Governance Challenges

I’m alway interested to hear what others in the field think are issues worth watching, so I found this an interesting post on the Conference Board’s Governance Center Blog re what’s hot for 2012. 

1. Executive compensation will continue in the spotlight. Rhonda Brauer, Senior Managing Director – Corporate Governance at Georgeson says “I have a sense that investors feel that the average vote for say-on-pay was too high last year, that they should have voted against more executive compensation packages and that more companies should have lost their votes.”
2. Corporate political spending will be highly scrutinized. “Given the 2012 presidential election and the impact of the 2010 Citizens United case removing restrictions on certain corporate political contributions, companies should expect to see an increase in shareholder calls for improved transparency and board oversight of corporate political spending,” said Jonathan Feigelson, TIAA-CREF.
3. Proxy access will gain steam. Says Brauer, “As these proposals become more common in future years, certain ownership thresholds and by-law procedures may become more standard, and some companies may take the initiative to adopt or to submit to a shareholder vote their own proxy access by-laws. In addition, proponents will be better prepared to submit more proposals and to withstand the no-action challenges that companies file in an attempt to exclude the proposals from their proxy statements.”
4. Global convergence of governance practices has begun and will continue to gain momentum. According to Mike McCauley, Senior Officer, Investment Programs & Governance / Florida State Board of Administration (SBA), “Whether it was the investor outrage shown by non-Japanese investors at the board of Olympus Corporation (not to mention the actions by its former non-Japanese CEO), or bold proxy access filings made by Norges Bank at several U.S. companies, shareowners are increasingly global in their approach to corporate governance and their pursuit of responsible investing.”
5. Fundamental concepts such as annual election of directors and majority voting become even more widespread. Charles Elson, Woolard Professor & Director at the University of Delaware’s Weinberg Center for Corporate Governance, believes “there is no compelling rationale for companies to oppose either the annual election of directors or majority voting. Eventually both approaches will end up as the default position, absent some rare and compelling reasons to choose another approach.”
6. Companies continue to face the need to find ways to rebuild trust eroded by the scandals of the past decade. All corporate governance participants – boards, executive officers, shareholders, proxy advisors, regulators and politicians – have both an interest and a role to play in rebuilding trust in the corporations that are the engine of our economy,” according to Ira M. Millstein, Weil, Gotshal & Manges, LLP.