I have been using Egan-Jones Proxy Services (“EJPS”) for several months to help me decide how to vote my proxies and have come to value their advice. For example, I like their policy of withholding votes from the entire compensation committee when voting against say on pay.
Recently Egan-Jones announced the implementation of changes to their proxy voting guidelines for the 2017 Proxy Season. I like the direction they are going.
Key updates for this year’s upcoming proxy season include:
- Over-boarding – Egan-Jones will expand its strictest over-boarding threshold to Chairmen who are not CEOs in addition to the current inclusion of CEOs. This requirement means that both Board Chairmen and CEOs will receive a WITHHOLD recommendation if they hold more than one outside public directorship.
- Board Member Tenure and Independence – They have decided to take a more conservative approach to the independence of Board members with a long tenure at a firm. Recognizing that at a certain point a long tenured Board member can no longer be considered fully “independent” they will classify Directors with ten or more years on the Board as “affiliated outside director.” Note that since they only recommend support of directors who are fully independent for membership in key Board committees and any non-independent director on such a committee will receive a recommendation of WITHHOLD.
- Auditor Ratification – Egan-Jones will apply stricter requirements to all Guidelines including a requirement for auditor rotation and rate firms based upon the relative size of the auditor payments as compared to other firms and the disciplinary history of the auditor chosen. A poor rating result will generally result in Egan-Jones not supporting ratification of that auditor.
See the full updated guidelines. Comments or questions about the Egan-Jones Proxy Guideline should be directed to Ms. Magda Pacheco, Manager, Client Relations at Egan-Jones Proxy Services.
I think any over-boarding application to independent Chairperson that is more onerous threshold to that applied to other independent directors is bad policy. It will motivate good experienced independent director not to step up and be independent chair. It will promulgate more combined roles to enable the independent director can serve on other boards. What threshold are they applying on overboard count to a Lead Independent director?
I really like the board member tenure and independence policy. I think its a good middle ground for issuers vs a term limit or retirement age rule. With this policy the director can still serve but due to limitations against serving on standing committees, the directors selected to continue to serve with this greater ‘cost’ will be limited to “all-stars” the board really wants to keep around and of skills supporting the remaining independent directors to be willing to personally step up their own committee obligations to fill in for.
Agreed, losing independence after 10 years a much better stance than term limits. If directors would more fully evaluate each other and fire non-performers, there would be less need for policies like this. Plus, we shouldn’t have to wait until 2050 to get boards that are closer to the gender and ethnic population proportions.
Andrew, I think we agree much more frequently than we disagree but in this case Egan-Jones seems reasonable to me. “Both Board Chairmen and CEOs will receive a WITHHOLD recommendation if they hold more than one outside public directorship.”
It seems to me that being a Board Chair or CEO is more than a half-time job. Limiting them to being a director at one other company seems reasonable to me. Yes, I do agree, the downside is it may leave more boards to combine the roles of Chair and CEO. That would be too bad.