Nom/Gov Committee Chair Council Meets Again
On Tuesday of this week, NACD held the second Nominating and Governance Committee Chair Advisory Council Meeting. The purpose of this Council is to bring the perspective of boardroom leaders, shareholders, and regulators to the table to identify potential challenges in the current environment and leading practices to meet them. This informal event provided an opportunity for the various stakeholders to speak frankly and seek common ground on the issues they face.
During the meeting, a theme emerged from the participant discussion: It became obvious that communication will be the greatest challenge for boardrooms moving forward. The theme began to materialize in an overview of the rulemaking progress at the SEC. A council member highlighted a need to improve disclosures regarding director skills and attributes. He remarked that many companies listed the skills their directors possess but did not articulate how the directors’ skills match the corporate strategy. On the other hand, it was acknowledged that executive compensation disclosures are becoming more transparent as more companies use executive summaries to explain pay plan rationales.
Conversation then turned to the challenges of shareowner and board engagement. The institutional shareholders viewed the new Dodd-Frank rules—such as say on pay—as extra tools to spur communication with directors. While the Council members did not see eye-to-eye on all facets of the director-shareholder relationship, it was agreed that communication is a year-round battle and waiting until proxy season to reach out to shareholders is too late.
The communication theme continued in response to a suggestion to say more about committee and full board procedures in proxy statements. While all agreed that boards need to do a better job of communicating their work and value, some said that detailed explanations may not be appropriate in public filings due to liability reasons. Rather, boards were encouraged to explain their practices and procedures on company websites, which provide much greater latitude for meaningful disclosures.
The meeting covered a variety of topics and provided practical advice for nom/gov committee chairs and board members in general. The most valuable takeaways will be available in a future summary of proceedings published by NACD.