The panelists for “Just Do It! Board-Shareowner Communications for 2011” were CalSTERS’ Janice Hester Amey, The Corporate Library’s Nell Minow, Computer Associates’ Bill McCracken, and Broadridge’s Marvin Sims. The panel tackled the hot topic issues related to the Dodd-Frank Act such as say-on-pay, majority voting, executive compensation, and separation of the CEO and chairman. While consensus on these topics was elusive, panelists did agree that the next year will be a “bumpy ride” for both boards and shareholders.
The panelists agreed that the Dodd-Frank Act is intended to improve board-shareowner communications; however, the results will likely be mixed. For example, proxy access was a point of disagreement amongst the panelists; some believe it will help foster greater accountability to the shareholders, while others believe it is not well thought-out as presented by the SEC.
Conversation also turned towards executive compensation. Nell Minow believes “nothing is more central than compensation.” Countering Ms. Minow was Bill McCracken, who emphasized that there should not be over-reliance on compensation, as there is more to consider when anticipating the failure or success of the board.
Editor and Co-Founder, The Corporate Library
CEO, CA Technologies; Director, NACD
Portfolio Manager, California State Teachers’ Retirement System (CalSTRS)
For background, CalSTRS is the second largest public pension fund with over $134B under management. CalSTRS is a long-term shareowner and is considered a passive investor. Their mission is to act as the steward for California state teachers’ retirement funds—ensuring that California’s K-14 professors and teachers (kindergarten through community college) have sufficient funds available when they retire. Approximately half of CalSTRS’ portfolio is invested in equities across roughly 7,000 companies. Typically CalSTRS’ investment is around 0.5 percent of outstanding stock per company.
Anne’s comments were extremely important for directors of publicly traded companies, as CalSTRS leverages corporate governance practices to add value and minimize risk to their portfolio. CalSTRS looks to directors to oversee delivery of long-term growth and value for shareholders. It does not have a political agenda; it’s all about long-term value creation.
Aside from shareholder value creation, the goals of Anne’s team are focused on creating a dialogue with companies and boards. Importantly, the majority of CalSTRS requests are resolved through dialogue.
During our meeting last week, Anne provided a brief summary of recent proxy access rules—SEC Rule 14a-11 and amended SEC Rule 14a-8(i)(8)—and what they mean for directors. While many organizations have provided detailed descriptions of these rules, Anne emphasized the following four key points:
Boards need to proactively engage in shareholder communications and dialogue. While boards need to be aware of shareholders concerns and desires, boards do not have to do as all shareholders request. Frequently shareholders perceptions are simply based on not knowing why.
The new proxy access rules level the playing field.
If a board and/or senior management disregards and/or avoids a shareholder’s request for information, proxy access is the tool of last resort.
Proxy access is seen by large investors as the “ultimate weapon” to influence a board.
Net: If your board is looking for an independent, third party to help conduct a confidential and customized in-boardroom program on strategy, the current environment, or succession planning; or for assistance conducting CEO and/or director succession planning, or exchange-mandated board evaluations, NACD’s Board Advisory Services faculty of 100 percent current directors and leading governance experts is ready to help your board advance exemplary board leadership. NACD’s Board Advisory Services (BAS) team is poised to help boards perform as strategic assets for their shareholders and senior management.
The recent whirlwind of legislative and regulatory activity has made it obvious that boards must be ready to adapt to a constantly changing business environment. As boards react to the new regulations and restrictions, I’ve crafted a list of eight things boards can do now.
Focus on the business, especially during this time of economic stress and volatility
Evaluate engagement with stockowners to find ways to improve two-way communications with an emphasis on new technologies and methodologies