Archive for the ‘Investor Relations’ Category

Director-Shareholder Engagement: Limits and Possibilities

October 25th, 2013 | By

Stakeholder communication is clearly a hot-button governance issue today. Some stakeholders— including institutional shareholders, activist shareholders, and regulators—want to have a dialogue with directors. But directors have differing opinions about what—and whether—to communicate. Each board should consider the circumstances where it may or may not be appropriate to engage with shareholders—and why. This panel discussed communication with shareholders, based on the panelists’ collective experiences.

1. Ideally, boards should be proactive in reaching out to engage with shareholders. Shareholders are a great source of information about how the company is perceived, which may differ substantially from management’s views. For example, management may view the company as a high flyer, but the investment community may place it in the moderate growth category. Such dialogue can also alert directors to the magnitude of any investor dissatisfaction, although it’s important to note that investors don’t speak with a unanimous voice.

2. Boards should get regular information about their shareholders, covering the top 15 or 20 investors, as well as who is moving into and out of the stock. It’s also helpful to have the investor relations department talk to former shareholders to understand why they no longer own the stock. If directors are meeting with shareholders, the directors should be briefed on whether the shareholder representatives are on the proxy voting side or the portfolio management side, what the investor’s governance policies are, how the investor uses proxy advisory firm recommendations, and whether the investor has supported activists in the past. This is part of the extensive preparation directors should do before engaging in dialogue. It’s also worth noting that, as well as spending sufficient time to prepare, directors need to devote substantial time—sometimes weeks—to these outreach and dialogue efforts in order to be effective.

3. There are two other concepts to note. The first to consider is how traditional disclosures can be improved so companies can communicate with shareholders more effectively. One recommendation was for a two-page summary of the proxy to provide a plain English overview of the company’s governance. The second is to understand what commentators are saying about the company on social media. The potential problem is that outsiders who comment on the company aren’t obliged to be correct. But whether the company chooses to address incorrect information or not, it’s helpful for investor relations functions to track those messages, as incorrect information may influence investor perception.

Erroll B. Davis Jr.
Director, General Motors, Union Pacific Corp.

C. Kim Goodwin
Director/Trustee, Allianz Global Investors Mutual Funds, Director, Banco Popular Inc; Non-Executive Director, PineBridge Investments LLC

Debra J. Perry
Board Member, Audit Committee Chair, Korn/Ferry International; Board Member, PartnerRe

Robert Schifellite
President, Investor Communication Solutions, Broadridge Financial Solutions

This summary provided by PricewaterhouseCoopers.

Power Breakfast: Managing Activist Shareholders

October 25th, 2013 | By

Shareholders don’t always agree with companies’ business plans or growth models, and some are becoming more active in making their opinions heard. This panel discussed how companies and executive teams can deal with activist shareholders. Referring to Carl Icahn’s recent dealings with Transocean in March 2013, the panel also discussed the importance of shareholder activist response plans and how companies need to have them in place. Understanding how to prepare, research, incorporate, and communicate disclosure strategies through investor relations and communications teams is also essential to effectively managing and dealing with activist shareholders.

1. Historically, large companies with good performance were relatively insulated from activist investors. This has changed dramatically in recent years, with some very high-profile companies becoming the target of activist campaigns. These activists have sought everything from the issuance of a special dividend to a change in strategy or representation on the board.

2. Shareholder activists are not a homogenous group. They have different goals, time horizons, and investment strategies. As such, it’s critical to gain an understanding of the specific activist playbooks, methodologies, strategies, and success rates of those who target the company.

3. Board members have a critical role in dealing with activist situations. But in order to be effective in this role, a game plan must be put in place well in advance. This plan should consider the team of external advisors that will be utilized, which board committees are responsible for what, and under what conditions the board will opt to use a shareholder rights plan (poison pill).

Steven Balet
Managing Director, FTI Consulting

Jason Frankl
Senior Managing Director, FTI Consulting

Jill S. Greene
Associate General Counsel, Transocean Ltd.

Elizabeth Saunders
Americas Chairman, Strategic Communications, FTI Consulting

This summary provided by PricewaterhouseCoopers.

Insights from the NACD Advisory Compensation Council

October 18th, 2013 | By

Executive compensation continues to be a significant hot-button issue. This panel addressed pressing issues involving compensation. The NACD Compensation Committee Chair Advisory Council is composed of some of the nation’s leading compensation committee chairs, regulators, and shareholder representatives of the Fortune 250. The council engages in robust dialogue on the expectations of the compensation committee, stakeholder communication strategies, and emerging trends; the panel offered lessons learned from the council about how to strengthen other boards’ compensation committee practices.

1. An important issue is defining pay. There is a need for standard definitions and a common nomenclature.

2. A benefit of shareholder engagement on compensation is that there has been a restructuring of the disclosures included in the proxy statement (CD&A). It’s easier to read, more concise, uses charts and is informative—and it tells a story.

3. It is important for the compensation committee not to assume the entire board understands the variables driving compensation: pay philosophy, peer group selection, etc. It’s also important not to be afraid to have a “non-cookie cutter” pay philosophy.

Amy L. Goodman
Partner, Gibson Dunn

Yvonne R. Jackson
Director, Spartan Stores; President, BeecherJackson

Robert James
Analyst, Farient Advisors

Nana Mensah
Chairman, Compensation and Leadership Development Committee, Reynolds American Inc.

This summary provided by PricewaterhouseCoopers.