Boards, Plumbing, Broadridge & footnoted*

The Changing Profile of Board Recruitment, in the November/December issue of The Corporate Board by Bonnie W Gwin of Heidrick & Struggles, discusses a continued risk aversion among the leadership of the Fortune 500.

Companies seeking to fill directors’ chairs with only current or former CEOs will find it nearly impossible to increase diversity on the board. This may create a conundrum for corporations who want to do both.

Companies are torn between the safety and reliability of veteran leadership but also increasingly recognize the need to widen the net beyond former CEOs/CFOs and current CEOs/CFOs to include those with a proven track record in marketing, human resources, information, social media and international experience drawn from rising corporate stars, functional leaders, successful business owners, non-profits and former government officials.

Gwin expects increasing demand and growing expectations that sitting CEOs/CFOs not spread themselves to thin will lead to an increased push toward a more diverse overall board demographic in 2012.

Elsewhere in TCB there was a brief review of WomenCorporateDirectors, research conducted by Heidrick & Struggles and Dr. Boris Groysberg of Harvard Business School.

Not only do women and men disagree about the reasons why fewer women servie on boards and if quotas are effective, but they also hold disparate views on whether increasing the number of women in the boardroom will actually improve overall board performance.

For example, 41% of women vs. 13% of men supported quotas. 55% of female directors vs. 16% of male directors agreed three or more women on any board make it more effective.

Proxy Voting Integrity

The Weinberg Center for Corporate Governance at the University of Delaware convened a roundtable to assist public policy makers understand some of the issues around proxy plumbing. While they didn’t tackle some of the thornier issues like mandating pre- or post-reconciliation by brokers or hedged long positions and “empty voting,” or the merits of alternatives to the current OBO/NOBO system, the group did agree on best practices regarding some of the softer issues:

  • Parties should confirm voting entitlements with the meeting tabulator six business days in advance.
  • Shareowners should be encouraged to cast their votes early to avoid disenfranchisement because of difficulties in reconciliation by tabulators and nominees.
  • Tabulators should promptly, within one day, communicate to vote reporting entities the reasons why vote reports are being rejected.
  • There should be end-to-end confirmation of votes for investors.
  • Regulators, such as the SEC and FINRA, should periodically examine or inspect transfer agents, brokers and other participants in the proxy process.

From the July-August Edition

In A New Voice for Individual Investors, Richard J. Daly, the CEO of Broadridge Financial Solutions notes that in 2010 only 5% of retail investors voted in corporate elections. He calls on the CEOs

of the top 1,000 public companies to join with us in launching a nationwide effort to encourage their employees, numbering in the tens of millions, to exercise a fundamental shareholder right to vote their proxy ballots, whether it is proxies relating to their employer or other companies in which they invest.

The message is to move to two-way digital communications.  Broadridge has electronic access to 85% of a company’s shareowners and can send messages out in 24 hours or less. They’ve surveyed shareowners how use mobile technologies, 30% hadn’t previously voted their proxies at all.

A recent survey showed that 90% of shareowners think annual meetings are very important or somewhat important. (I’ll be the same survey would find just about the reverse for CEOs and directors.  Companies should try to meet shareowner expectations by making the annual meeting at least as important as a quarterly earnings call. Better still, discuss some topical issues with shareowners as if their opinions mattered… move towards something that looks more like a deliberative meeting.)

Daly points out, “one of the wonderful things about corporate governance is that even a seemingly small minority can likely get a company’s attention.” Getting attention is not the same as getting change. In the final analysis, “shareholders will not be heard if they do not express their voice through their proxies.”

On the last page, there’s a conversation with Michelle Leder, of* who discusses how her site facilitates the airing of corporate dirty laundry. She sees recent reforms having some positive changes: the number of firms with tax gross ups has been reduced, as has use of personal jets for execs and their families. There’s still room for improvement, says Leder who finds director pay of $500,000 a lot, “for what is still really a part-time job.”

She and her small staff searche the footnotes of SEC filings for meeting attendance by directors, related-party transaction agreements between the CEO, the company and directors and more broadly anything companies would rather keep quiet. Shareowners should pay attention to her updates. Corporate officers should work to get out the dirt on their own, before the need for it to go public. Happy to see Leder get attention. I love their more recent Holiday greetings from team footnoted! with a holiday shot of the children of footnoted* staff. They’ve never met but look like a tight cohesive group.

I’d love to see a similar Photoshop group portrait of footnoted* avid readers. Here’s mine.

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