existing resources, loan facilities, covenant waivers, bonds, and reach a considered view on working capital and the necessary equity to bridge to a stable.
  • Tapping your shareholders –look at existing shareholder permissions, decide on placing vs pre-emptive offering, consider short vs. long form prospectus and working capital statement, pre-load preparation of due diligence and dataroom, be aware that issuers with no recent primary activity could face near-IPO levels of management time to prepare.
  • Managing the details – Start collecting your corporate dataroom, consider new issues raised by prospectus due diligence, prepare internal teams and dataroom structures to handle due diligence enquiries efficiently.
  • Preparing for the first listed bond – as for rights issues, maiden issuers could require near-IPO levels of management time to prepare for prospectus disclosure, consider the interaction with existing debt facilities, ensure that appropriate shareholder and board approvals are in place.
  • How to take control of non-core disposals – avoid the fire sale by investing in high quality standalone disclosure, financials, dataroom, prepare separation planning including top level 100-day integration plans.

About The Deal Team

The Deal Team provides dedicated Deal Captains to project manage transactions within existing management teams for listed equity and debt capital markets transactions and M&A. Based in London and working across Europe, we are experts in delivering complex transactions. We know how to maximise the speed and efficiency of execution for deals such as rights issues, high yield bonds, and M&A disposals, among others. More information on The Deal Team and our Race to Recapitalise series of articles can be found at or contact Managing Director Julian Macedo

Boudicca’s previous COVID-19 Updates are now available online

We invite you to read previous the previous Updates, which include:

9 April COVID-19 and its Impact on Proxy Voting, Stewardship and Corporate Governance

25 March COVID-19 and the Proxy Agencies

This Report may not be reproduced, redistributed or republished, in whole or in part, for any purposes without the written permission of Boudicca Proxy Ltd. Neither Boudicca Proxy Ltd nor any of its affiliates accept any liability whatsoever for the actions of third parties in this respect.

The Report does not constitute a comprehensive or accurate representation of past or future activities of any company or their shareholders but rather is designed to provide an overview thereof. All data and descriptions of any company, business, markets or developments mentioned in this Report, may be a combination of current, historic, complete, partial or estimated data. The Report may include statements of opinion, estimates and projections with respect to the anticipated future behaviour of shareholders and as to the market for those companies’ products and services. These may or may not prove to be correct.

This Report is not, and should not be, construed as a recommendation or form of offer or invitation to subscribe for, underwrite or purchase securities in any company or any form of inducement to engage in an investment activity.

All information contained in this Report has been sourced from publicly available information and has not been independently verified. Neither Boudicca Proxy Ltd nor any of its affiliates, partners or agents, make any representation or warranty, expressed or implied, in relation to the accuracy, reliability, merchantability, completeness or fitness for a particular purpose of the information contained in this Report and expressly disclaim any and all liability arising from (i) any such information contained in the Report or (ii) any actions based on or relating to such information contained in the Report, or (iii) errors in or omissions from this Report, or (iv) the Client’s use of the Report. In particular, Boudicca Proxy Ltd shall not be liable to the Client, or any third party, for any loss of profit or any indirect, special or consequential loss, damage, costs, expenses or other claims which arise out of or in connection with the use of and/or reliance on the Report.