Back in June, Texas passed a law – known as “Senate Bill 2337” – that mandates certain disclosures when proxy advisors recommend casting a vote for “non-financial reasons” or provide conflicting advice to multiple clients. The “non-financial” reasons include a recommendation wholly or partly based on environmental, social or governance investing, diversity, equity or inclusion, social credit or sustainability scores or membership in or commitment to an organization or group that bases its assessment of a company’s value on nonfinancial factors. The law takes effect on September 1st.
Both ISS and Glass Lewis have filed a lawsuit challenging the law and the court has not yet ruled on their challenge. A hearing on a motion for a preliminary injunction will not occur until August 28th. Because of the law is effective on September 1st, Glass Lewis recently wrote a note to clients indicating how it will comply with the law until the court has issued a ruling. The note concludes with this:
“What is Glass Lewis’ interim approach to comply with the law if necessary?
Because the court has not yet ruled on our motion for a preliminary injunction against the law’s enforcement, the law may come into effect and apply to all proxy advisory services on Texas companies provided on or after September 1, 2025. Given the breadth of the law, Glass Lewis proxy advisory services (including proxy research and vote recommendations) related to Texas companies provided on or after that date will be followed by the Section 101 “warning notices” to clients described above, with copies shared with the subject Texas companies. The significant majority would also have to be followed by Section 102 notices, which must also be shared with companies and the Texas Attorney General. These notices will not contain client names or any identifying information.
Finally, we recognize that there are situations in which some of our asset manager clients “pass through” to their end clients some or all voting decisions for separate accounts or pooled investment vehicles applying a Glass Lewis voting policy. Please be advised that, in such circumstances, Glass Lewis will only provide Section 101 and 102 notices to you as our direct client.”
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