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,

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),, 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

– Roger Pondel,

For Public Companies, It’s Always Something

It seems like every day there is a new article or hypothesis about corporate boards and governance.  Diversity…Say on Pay…Proxy Access…Tenure.  You name it, it’s been debated.

A new Ernst and Young study takes on the topic of board member skills, or more specifically providing more disclosure to investors about the skills and experience of board members.  According to Ernst and Young, “Investors increasingly seek confirmation that boards have the skill sets and expertise needed to provide strategic counsel and oversee key risks facing the company, including environmental and social risks.”  Of the 50 institutional investors interviewed, more than three-quarters do not believe companies do enough to explain why they have the right people in the boardroom.

The Wall Street Journal reported that a thorough approach to selecting directors is more important than lower mandatory retirement ages for board members.  It only makes sense that investors be more concerned about what each director can bring to the table (pun intended) than how old that director is or how long they have been serving.  Although, these issues are also hot buttons for today’s boards.

As we tweeted earlier this week, there are more than 100 proxy access proposals thus far in 2015, up from just 17 last year, signaling that institutional investors want to be part of the process for selecting who will be guiding the companies they own.  Fourteen corporations are taking a more proactive approaching by voluntarily agreeing to give investors the ability to nominate their own directors.

It will likely be some time before corporate America turns over the board selection process, but in the meantime, we continue to believe that disclosure and transparency in governance for listed companies are the best way to build and maintain credibility and goodwill.

— Laurie Berman,

Board Member, Meet Shareholder

Nederlands: Vergaderruimte Boardroom Kromhout ...

(Photo credit: Wikipedia)

The Conference Board recently published a blog post on the rapid increase in shareholder requests for special meetings with board members.  Several factors are influencing this trend, including “say-on-pay” and more and more investors calling for the appointment of an independent board chairman.  Indeed, shareholder activism seems to parallel this new wave of requests for special meetings.  The question is, should board member-shareholder engagement be shunned or embraced?  Let’s first review some results from a recent survey conducted by the National Investor Relations Institute.


  • The majority of survey respondents (60%) state that their companies do not permit board members to engage directly with shareholders (defined as in-person or via telephone).
  • Within companies that do allow direct communication, 65% state that any board member may speak directly, while 35% state that only certain board members may speak directly to shareholders.
  • Within companies that do allow direct communication, 57% indicate that a member of management is not required to be present during these discussions.
  • In general, as market cap increases, so does the likelihood that only certain board members may speak with shareholders and that management’s presence is required.
  • Companies are only slightly more likely (43%) to facilitate indirect communication between boards and shareholders (defined as e-mail responses to questions via a third-party, such as the IR department or corporate secretary’s office), than direct communication (40%).

There are pros and cons to board member-shareholder engagement, and much of that depends on the shareholder base and propensity for activism. But as the Conference Board points out, engagement is here to stay and it behooves companies to develop a plan of engagement long before a rogue activist is banging down the door.

Following are a handful of tips to consider when board members engage with investors:


  • Instead of letting them come to you, proactively engage top investors with a specific agenda, whether it is to discuss the company’s executive compensation plan or other corporate governance concerns.
  • Make sure the board member is accompanied by an investor relations representative or another knowledgeable board member.
  • Try to summarize positive developments for the company at the beginning of the conversation.  It is easy to get derailed or focus on one specific topic from the outset of a conversation and never return to a broader discussion about positive developments.
  • Set time parameters.  Generally, 30 minutes to an hour should more than suffice.
  • Ask questions.  Yes, the investor is generally asking the board member questions. But engaging with an investor could provide invaluable insight that could greatly improve shareholder relations.

— Evan Pondel,

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