While management handles investor relations and shareholder communications at most companies, some have found that direct dialogue between the board and shareholders may be beneficial, according to a new publication from PwC’s Center for Board Governance and the law firm Weil Gotshal & Manges LLP.
Director dialogue with shareholders – what you need to consider is a 20-page publication that describes the current public company-shareholder communications environment. It provides a framework for boards to use when considering whether they should and, if so, how they should engage in discussions with shareholders. The publication also addresses how Regulation Fair Disclosure affects such communications and shares practical insights from directors and investors.
The framework, which cites data from PwC’s 2013 Annual Corporate Directors Survey, includes questions boards should ask when considering communications with shareholders. Those questions include:
The framework also includes a list of Do’s and Don’ts for directors regarding director dialogue with shareholders as well as advice from shareholders to other shareholders when it comes to that dialogue.
The SEC staff will host a December 5 public roundtable to discuss the use of proxy advisory firm services by institutional investors and investment advisors.
Just last month the NASDAQ market petitioned the SEC to require proxy advisors to reveal models and methodologies they use to make proxy voting recommendations and to mandate disclosure of all potential conflicts of interest. The October 8 petition states that “the changes we advocate seek to address these concerns and promote transparency and fairness in this important area, to the benefit of companies, shareholders, and the public interest.”
The role of proxy advisory firms, which assist investors and investment advisers in voting on matters presented to shareholders, was among the issues the commission explored in a 2010 concept release on ”proxy plumbing”. The roundtable will provide a forum to discuss such issues as potential conflicts of interest and transparency in the proxy advisory industry.
These issues as well as the accuracy of proxy advisory firms’ work were the subject of a publication by the US Chamber of Commerce’s Center for Capital Markets Competitiveness. Best Practices and Core Principles for the Development, Dispensation, and Receipt for Proxy Advice report calls for proxy advisors to share drafts of their work with public companies before they are released. The report also asks that the advisory firms adopt policies and procedures that ensure the accuracy of their research and disclose potential conflicts of interest.
In the report, the Chamber states that it wants these principles to serve as a basis for proxy advisory firms, public companies, and investment portfolio manager organizations to engage in a dialogue to create a system that fosters strong corporate governance.
Results from PwC’s 2013 Annual Corporate Directors Survey(click on Regulatory and governance environment to download the appropriate section) showed that while 49% of directors believe proxy advisors are at least “moderately influential” on executive compensation decisions (say on pay), 34% of directors describe proxy advisory firm independence as fair or poor and 47% say the same about the thoroughness of the firms’ work.
According to the 2013 Spencer Stuart US Board Index – its annual examination of the latest data and trends in board composition, practices and director compensation among the S&P 500 companies – retired senior executives and professionals now comprise 48% of new independent directors, compared with 32% in 2008. Also, active executives or professionals represent 52% of new independent directors, a decrease from 68% in 2008, and for the first time there are more retired CEOs, COOs, presidents and chairs than active executives who have joined boards in the past year (79 retired vs. 77 active).
As for director turnover, S&P 500 boards elected 339 new independent directors in the 2013 proxy year, a 16% increase over 2012. Spencer Stuart also stated that was the highest number of new independent directors since 2008, when there were 380.
Some other findings include: