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Listen, Understand, Communicate. (Repeat)

Glass Lewis and ISS recently released new guidelines for the 2015 proxy season, which go into effect for shareholder meetings held on or after January 1, 2015 and February 1, 2015, respectively.

The new guidelines put greater emphasis on protecting shareholders’ rights with respect to bylaw/charter amendments, litigation, and shareholder proposals, as well as increased qualitative and quantitative scrutiny on executive pay and equity plans.

With shareholder activism continuing to rise and Glass Lewis and ISS guidelines increasingly defining how boards should conduct business, what should companies be doing to prepare for next year’s proxy season?

Here are three simple strategies for making sure your company is ahead of the curve:

  1. LISTEN. Do you know how your investors are feeling about the company and its progress…not just after you send out your proxy, but throughout the year? How often does your IR team engage with investors – not just to update them on your story but to also get feedback from them on management, company progress, etc.?There are two types of companies that typically get widespread voter turnout during proxy season: those whose management spend a lot of time listening to their investors…and those who spend virtually none and find themselves in the middle of a proxy fight.
  1. UNDERSTAND. Understanding your investors’ investment goals and philosophy can go a long way in learning how to most effectively communicate your company’s strategy and actions – before, during and after proxy season. Leverage your IR team and proxy advisory firm to help you gain a clear understanding of the investors who own your stock:
    • Breakdown of the types of investors holding your stock (retail, quantitative vs. qualitative buyside)
    • Buyside investors
      – How long does this investor typically hold? What price targets or corporate developments could cause them to exit your stock?
      – Have they been activist in the past? If so, what were their trigger points
      – What is the investment thesis of the firm? What are their typical entry and exit points? What factors led them to making the decision to buy your stock or increase/decrease their position?
      – Who is the decision maker at the firm? How do they prefer to communicate with the company –and how often?
      – Does this investor subscribe to Glass Lewis or ISS for voting recommendations? Who within your buyside investor’s firm is responsible for voting their proxy? (In many cases, it’s not the person who made the decision to invest in your stock.)
    • Glass Lewis and ISS
      – Is your management team and IR team up to date on the latest guidelines?
      – How do your current policies or potential proposals match up with ISS and Glass Lewis’ recommendations?
  2. COMMUNICATE. Strong shareholder relationships start with a commitment to communication. Waiting until proxy season starts again to talk to a dissatisfied shareholder – or any shareholder – is often too late.
    • Communicate with your investors regularly (especially with the ones who are unhappy)
    • Communicate to your board on investor sentiment and feedback quarterly.
    • Be positive and responsive to investors who request talking with your board. The best way to start a proxy fight is to ignore or dismiss a disgruntled shareholder.
    • Be proactive in communicating with Glass Lewis, ISS and shareholders on sensitive proposals

– E.E. Wang, ewang@pondel.com

 

 

 

Lots of Opining as 2013 Proxy Season Heats Up

With this year’s proxy season well underway, bloggers throughout the nation continue to pontificate about the many hot topics facing public companies when it comes to shareholder voting. There’s a lot to learn, but to spare you some time:
 

  • Take a look at last week’s post byThe Metropolitan Corporate Counsel entitled, “This year’s Proxy Season, the Good News and the Bad News,” which sites say on pay and director independence as continuing issues.
     

  • Or you can look at the website,www.law.com, which focuses on environmental issues as dominant themes.
     

  • The Shareholder Rights Project, part of Harvard Law School’s Forum on Corporate Governance and Financial Regulation, recently announced that proposals it has submitted for 2013 meetings already have had significant impact, with declassifying boards and moving to annual director elections topping its list.
     

  • You also may want to look at www.boardmember.com; www.boardsuitecorp.com; www.proxymonitor.org; and www.corporatesecretary.com.
     

  • Many law firms and proxy solicitation firms are, of course, discussing current issues, as are most of the national law firms.
     

  • Then of course, there’s proxy advisory firm ISS, www.issgovernance.com, stating that political issues have surpassed environmental concerns this year, and that board diversity is elevating on the list of resolutions.
     

  • The other major proxy advisory firm, Glass Lewis, www.glasslewis.com, this year is adamant about board responsiveness to proposals that have received shareholder votes of 25 percent or more against a company’s recommendation.

 
That last one, board responsiveness, is among issues PondelWilkinson takes very seriously, and that ISS and Glass Lewis both continue to address. They will recommend a vote against directors if a board failed to act on a shareholder proposal that received the support of a majority of the shares outstanding the previous year, or if the board failed to act on a shareholder proposal that received a majority of shares cast in the last year and one of the two previous years.
 
My promise to spare you some time with this summary really isn’t sparing you much time at all. While there’s not much that is brand new this year, as always, there’s lots of noise out there, important issues brewing and many opinions of what’s hot. So it’s always a good idea to educate yourself if you are an issuer or a shareholder.

 

rpondel@pondel.com
 
 

Help Speed the Information Flow

A lot has changed in the capital markets since the 1970s, particularly relating to the rapid dissemination of information. However, one key piece of information still reaches companies slower than the 405 Freeway on a Friday afternoon–13F reports showing changes in institutional shareholder ownership.
 
Today, 13F reports, the reporting form filed by institutional investment managers, reaches the public 45 days following the end of each quarter, a glacial pace when considering the advances in electronic communications. Now there is an effort underway to encourage the rapid dissemination of such information, changing that filing period to two days following the quarter.
 
NYSE Euronext, along with the Society of Corporate Secretaries and Governance Professionals and the National Investor Relations Institute recently petitioned the SEC to change the 13F reporting period, stating that the delay “hampers public companies’ ability to identify and engage with their shareholders, including their ability to consult with shareholders regarding “say on pay,” proxy access and other key corporate governance issues.”
 
The petition argues the following points: The length of the current 45-day delay period keeps material information from reaching investors and public companies on a timely basis;The objectives underlying section 13(f) support reducing the delay period; The arguments for maintaining a 45-day delay period are unpersuasive;A substantial reduction in the 45-day delay period would align rule 13(f) with public company governance best practices.
 
We certainly agree that this petition makes sense, especially when you consider the timely disclosure requirements under Regulation FD, filing requirements for 8k’s and Form 4′s, combined with management’s need to understand and know its shareholder base. To send a letter to the SEC in support of the petition, please click here.

 

Matt Sheldon – msheldon@pondel.com