Disclosing Modifications

Proxy Statements Increase Disclosures

Proxy Statements Disclosing Engagement

Nearly half of S&P 100 companies included information in their proxy statements that showed how they responded to shareholder concerns and made changes to policies, according to a new report from Equilar, Innovations in Proxy Design, featuring commentary from Donnelley Financial Solutions and Pay Governance.

In 2012, just 14.3% of the S&P 100 included disclosures in their proxy statements on how they modified their practices after engaging shareholders, a figure that increased to 42.0% in 2016.

Disclosing Modifications

Disclosing Modifications in Proxy Statements

Said Ron Schneider, Director of Governance Services for Donnelley Financial Solutions, who provided independent commentary for the report:

For companies with recent poor shareholder votes or that otherwise may be flagged for performance or governance lapses, it is generally expected that they will go beyond discussing the scope of engagement. The most memorable of these presentations are often in tabular format, with columns labeled ‘we spoke, we listened, we acted’ or in some similarly eye-catching format.

Say on Pay in Proxy Statements

In addition, companies have also become more transparent with regards to addressing Say on Pay results in their proxy statements. However, the number of companies doing so has fluctuated over the years, and has not risen to the levels of those disclosing modifications after engagement. In 2012, 17.3% of S&P 100 companies included in the study included information about how they responded to Say on Pay, and while that figure nearly doubled to 32.0% in 2016, it had fallen for two consecutive years from 2013 to 2015.

Disclosing Responses in Proxy Statements

Disclosing Responses in Proxy Statements

These figures do not show exactly how or what companies are saying about their voting results, so there is much more beneath the surface on a case-by-case basis. Experts note that it’s important to be as detailed as possible, especially when responding to a poor vote.

According to Christine Skizas, a Partner with Pay Governance, who also provided independent commentary for the report,

Companies that have had challenging Say on Pay votes should be especially careful to record and disclose the percentage of shareholders/shares outstanding that were contacted and with which communications were held, and what the findings of those efforts were.

Of course, just because companies do not disclose this information does not mean they did not reach out to investors or have a good relationship with them. That said, since the proxy is publicly available, it can serve as a message to a much larger set of constituents outside the investor base. Employee advocates or the media may be closely scrutinizing company policy but don’t have access to the deeper insight a shareholder would receive from direct engagement outreach, and they can benefit from this disclosure.

Dan Marcec, Director of Content at Equilar, added,

Companies have an opportunity to use the proxy to reach out to stakeholders en masse each year. Even a simple acknowledgement that they were pleased with Say on Pay voting results as a reflection of their good will with shareholders may open the door for better investor relations on other topics.

Proxy Statements – Innovations in Proxy Design Key Findings

  • The percentage of S&P 100 companies including proxy summaries increased from 39.4% in 2012 to 79.0% in 2016.
  • The average S&P 100 CD&A grew in length by 5.0% from about 8,900 words in 2012 to about 9,400 words in 2016, despite a slight decrease in 2013.
  • The prevalence of compensation program checklists rose from 5.1% in 2012 to 66.0% in 2016.
  • The number of companies disclosing modifications following shareholder engagement increased from 14.3% in 2012 to 42.0% in 2016.

About the Report on Changes in Proxy Statements

Innovations in Proxy Design, through an examination of proxies filed by S&P 100 companies, highlights evolving trends in proxy communications supported by unique and exemplary compensation and corporate governance disclosures. Supported by commentary from Donnelley Financial Solutions and Pay Governance, the report includes information on proxy navigation features, the prevalence of visualizations and graphics, and innovative ways companies use this document to communicate their story to shareholders.

Request the full report here.

For further discussion on this topic, please join Equilar, Donnelley Financial Solutions and Pay Governance for a webinar on Thursday, February 23. Communicating Compensation: How to Use the Proxy to Tell Your Pay Story

About Equilar

Equilar is the leading provider of board intelligence solutions. Companies of all sizes rely on Equilar for their most important boardroom decisions, including 70% of the Fortune 500 and institutional investors representing over $13 trillion in assets. Equilar offers data-driven solutions for board recruiting, executive compensation and shareholder engagement that bring together business leaders, institutional investors and advisors to drive exceptional results while ensuring sound corporate governance. The Equilar suite of solutions includes industry-leading board education symposiums, comprehensive custom research services and award-winning thought leadership. Founded in 2000, Equilar is cited regularly by Associated Press, Bloomberg, CNBC, The New York Times, The Wall Street Journal and other leading media outlets.

About Donnelley Financial Solutions

Donnelley Financial Solutions (NYSE: DFIN) provides software and services that enable clients to communicate with confidence in a complex regulatory environment. With 3,500 employees in 61 locations across 18 countries, we provide thousands of clients globally with innovative tools for content creation, management and distribution, as well as data analytics and multi-lingual translations services. Leveraging advanced technology, deep-domain expertise and 24/7 support, we deliver cost-effective solutions to meet the evolving needs of our clients.

About Pay Governance 

Pay Governance LLC is an independent firm that serves as a trusted advisor on executive compensation matters. Our work helps to ensure that our clients’ executive rewards programs are strongly aligned with performance and supportive of appropriate corporate governance practices.

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