PRESENTATION TO LOS ANGELES DEPARTMENT OF WATER & POWER

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2 PRESENTATION TO LOS ANGELES DEPARTMENT OF WATER & POWER PROXY RESEARCH AND VOTING SERVICES JANUARY 10, 2018

3 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 Proxy Season Review V Proxy Season Preview VI. Q & A 2

4 I. GLASS LEWIS OVERVIEW 3

5 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%) 4

6 GLASS LEWIS OWNERSHIP 5

7 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 6

8 II. SUMMARY OF SERVICES PROVIDED 7

9 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 8

10 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 9

11 2. PROXY VOTING PLATFORM Viewpoint Flexible, configurable user interface Responsive search; workflow updates dynamically In-application user collaboration; also streamlines communication between nonusers 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 10

12 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 11

13 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

14 III. VOTING STATISTICS AND REPORTS 13

15 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:

16 VOTING ACTIVITY REPORT VOTING SUMMARY FOR LADWP 15

17 VOTING ACTIVITY REPORT PROPOSAL STATISTICS FOR LADWP 16

18 Proxy Voting Report Example 1 CISCO SYSTEMS, INC

19 Proxy Voting Report Example 2 ENBRIDGE INC

20 IV PROXY SEASON REVIEW 19

21 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 20

22 2017 SHAREHOLDER PROPOSALS BY CATEGORY 21

23 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 22

24 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 23

25 V PROXY SEASON PREVIEW 24

26 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 25

27 THANK YOU AND Q & A 26