The last of my notes from the Society’s 2015 National Conference in Chicago, 6/24-27/20015. Part 1, Part 2, Part 3, and Part 4. Sorry to be posting so long after the event but I still find them useful… and going through my notes may help you remember some of the more interesting points if you attended or get some sense of what went on if you did not. Even though it took me months to get them out, they are still cryptic.
More on Twitter at #Society15. If anyone has photos or notes from the panel I was on, “Responding to Shareholder Proposals,” I would appreciate it if you would send copies along to me. Panel members included Elizabeth Ising, Amy Borrus, James McRitchie. Rick Hansen moderated. I had a great time and expect to be negotiating dozens of proxy access proposals next season more smoothly. Thanks again to the Society.
Board Recruitment and Refreshment
Stuart R. Levine, Robert E. Hallagan, John F. Olson, Anne Sheehan
CalSTRS feels boards need to refresh but doesn’t have a policy of tenure limits for boards
Regulatory compliance, emerging technology, demographics. Boards must be in continuous learning mode. Tenure limits are blunt instruments. CalSTRS wants companies to have a refreshment mechanism. If the board evaluation process works, okay. However, don’t have a mandatory retirement age and then waive it.
What is your contribution? Are your skills still helpful? What type of skill sets are needed for the next director? Does your board do evaluations?
When you recruit, set the expectations regarding how long they will be on the board. Conduct an independent assessment of board members.
Set up a skills matrix first for what nominees should have before recruiting them. Push the governance committee to open the lens.
Designing a Shareholder Engagement Program
Anita Skipper, Christina Maguire, Shelley J. Dropkin, Sarah A.B. Teslik
Many more international firms and funds are visiting the US. Not as much in reverse but increasing. If governance issue then chair should be available. Evolution but more board involvement today than in past. In UK, company secretaries are prime point of engagement.
Lunch makes shareholder engagement meetings go better. Worst meetings are where the investor feels they have no influence. Some where directors obviously doesn’t want to be there. When the Chairman starts cutting their nails your in trouble or when directors are slumped in their chairs using their Blackberries. Should know what the funds history of votes is before the meeting.
Only 15% use third party for board assessments. Are boards using as a crutch because they don’t want to make the decisions? Some argued that some boards could do it on their own. Dysart observed that people are often more candid in board evaluations during a long phone interview. WalMart is doing board evaluations early in the year to better inform annual board strategy sessions. Investors want to know evaluations are not just check the box. Companies don’t usually disclose in their proxy statement that a third party facilitated evaluations.
Former Chief Justice Myron T. Steele
The Court is no populist discussion. How are we going to set the right balance between management, shareholder, and boards? Forum selection bylaws of Delaware have been upheld elsewhere. Prohibition against fee-shifting bylaws passed and signed.
In many cases private ordering through case-law is better than legislation. Specific case, specific real-world circumstances. Bad faith was the absence of good faith and good faith was the absence of bad. Loyalty and care are good standards… but not good faith.
Recent opinion from Strine on C&J Resources explains what one has to do to get injunctive relief. Explains Revlon reasonableness analysis. It is not intended to be a perfect process. Nuanced changes. Shouldn’t be a chilling effect on risk taking by directors… reasonable judgement. Case here.
Look at the potential conflicts of interest in your advisors re ability to rely on. Case on appeal. Aiding and abetting conflict.
More shareholder centric? Board is responsible for the direction of corporation. Substantive coercion where shareholders might not act in their own best interest. Airgas. see Constrained by Delaware Supreme Court Precedent, Chancellor Chandler Upholds Airgas’s Use of Poison Pill.
Ownership has changed from mom and pop to large sophisticated investors. “Substantive coercion” may go away if shareholders are in a position equal to board. Not shareholder-centric but tempered… not impinging on shareholder franchise unless there is a compelling business case.