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PRESENTATION TO LOS ANGELES DEPARTMENT OF WATER & POWER
PROXY RESEARCH AND VOTING SERVICES
JANUARY 10, 2018
AGENDA
I. Glass Lewis Overview
II. Summary of Services Provided
1. Proxy Research – Proxy Paper
2. Proxy Voting Platform– Viewpoint
3. Custom Policy Review
III. Voting Statistics and Reports
IV. 2017 Proxy Season Review
V. 2018 Proxy Season Preview
VI. Q & A
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I. GLASS LEWIS OVERVIEW
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COMPANY PROFILE
The leading independent provider of global governance services, helping institutional investors understand and connect with the companies they invest in.
Glass Lewis offers a complete suite of governance-related services:
Proxy Paper – In-depth research on 20,000+ company meetings every year
Viewpoint – Leading-edge proxy vote management platform
Right Claim – Class action settlement recovery service
E&S – Complete spectrum of E&S data, monitoring, and screening tools
Meetyl – The leading global web-based platform for corporate access
Glass Lewis is a portfolio company of the Ontario Teachers’ Pension Plan Board (80%) and Alberta Investment Management Corp. (AIMCo) (20%)
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GLASS LEWIS OWNERSHIP
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NOTABLE CHANGES: 2017
Robert McCormick – Chief Policy Officer
Departed in January
Aaron Bertinetti – Senior Vice President, Research & Engagement
Promoted in February
Fergus Curtain – Vice President, Technology
Started in September
Larry Jennings – Vice President, Technology
Departed in September
Naoko Ueno – Senior Director, Asian Research
Promoted in November
Cassandra Traeger – Director, Client Policy and Stewardship
Started in April
Julian Hamud – Director, Executive Compensation Research
Promoted in July
Martin Mortell – Director, UK & European Research
Promoted in July
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II. SUMMARY OF SERVICES PROVIDED
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1. PROXY RESEARCH
Proxy Paper®
Guaranteed global coverage; complete report for all companies
More than 20,000 meetings across 100 markets
Independent and contextual analysis with a focus on economic impact
Equilar market peers in Pay-For-Performance (P4P) model for US and Canada
Direct access to research team
Board presentations, white papers, Proxy Talks, data feeds
Issuer Engagement Policy:
Designed to empower clients and investors
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PROXY RESEARCH PROCESS
Team Approach
Analysis varies based upon market, issue, complexity and company size
All reports reviewed by two or more people; varies by report profile
Accuracy and lead times are monitored to ensure client satisfaction
Executive Compensation
Analyze executive compensation quantitatively and qualitatively
Exclusive rights to incorporate Equilar market-based peers in P4P model
Incorporate multiple performance factors into P4P analysis
Mergers & Acquisitions / Proxy Contests
Specialized team and experience
Proposed offers are evaluated versus the returns to shareholders
Approach to proxy contests aligns well with most institutional investors
ESG / Shareholder Proposals
Viewpoint’s proprietary rules engine interprets complex policies
Unmatched nuance and cascading rules minimize noise and focus your attention on the most important issues
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2. PROXY VOTING PLATFORM
Viewpoint®
Flexible, configurable user interface
Responsive search; workflow updates dynamically
In-application user collaboration; also streamlines communication between non-users
Nuanced custom policy implementation
Transparent and compliant; audits, reconciliation and activity logs
Extensive permissioning controls
Myriad reporting options
Secure and reliable:
99.9%+ uptime; round the clock support
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VOTE AGENCY SERVICE
Service Level Flexible service model and configurable technology supports tailored client workflow
Dedicated client service rep with limited client load; less than 15 clients per rep
Service culture built on integrity and accountability, and rewarding responsiveness
North American, European, and Asia-Pacific offices provide support for client’s global offices, as well as nearly 24/7 backup support for urgent operational requests
Technology and Operations Modern platform architecture supports sophisticated and evolving workflow
Continued investment and agile development process ensures rapid innovation
Client-centric product development and software update processes
Unrivaled 10-year track record of reliability, security, and performance
Reporting and Compliance Multi-faceted account and ballot reconciliation process
Complete and reportable logging of user activities
Glass Lewis business model minimizes risk to clients
Proactive, transparent disclosure of potential conflicts which cannot be eliminated (e.g., research on a public investment company which is also a client)
Scheduled and ad-hoc reporting; public vote disclosure hosting
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3. CUSTOM POLICY REVIEW
While consulting with LADWP, reviewed and updated LADWP’s policy guidelines. New policy guidelines were approved during the May 2017 Board meetings.
Added language to address certain issues not previously covered by the guidelines: Combination of share issuances with convertible debt (Section I-4)
Clarifying between Election of key vs. non-key committee members (Section I-20)
Separation of the Chair and CEO positions (Section I-27)
Amendments to company articles or bylaws (Section I-30)
Bundled Proposals (Section I-31)
Director Compensation (Section II-13)
Post-Employment/Severance Agreements (Section II-14)
Clarifying between proposals regarding repurchase or reissuance of existing shares vs. proposals to issue new shares or cancel outstanding shares (Section II-29)
Shareholder Proposals regarding Firearms (Section III-9)
Plan to bring updates to proxy guidelines back to the Board in 1Q 2018 or 2Q 2018.
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III. VOTING STATISTICS AND REPORTS
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VOTING STATISTICS FOR LADWP
December 1, 2016 to November 20, 2017
Total number of meetings: 979
Number of US: 350
Number of non-US: 629
Total number of ballots cast: 2046
Number of US: 780
Number of non-US: 1266
Total number of proposals: 9877
Number of Management Proposals: 9758
Number of Shareholder Proposals: 119
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VOTING ACTIVITY REPORT – VOTING SUMMARY FOR LADWP
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VOTING ACTIVITY REPORT– PROPOSAL STATISTICS FOR LADWP
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Proxy Voting Report – Example 1
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CISCO SYSTEMS, INC.
Proxy Voting Report – Example 2
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ENBRIDGE INC.
IV. 2017 PROXY SEASON REVIEW
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2017 PROXY SEASON TRENDS
Investors seeking more diverse boards Greater focus on gender, ethnicity, age, background, home country, tenure
More scrutiny and use of skills matrices (Board Accountability Project 2.0)
Culture and risk oversight key emerging issues (Wells Fargo, Uber, Equifax)
Glass Lewis supported 90.4% of 22,000+ director elections
High volume Say on Pay year Continues to be key focus for shareholders, with a high frequency year in US, Brexit impact
in UK and new binding vote in France, amongst others
Seeking enhanced disclosure, alignment and rationale of performance metrics and targets
In US, Glass Lewis supported 84.1% of 2,000+ SOPs and 83.6% of 1,000+ equity grants
Paradigm shift on climate change reporting Record number of shareholder proposals and support from large asset managers
Three majority-supported shareholder proposals (Exxon, Occidental, PPL)
Task Force on Climate-Related Financial Disclosure (“TCFD”)
Glass Lewis supported 85% of 33 proposals
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2017 SHAREHOLDER PROPOSALS BY CATEGORY
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OTHER SHAREHOLDER PROPOSAL HIGHLIGHTS
Quality of proposals and support is improving across market Glass Lewis supported 53% (2016: 51%) across 453 proposals
Proxy access 3% shares/3 years/20% board is status quo Glass Lewis supported all 30+ proposals through season, with companies’ own management supporting
a third of those. Opposed 20 “fix it” amendments.
Gender pay equity targeting banks in 2017 after tech in 2016 Glass Lewis supported 69% of 13 proposals, low support but increasing discussion on risk and disclosure
Wells Fargo, JPMorgan, Bank of America and Citigroup
Board diversity Glass Lewis supported 80% of 10 proposals, two received majority support with mainstream proponents
Apple, Constellation Software, Tyson Foods and Discovery Communications
Proxy voting policies at asset managers
Glass Lewis supported none of the 6 proposals, but issue could inspire support of other types of SHPs
Blackrock, T. Rowe Price and Franklin Resources
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RISE OF STEWARDSHIP & PRAGMATIC POLICY
Engagement is a game changer Widespread engagement between companies and investors
Impacting shareholder expectations and outcomes at meetings
Continues to accelerate, supported by stewardship codes emerging across North America, Europe, Asia and long term practices in UK & Australia
In last 18 months Glass Lewis analysts have engaged with over 4,500 companies, including formal meetings with approximately 1,500
Pragmatic policy Investor Stewardship Group (ISG) is a key foundational advance for a pragmatic
approach to corporate governance and long-term shareholder value creation
The ISG Principles are closely aligned with Glass Lewis’ own guidelines
Integration of ESG teams with investment teams is following the European example as evidence of ESG impact on long-term shareholder returns strengthens
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V. 2018 PROXY SEASON PREVIEW
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THEMES FOR 2018
Investors pushing for gender diverse boards Major asset managers and pension voting policies for boards with less than X% or X number of female directors
Glass Lewis already factors diversity in voting recommendations for directors, but will explicitly recommend against nomination committee chairs from 2019 where no women and no reasonable explanation given
Effectiveness of the board in risk oversight NYC Comptroller will campaign for climate expertise and skills matrices (Board Accountability Project 2.0)
Cyber-risk becoming emerging concern (Equifax, Facebook, Yahoo, Uber)
Accountability for culture (Wells Fargo, NACD) and sexual harassment (Media)
Climate will continue to heat up Task Force on Climate-Related Financial Disclosure (TCFD), Sustainability Accounting Standards Board (SASB),
Principles of Responsible Investment (PRI) all increasing awareness and scrutiny
Company responsiveness to shareholder proposals in focus
Introduction of the CEO pay ratio Potential to shift public debate on pay from an economic to a social issue, unlikely to change ST behavior
Rejection of dual class, particularly IPOs Investor furor over Snap, indices impact and international exchange changes will heighten scrutiny
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THANK YOU AND Q & A
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