DEFA14A: EPAM Systems Defends Board Oversight Amid Glass Lewis Recommendation Against Director

EPAM Systems issues a statement addressing concerns raised by Glass Lewis regarding the board's oversight of environmental and social risks, urging stockholders to vote for the election of director Robert E. Segert.

Summary

• EPAM Systems has responded to a Glass Lewis proxy paper that recommended stockholders oppose the election of Robert E. Segert, the Chair of the Nominating and Corporate Governance Committee.
• The company disagrees with Glass Lewis's assertion that the lack of formal designation of the board's role in overseeing environmental and social risk implies insufficient oversight.
• EPAM clarifies that its proxy statement details the board's responsibility for overseeing environmental and social matters, including receiving updates from management and committees on ESG risks.
• The board reviews the ESG program and its progress, most recently in February 2024.
• EPAM emphasizes that the Nominating and Corporate Governance Committee ensures the board conducts meaningful oversight of material environmental and social risks.
• EPAM encourages stockholders to vote FOR Robert E. Segert and the other director nominees.

Sentiment

Score: 5

Explanation: The sentiment is neutral to slightly negative. While EPAM is proactively addressing concerns, the Glass Lewis recommendation introduces uncertainty and potential reputational risk.

Positives

• EPAM is actively engaging with stockholder concerns raised by Glass Lewis.
• The company is providing additional information to clarify its board's oversight of ESG risks.
• EPAM's board is directly involved in reviewing the company's ESG program and progress.
• The company is transparently disclosing its risk oversight framework in its proxy statement.

Negatives

• Glass Lewis has recommended against the election of a key director, Robert E. Segert, potentially signaling governance concerns.
• The disagreement highlights a potential disconnect between EPAM's disclosed practices and external perceptions of its risk oversight.

Risks

• The Glass Lewis recommendation could influence stockholder voting decisions.
• Continued scrutiny of EPAM's ESG oversight could impact its reputation and investor confidence.
• Failure to adequately address concerns about board oversight could lead to further negative recommendations from proxy advisory firms.

Future Outlook

The document focuses on addressing immediate concerns regarding director elections and board oversight, with no specific forward-looking financial guidance provided.

Management Comments

• We disagree with the Proxy Paper's assertion that our lack of formal designation or codification of the Board's role in overseeing our environmental and social risk implies that our Board does not maintain oversight of material risks or, alternatively, that the Board's oversight of these risks is insufficient.
• We strongly encourage our stockholders, consistent with the prior recommendation of our Board, to vote FOR Robert E. Segert and each of the other three director nominees named in our 2024 proxy statement.

Industry Context

This announcement reflects the increasing scrutiny companies face regarding ESG practices and board oversight, particularly from proxy advisory firms like Glass Lewis. Companies are under pressure to demonstrate robust governance structures and transparent reporting on environmental and social risks.

Comparison to Industry Standards

• Many companies codify specific board responsibilities in a charter, which EPAM does not do for its overall board responsibilities.
• Companies like Microsoft and Unilever have dedicated ESG committees at the board level, demonstrating a higher level of formalization than EPAM's current structure.
• Other companies provide detailed ESG reports aligned with frameworks like SASB or GRI, offering more comprehensive disclosures than EPAM's proxy statement.

Stakeholder Impact

• Shareholders are directly impacted by the voting recommendations and the company's response.
• Employees may be indirectly affected by any changes in board composition or governance practices.
• The company's reputation and investor confidence could be influenced by the outcome of the director election and the ongoing scrutiny of its ESG oversight.

Next Steps

• Stockholders will vote on the election of directors at the 2024 annual meeting.
• EPAM will likely continue to engage with Glass Lewis and other stakeholders to address concerns about board oversight.
• The company may consider further clarifying or formalizing its ESG oversight practices in future disclosures.

Key Dates

Keywords

ESG, Risk Oversight, Corporate Governance, Proxy Statement, Glass Lewis, EPAM, Board of Directors