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In brief

On 24 November, Glass Lewis published its 2021 Proxy Voting Guidelines for the United Kingdom (UK).

Unsurprisingly the COVID-19 pandemic and its impact on governance and stewardship practices is featured prominently in the updated Guidelines. The role of ESG policies is also highlighted. Notably, Glass Lewis now recommends voting against companies in the UK (and North America and Europe) that maintain all-male boards.

In similar news, the High Pay Centre (HPC) in December published its first report into the pay ratios and disclosures of FTSE 350 companies. The inequality of executive pay is the central message, with the report finding that for FTSE 100 companies, the median CEO/median ratio was 73:1 and the median CEO/lower quartile ratio was 109:1. The HPC welcomes the new pay ratio disclosures and lauds it as the first step in the discussion about pay and inequality in the UK.



Key changes to the 2021 Proxy Voting Guidelines for executive compensation include:

1. Alignment of Remuneration with Stakeholder Experience

  • The guidelines have been updated to clarify that remuneration committees retain a level of discretion to ensure that remuneration outcomes for executive directors align with company performance, in addition to shareholder and employee experience.
  • The guidelines highlight that remuneration committees should consider exercising downward discretion where:
    •  A company has suffered an exceptional negative event that has had a material negative impact on shareholder value; or
    •  A company’s decisions regarding working conditions have had a material negative impact on employees.

In cases of substantial misalignment between executive pay outcomes and the experience of shareholders or employees in the past fiscal year, Glass Lewis may recommend that shareholders vote against a company’s remuneration report solely on this basis.

2. Board Gender Diversity

  • From 2021, Glass Lewis will expect FTSE 350 companies to provide meaningful disclosures regarding their performance against the board ethnic diversity targets.
  • They have also clarified that they will generally recommend against the chair of the nomination committee at any FTSE 350 board that has failed to meet the 33% board gender diversity target (as set out in the Hampton-Alexander Review) and against the chair of any nomination committee for companies on the London Stock Exchange’s main market where the board is composed solely of one gender.
  • Glass Lewis may vote against the chair of the relevant committee or the board of directors (as applicable) in egregious cases where boards have failed to respond to legitimate concerns regarding a company’s workforce diversity and inclusivity policies, practices and disclosure.

3. Environmental and Social Risk Oversight

  • From 2021, Glass Lewis will note as a concern when boards of companies listed on the FTSE 100 index do not provide clear disclosure concerning the board-level oversight afforded to environmental and social issues. For shareholder meetings from 1 January 2022, they will recommend voting against the governance chair of a board who fails to explicitly disclose the board’s role in overseeing these issues.

4. Environmental and Social Initiatives

  • The guidelines have been updated to clarify that Glass Lewis supports shareholder proposals to improve governance structures or promote relevant disclosures that serve the long-term interests of shareholders. They also clarify that Glass Lewis assess shareholder proposals on environmental and social issues in the context of financial materiality.

5. Virtual Shareholder Meetings

  • The guidelines have been updated to reflect Glass Lewis’s expectations in relation to the organisation and disclosure of virtual shareholder meetings, in addition to proposals to amend a company’s articles of association to allow for virtual meetings.

To read Glass Lewis’s guidelines in full, please click here.  For further information and to discuss what this development might mean for you, please get in touch with your usual Baker McKenzie contact.

HPC: Pay Ratios and FTSE 350: An analysis of the first disclosures

On 16 December, the HPC published its first report on the pay ratios and disclosures of the FTSE 350. The report is based on the new pay ratio disclosures published in 2019/2020 for the first time following the introduction of new rules requiring listed companies with over 250 UK employees to disclose their CEO’s pay relative to the upper quartile, median and lower quartile pay of their UK workforce.

The median CEO/median employee pay ratio across the FTSE 350 is 53:1 and the median CEO/lower quartile employee ratio is 71:1. These ratios are significantly higher for the FTSE 100, where the median CEO/median ratio is 73:1 and the median CEO/lower quartile ratio is 109:1.

The report is generally critical of the existing executive pay culture in the UK and credits the report as “the beginning, rather than the end point, of a discussion about pay”.

The report follows the review published by HPC and CIPD in August on CEO remuneration in the FTSE 100 and the impact of the COVID-19 pandemic. For a copy of our client alert on this, please click here.

For a copy of the HPC report on FTSE 350 disclosures on the CEO pay ratio, please click here.


Jeremy Edwards is a partner and the head of the Employee Benefits Group in Baker McKenzie’s London office. He advises on all aspects of employee share plans and employee taxation. Jeremy has over 20 years’ experience as a share plan lawyer and two years’ experience as a corporate lawyer. He is currently serving on the advisory panel of ProShare and is a regular speaker at share plan conferences held in the United Kingdom.


Victoria Kirsch is an Associate in the Employee Benefits Group, part of the Employment Department of the London office of Baker McKenzie. She is a member of the Firm's Global Labour Employment and Employee Benefits Practice Group that provides advice upon related corporate, tax and labour law issues.


Emma Louise Garthwaite is an Associate in Baker McKenzie's London office.