Board and Shareholder Communications

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Open board-shareholder communications are proving to be more essential than ever following the passage of the Dodd-Frank Act, and are expected to be of increasing importance in coming years. A panel convened at the NACD Board Leadership Conference agreed that boards must establish communication lines that are not necessarily more detailed, but rather more effective, in light of regulations such as Reg FD.

Though Broadridge Financial Solutions’ board has not yet been approached with a request from investors to discuss board policies, Corporate Governance Officer MaryEllen Andersen said, the board has developed a plan on how to respond should an investor ask for the right, opting to allow investors to communicate with either the lead director, independent chairman or an independent group of directors, rather than straight with the C-suite.

Stephen M. Davis, a senior fellow at Harvard Law School’s Program on Corporate Governance, noted four major changes he anticipates in board-shareholder communications: the culture of non-compliance becoming obsolete, “say on pay” becoming a catalyst for more open communications, board composition changes through majority rule votes and the rise of shareholders participating through collective actions, including social media. He noted it was a “question of culture” and directors must shift to today’s standards of more open communications.

As both an investment management firm and activist investment firm, TIAA-CREF is in a unique situation for evaluating board-shareholder communications standards. “We wear two hats,” CREF Chairman Maceo K. Sloan said, “we have to make sure we’re doing the same things we’re asking them to do. We lay that out very clearly in our policy statements as a vital part of board shareholder communications.”

CamberView Partners Managing Partner Abe Friedman noted the majority of shifts in shareholder communications have occurred in the last couple of years, after Dodd-Frank, and are poised to continue in that trajectory. “As boards we need to become more prepared to engage with investors and communicate in a different way.” He emphasized that dialogues with shareholders must be two-way conduits, using communications to both explain their positions and gain insight on future decisions from investors, not allowing Reg FD to be a barrier.

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