Access, Tenure, Pay

The 2015 proxy season is underway, and following our exhaustive annual Google search for trends, it is clear that three major issues are leading the way on this year’s ballots: corporate access; board tenure/composition; and once again, executive pay.

Regarding corporate access, everyone seems to be talking about New York City Controller Scott Stringer’s filing of proxy access proposals at 75 companies, all at once, whose shares are owned by the New York City Pension Funds. Stringer’s proposals, as with most on this subject, request that companies adopt bylaws giving shareholders who own at least 3 percent of a company for three or more years the right to list their director candidates, representing up to 25 percent of the board. Some call for 5 percent ownership. There are some interesting pros and cons of letting shareholders have their way so easily, explained well in a Harvard Law School Forum on Corporate Governance, http://blogs.law.harvard.edu/corpgov/.

On the board composition/tenure issue, just how long can a board member serve and still be an independent advocate of the shareholders? Investors are concerned that long-serving directors may not be really independent and engaged. They may have made too many friends on the board and among the management teams. Institutional Investor Services (ISS), www.issgovernance.com, the leading proxy advisory firm, says nine years should be about it. Other aspects of this subject that are gaining steam include board diversity, with the term “board refreshment” becoming quite in vogue.

Lastly, always a bugaboo, the subject of executive compensation again seems to be receiving heightened attention. Aligning pay with performance is nothing new and always good, and boards seem to be doing a pretty good job of it. Even though the votes are non-binding, “yes” or a “no” votes that do not pass by large margins can signal shareholder discontent. Many companies see major swings in their say-on-pay votes from one year to the next. Read more at www.corporatesecretary.com.

– Roger Pondel, rpondel@pondel.com

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