Update on meetings with proxy advisors on certain corporate governance topics

Prior to the meetings, the Committee had selected the following topics for discussion:

• Evaluation and takeaways from the 2024 AGM season and reflections on relevant global trends
• Discussion on proposed 2025 policy changes
  • Shareholder meeting format
  • Appointment of auditors and auditor fees
  • Board oversight of Artificial Intelligence
  • Restricted share and ”hybrid” plans
• Discussion on other policy items
  • Gender diversity 
  • Multiple share classes 
  • Remuneration

For Glass Lewis, the main takeaways for the 2024 AGM season have been the continued transposition of the Corporate Sustainability Reporting Directive (CSRD) and the development of best practice in this regard. Furthermore, discussions about remuneration and shareholding meeting formats have continued to be present. 

ISS has noted the same trends but has also seen a continuous focus on multiple share classes and increased regulatory arbitrage in this area In recent years various regulatory initiatives allowing for multiple voting rights created a competing environment among European member states with an aim to create attractive capital markets, and in ISS’ view, putting increased pressure on a key governance practice.

In its 2025 voting guideline Glass Lewis informs that it may recommend shareholders to vote against accountable directors at companies that hold shareholder meetings that do not allow for in-person attendance unless certain safeguards are in place. Glass Lewis is not aware of significant problems with virtual shareholder meetings in the Nordic countries specifically but noted also an update to the Swedish Corporate Governance Code recommending that shareholder's meetings are held at venues that enables shareholders to attend in person, regardless of whether the shareholders are also given an option to participate remotely. The most important factor, according to Glass Lewis, when holding the shareholder meeting, is that shareholders can challenge the board. Glass Lewis emphasized that fully virtual shareholder meetings can be problematic in that respect. However, if it works in local markets and shareholders' rights are respected, then virtual shareholder meetings should be accepted. 

ISS stressed its continued support for physical and hybrid meetings. Therefore, ISS’ view is that virtual shareholder meetings should only be accepted if there are special circumstances that make a fully virtual shareholder meeting the only viable option, like a pandemic. However, ISS will make its assessment on a case-by-case basis. 

Glass Lewis has updated its guideline to also reflect the appointment of auditors for Sustainability Reporting. Glass Lewis believes a best market practice has not yet been formed and will therefore continue to see how this area develops. For instance, it is not yet clear if the same auditor, as the financial auditor, is preferred, or it should be two different auditors. Glass Lewis has not taken a position in relation to this yet.

Glass Lewis has also updated its proxy voting guideline to recommend voting against the re-appointment of the auditor if a company does not disclose sufficient information regarding the fees paid to the auditor for the past fiscal year and does not provide for a shareholder vote on audit fees.

ISS has updated its proxy voting guidelines to align with current EU regulation requiring public interest entities to rotate their statutory auditor. This is done to extended this as a best practice standard to European markets without auditor rotation requirements (e.g. Faroe Islands, Greenland, and Switzerland). So, it will have no effect in the Danish listed companies. 

Glass Lewis has introduced the section because AI is seen as a strong current trend, and investors are looking for guidance with regards to the specific risks involved with a company’s exposure to AI. Glass Lewis still believes best practice Is evolving but notes that the companies with AI exposure should disclose the board’s role in overseeing AI related risks.

Glass Lewis has clarified that such proposals are assessed on a case-by-case basis considering the rationale provided by the board, the inclusion of structural elements that are intended to align executives’ interests to the long-term performance of the company, and an adequate reduction in target opportunity to reflect the reduced risk profile of the plan.

Neither Glass Lewis nor ISS has not made any changes to their previous recommendations for 2025, in particular as Member States are still in the process of implementing the directive's requirements and as the market practice continues to evolve in this regard.

Glass Lewis has not applied its policy regarding multiple share classes in Denmark. The policy will only be applied in relation to poor corporate governance and management issues that Glass Lewis believe results from entrenchment stemming from multiple share classes.

For ISS, 2024 marked the first AGM season when the policy on board accountability for capital structures with unequal voting rights was applied. The policy's application in the Nordics primarily extended to Sweden, and to a lesser extent, to Denmark and Finland. ISS noted that the application of the policy was in line with the expectations communicated to market participants prior to the AGM season.
 

Both Glass Lewis and ISS have noted that quantum of remuneration is rising, and as such it is still a big topic. Both noted that disclosure on remuneration practices is lagging behind general investor expectations. . Companies are, in general, good at explaining what their remuneration policies are, but are often lagging behind in explaining the rationale behind them, for instance what is the background behind choosing one KPI instead of another and how does the remuneration help align executives’ interests to the long-term performance of the company. In addition, Glass Lewis informed that generally disclosures concerning discretionary payments and bonuses are lagging behind - also for Danish listed companies.

Neither Glass Lewis nor ISS plan on revising their guidelines on remuneration.