• Secretaries and compliance officers inexperienced at marketing themselves
• Larger pool of candidates eyeing jobs in governance roles
• The speaking circuit offers great visibility and networking
• Players on the ‘other side of the table’ make strong allies
• Compliance experience may earn a seat on the board
As corporations across the United States and around the world are coming to terms with new compliance and governance realities, the role of executives in these fields has risen from being viewed as a necessary evil to among the top strategic positions. As many companies can attest, any failure, real or perceived, in compliance or regulatory matters has a serious effect on share price, morale and reputation. Sometimes, even something as minor as missing a routine filing deadline can result in steep fines, negative media attention and a gaggle of angry shareholders knocking at the front door.
With this increased focus on governance activities and the severe legal penalties for failure, companies are looking to replace, rebuild, restructure or simply supplement their secretariat and compliance teams.
The challenge is that this has been traditionally been a function without any significant ‘market.’ Companies often find it difficult to locate the best talent in the field and few corporate secretaries and compliance officers are comfortable with, or experienced at, marketing themselves to potential new employers.
As the salary survey published in the November issue of Corporate Secretary indicates, the salaries for corporate secretaries, compliance and ethics officers are soaring, so individuals have a great incentive to move through the ranks. Due to the high cost of employing executives in these fields companies also need to ensure they are identifying and acquiring the best talent available.
Perhaps the greatest change in the employment market for corporate secretaries and compliance executives is the fact that a larger pool of people, from young law graduates to experienced securities lawyers to prosecutors, are targeting the roles. This is another major reason for increased salaries.
Visibility counts
So, for corporate secretaries who are not accustomed to self-promotion, what should they be doing to make themselves known? Bob Lamm, managing director, associate general counsel and corporate secretary at Financial Guaranty Insurance Company (FGIC) says one of the most important things is to ‘get yourself out there.’‘Get onto the speaking circuit,’ counsels Lamm. ‘It gets you in front of people that would not otherwise know who you are and also begins to establish your name as a thought leader.’
There are plenty of opportunities for people looking for speaking roles. Most conference organizers are more than happy to have corporate participants speaking and as the focus on governance increases demand for corporate secretary commentary is on the rise. But don’t just restrict yourself to your own circle, urges Lamm.
If you are looking to advance your chances of employment then obviously you need to meet people that you would not otherwise see. There are literally dozens of directors’ institutes, general business conferences and governance or compliance related events all over the country. ‘Directors can be extremely influential in employing new corporate secretaries and sitting on panels with them is invaluable,’ says Lamm.
Joining professional societies and associations is also an excellent way to expand your network. The Society of Corporate Secretaries and Governance Professionals (SCSGP) is one of the larger groups serving the space although there are a number of new groups that are offering a broad range of services and approaches to compliance and governance. These include the Open Compliance and Ethics Group (OCEG), Society of Corporate Compliance and Ethics (SCCE), the Ethics and Compliance Officer Association (ECOA), and the National Association of Corporate Directors (NACD).
But simply joining a society, or several, is not sufficient. It is important to be an active participant in meetings, committees and conferences. This is necessary for increasing knowledge but also serves to increase standing among peers.
Consultants getting in on the fun
Such is the demand for governance and compliance experts, some of the largest and most prestigious executive recruitment consultancies in the country are establishing practices serving this field. The phenomenon is relatively new and some agencies are gaining more ground than others. One group that is making moves in this area is Spencer Stuart. The firm houses the corporate secretary, ethics and compliance officer roles under the broader legal search team. This has made sense since an overwhelming proportion of corporate secretaries and compliance officers were formerly lawyers in either private or corporate practice.
The landscape is changing, however, and there is a growing trend towards corporations appointing non-lawyers to these roles, especially compliance. Ethics officers tend not to be lawyers and most companies are now starting to realize that, from a structural perspective, housing the ethics function in the legal department is not considered to be best practice.
In response to this trend, recruiters and their clients are changing the way they identify talent. As part of this, firms such as Spencer Stuart are co-sponsoring events like the Canadian Corporate Governance Awards in association with the Conference Board of Canada.
Diversify your network
Forming close relationships with players on the ‘other side of the table’ is something strongly advised by Lamm and other leaders in the field. When companies are looking to fill senior roles they are increasingly asking institutional clients for their thoughts. Institutional investors can make strong allies and, as they become more activist in their approach, it is likely their influence in employing executives serving the board will increase.
In order to gain exposure to the investor community, it is highly recommended that compliance and governance professionals join groups like the Council of Institutional Investors (CII). Closer associations with investors are helpful not just for long-term career prospects but it will also assist in improving current job performance. Of course, as with most professions these days, being good at what you do is not usually sufficient to earn significant promotion. You must be able to stand out from the crowd, says Lamm. This may involve taking a different approach or developing new thinking. Some corporate secretaries and general counsel have become almost as well known as their CEOs. When people discuss majority voting, they nearly always cite Pfizer and Peggy Foran has become one of the most respected and quoted executives in the country. Obviously a corporate secretary must choose his or her company and stance carefully. Getting associated with a corporate scandal or compliance failure will ruin a career faster than a good reputation can build one. Just ask any of the former non-board executives at UnitedHealth, AIG, Computer Associates, HP or Enron. Some of the secretariat and general counsel at these firms may have escaped jail time, but finding new employment is not going to be any easy task.
One corporate secretary, who requested not to be named, quips that in order for his peers to advance their careers or move to more senior roles at another company the most important thing they can do is ‘get a personality.’ It may sound like a flippant thing to say, but similar advice is given by recruiters to potential candidates all the time. Improved speaking and presentation skills always make a person appear more effective. With the growing focus on compliance, there is more demand from investors and the media for direct access officers in that role. Talking is not always an easy thing to do and, without real interpersonal skills, getting ahead in a networking situation is nothing but a pipe dream.
Taking your skills to the board
Importantly, the job opportunities on offer to well-respected corporate secretaries and compliance experts go beyond the standard roles most people know. Boards have been hearing an increasingly loud message about their roles and responsibilities in preventing corporate wrongdoing. Under the 2004 revisions to the Sentencing Guidelines for Organizations, the board must oversee the company’s compliance program and be knowledgeable about its operation.
The difficulties in finding board talent with the skills and experience to effectively monitor governance and compliance have been well reported. Almost every company highlights longer search times and higher salaries that must be paid to entice new board members. Many older, more traditional board members are leaving the boards they serve or refusing to take on new positions, creating a serious shortage of talent to guide modern companies.
According to Dan Roach, vice president and corporate compliance officer at Catholic Healthcare West and co-chairman of the SCCE, and Joe Murphy, board member at SCCE and founder of Integrity Interactive, compliance officers make ideal candidates for audit committee service.
In a recent report published in Ethikos, Roach and Murphy pose the question: ‘The audit committee must have members who can identify potential financial and accounting issues, ask the right questions and assess the need for further follow-up and inquiry by the committee. But is financial expertise enough, when compliance responsibility is also being placed on the audit committee’s plate?’
Compliance issues, especially those that go beyond mere regulatory reporting requirements, are extremely complex and in many cases will be outside the field of expertise of more traditional audit committee members. Financial and accounting skills are one thing, but compliance and ethics are very different beasts.
The committee members need an understanding of the regulatory environment in which the company operates. They must also understand the extensive laws, governmental guidance and industry practices regarding the development and operation of an effective compliance program. The report asks, ‘Can a board objectively and credibly measure whether the company’s compliance program is effective when their only source of information is the same compliance officer whom they are required to oversee?’
For this reason, an experienced compliance officer could add invaluable expertise to the board generally and the audit committee in particular. In addition, as companies strive to implement effective ethics programs, ethics officers could also be on the director recruitment radar. Corporate secretaries, with their intimate knowledge of board function, meeting dynamics and regulatory compliance, have also found their way onto the board. The coming years may see this trend develop which will place even more pressure on the market for talent in this area.
Overall, demands on the compliance, governance and ethics functions are causing a shift from these roles being ‘part-time’ jobs to being highly skilled specialist positions. If they desire to remain at, or rise to, the top of the newly established professions, practitioners must change the way they view themselves. Only then can they present themselves in the best possible light to current and prospective employers.America’s corporate leaders may feel as though they have woken up in boot camp. As the 2007 proxy season looms large, CEOs, their boards, in-house legal teams and those tasked with corporate reporting and compliance are mustering their troops, checking their defenses and, in many cases, drawing up battle plans.
For those looking to get through proxy season unscathed by messy shareholder proposals or costly proxy fights, Corporate Secretary asked Institutional Shareholder Services (ISS), Glass Lewis and DF King what companies should be doing to get prepared.
Almost everyone agrees this year will see more shareholder campaigns and proxy contests than the last few. Rick Grubaugh, SVP, M&A and corporate proxy solicitation at DF King explains: ‘Companies disclosing jaw-dropping compensation are going to face withhold campaigns against members of the compensation committee. These can be launched at the eleventh hour and can have a significant impact.’
Robert McCormick, vice president of proxy research and operations at Glass Lewis, agrees: ‘It is highly probably that new disclosures of executive compensation will result in a higher level of withhold votes against members of the compensation committee. The wow factor is going to be significant because investors can now see a total for previous years’ compensation. Much of this data was previously available, but never all in one place and in an easily identified manner. That is going to shock a lot of people and it will lead to some action against the people that were on the committee at the time those payments were made,’ he says.
Pay for performance
Other issues that received high-level support last year will likely raise their heads again, according to McCormick, in particular those related to tying pay to some form of performance standard. Also, proposals seeking that shareholders have some sort of ratification of the compensation committee report will likely increase. These were brought at four companies in 2006 and each received very high-level support – an average of 40 percent, which is very high for a first-year proposal.
Majority voting will continue to be a big issue. At least 150 companies are likely to see proposals on this subject. Some companies have taken significant steps in this area and received very high levels of support. However, most are taking some sort of middle- ground approach like Pfizer, and these are receiving a reasonable amount of support.
Returning to compensation, McCormick feels that while high levels of pay will disturb some investors, it is not a universal problem: ‘Total amounts have not really changed year-on-year. Even if pay levels are high, and many of them are going to be, shareholders are much happier if they see that pay is tied to some sort of performance standard. They want not just a vague statement saying that payments are tied to performance but a little more detail. The CD&A should include some basic performance metrics and a discussion of how they were met. For example, they achieved 80 percent of target levels and therefore they received 80 percent of their bonus.’
‘Obviously, there is a line between discussing some of the performance parameters and divulging potentially competitive information,’ McCormick continues. ‘I think it is okay for a company to say we have parameters based on components of the following metrics: total shareholder return (TSR) and return on investment (ROI). That is basically market information so it isn’t that bad to disclose. It is definitely possible to present a general overview without divulging anything that is going to impact the business.’
While majority voting and executive compensation will be the most high-profile issues, it is important not to forget about some other perennial favorites of the activist community. Anti-takeover provisions will be a problem for some companies this year, according to McCormick. Last year, for example, was the first time that a majority of S&P 500 companies did not have classified boards. ‘This makes it far more difficult for the companies that still have classified boards because it removes the argument that everyone else is doing it, so we are too,’ he says.
More than in the past, communication is going to be the key to avoiding protracted battles. Proxy solicitation firms should be able to assist in identifying investors that are likely to present issues or to vote in a particular way. Grubaugh highlights the need for not waiting until a problem arises to start talking with shareholders: ‘Early engagement is important because approximately two-thirds of proxy contests where a dissident pre-files go away before they even get to a vote.’
Grubaugh further highlights the need to stay up to date with your shareholder base. ‘Ownership will have changed since the last proxy season and it is vital to understand who the shareholders are at the record date.’
Don’t forget the advisers
It is a good idea to understand the influence of the various advisory firms like ISS and Glass Lewis on your shareholders. Some of them will listen to ISS or others’ recommendations and some investors will not, so you must understand this so as not to waste effort in talking about the wrong issues with the wrong groups, explains Grubaugh.
Active communication with proxy advisory firms is very important. There is a tendency to take an adversarial view of advisory firms but this is not generally useful. If it emerges that you are going to get a negative recommendation, then you should talk with the advisory firm to get that issue changed before the recommendation comes out. Once the recommendation is out, it is a lot more difficult to handle.
One significant difference that we are going to see in 2007, says Grubaugh, is the approach of some companies toward the activist community. CEOs and boards have been willing to negotiate and make major concessions, like giving up a board seat to a dissident. ‘There is most likely going to be a lot more pushback this year. There is a growing feeling that some companies have been too quick to give up too much. They will most likely start to pick and choose which dissidents they will negotiate with and which ones they will fight,’ he says.
But it is not just corporations that benefit from increased engagement. In many cases activists are more likely to achieve a desired result through a conciliatory approach. They can often achieve much greater levels of influence and change through in-depth engagement than through proxy votes or fights.
If the only time a company hears about an issue is via a proxy contest, it is hardly surprising there is resistance. The company may not know why investors are voting the way they are or even which investors are voting. ‘This is not a particularly efficient way to effect change,’ says McCormick.
The experts concur that there is more to this proxy season than tactics. Beyond ensuring efficient filing and reporting structures and expanded compensation disclosure, companies striving for a painless proxy season should focus on a strategy of active engagement with investors, proxy advisory and ratings firms and the media.
With this increased focus on governance activities and the severe legal penalties for failure, companies are looking to replace, rebuild, restructure or simply supplement their secretariat and compliance teams.
The challenge is that this has been traditionally been a function without any significant ‘market.’ Companies often find it difficult to locate the best talent in the field and few corporate secretaries and compliance officers are comfortable with, or experienced at, marketing themselves to potential new employers.
As the salary survey published in the November issue of Corporate Secretary indicates, the salaries for corporate secretaries, compliance and ethics officers are soaring, so individuals have a great incentive to move through the ranks. Due to the high cost of employing executives in these fields companies also need to ensure they are identifying and acquiring the best talent available.
Perhaps the greatest change in the employment market for corporate secretaries and compliance executives is the fact that a larger pool of people, from young law graduates to experienced securities lawyers to prosecutors, are targeting the roles. This is another major reason for increased salaries.
Visibility counts
So, for corporate secretaries who are not accustomed to self-promotion, what should they be doing to make themselves known? Bob Lamm, managing director, associate general counsel and corporate secretary at Financial Guaranty Insurance Company (FGIC) says one of the most important things is to ‘get yourself out there.’‘Get onto the speaking circuit,’ counsels Lamm. ‘It gets you in front of people that would not otherwise know who you are and also begins to establish your name as a thought leader.’
There are plenty of opportunities for people looking for speaking roles. Most conference organizers are more than happy to have corporate participants speaking and as the focus on governance increases demand for corporate secretary commentary is on the rise. But don’t just restrict yourself to your own circle, urges Lamm.
If you are looking to advance your chances of employment then obviously you need to meet people that you would not otherwise see. There are literally dozens of directors’ institutes, general business conferences and governance or compliance related events all over the country. ‘Directors can be extremely influential in employing new corporate secretaries and sitting on panels with them is invaluable,’ says Lamm.
Joining professional societies and associations is also an excellent way to expand your network. The Society of Corporate Secretaries and Governance Professionals (SCSGP) is one of the larger groups serving the space although there are a number of new groups that are offering a broad range of services and approaches to compliance and governance. These include the Open Compliance and Ethics Group (OCEG), Society of Corporate Compliance and Ethics (SCCE), the Ethics and Compliance Officer Association (ECOA), and the National Association of Corporate Directors (NACD).
But simply joining a society, or several, is not sufficient. It is important to be an active participant in meetings, committees and conferences. This is necessary for increasing knowledge but also serves to increase standing among peers.
Consultants getting in on the fun
Such is the demand for governance and compliance experts, some of the largest and most prestigious executive recruitment consultancies in the country are establishing practices serving this field. The phenomenon is relatively new and some agencies are gaining more ground than others. One group that is making moves in this area is Spencer Stuart. The firm houses the corporate secretary, ethics and compliance officer roles under the broader legal search team. This has made sense since an overwhelming proportion of corporate secretaries and compliance officers were formerly lawyers in either private or corporate practice.
The landscape is changing, however, and there is a growing trend towards corporations appointing non-lawyers to these roles, especially compliance. Ethics officers tend not to be lawyers and most companies are now starting to realize that, from a structural perspective, housing the ethics function in the legal department is not considered to be best practice.
In response to this trend, recruiters and their clients are changing the way they identify talent. As part of this, firms such as Spencer Stuart are co-sponsoring events like the Canadian Corporate Governance Awards in association with the Conference Board of Canada.
Diversify your network
Forming close relationships with players on the ‘other side of the table’ is something strongly advised by Lamm and other leaders in the field. When companies are looking to fill senior roles they are increasingly asking institutional clients for their thoughts. Institutional investors can make strong allies and, as they become more activist in their approach, it is likely their influence in employing executives serving the board will increase.
In order to gain exposure to the investor community, it is highly recommended that compliance and governance professionals join groups like the Council of Institutional Investors (CII). Closer associations with investors are helpful not just for long-term career prospects but it will also assist in improving current job performance. Of course, as with most professions these days, being good at what you do is not usually sufficient to earn significant promotion. You must be able to stand out from the crowd, says Lamm. This may involve taking a different approach or developing new thinking. Some corporate secretaries and general counsel have become almost as well known as their CEOs. When people discuss majority voting, they nearly always cite Pfizer and Peggy Foran has become one of the most respected and quoted executives in the country. Obviously a corporate secretary must choose his or her company and stance carefully. Getting associated with a corporate scandal or compliance failure will ruin a career faster than a good reputation can build one. Just ask any of the former non-board executives at UnitedHealth, AIG, Computer Associates, HP or Enron. Some of the secretariat and general counsel at these firms may have escaped jail time, but finding new employment is not going to be any easy task.
One corporate secretary, who requested not to be named, quips that in order for his peers to advance their careers or move to more senior roles at another company the most important thing they can do is ‘get a personality.’ It may sound like a flippant thing to say, but similar advice is given by recruiters to potential candidates all the time. Improved speaking and presentation skills always make a person appear more effective. With the growing focus on compliance, there is more demand from investors and the media for direct access officers in that role. Talking is not always an easy thing to do and, without real interpersonal skills, getting ahead in a networking situation is nothing but a pipe dream.
Taking your skills to the board
Importantly, the job opportunities on offer to well-respected corporate secretaries and compliance experts go beyond the standard roles most people know. Boards have been hearing an increasingly loud message about their roles and responsibilities in preventing corporate wrongdoing. Under the 2004 revisions to the Sentencing Guidelines for Organizations, the board must oversee the company’s compliance program and be knowledgeable about its operation.
The difficulties in finding board talent with the skills and experience to effectively monitor governance and compliance have been well reported. Almost every company highlights longer search times and higher salaries that must be paid to entice new board members. Many older, more traditional board members are leaving the boards they serve or refusing to take on new positions, creating a serious shortage of talent to guide modern companies.
According to Dan Roach, vice president and corporate compliance officer at Catholic Healthcare West and co-chairman of the SCCE, and Joe Murphy, board member at SCCE and founder of Integrity Interactive, compliance officers make ideal candidates for audit committee service.
In a recent report published in Ethikos, Roach and Murphy pose the question: ‘The audit committee must have members who can identify potential financial and accounting issues, ask the right questions and assess the need for further follow-up and inquiry by the committee. But is financial expertise enough, when compliance responsibility is also being placed on the audit committee’s plate?’
Compliance issues, especially those that go beyond mere regulatory reporting requirements, are extremely complex and in many cases will be outside the field of expertise of more traditional audit committee members. Financial and accounting skills are one thing, but compliance and ethics are very different beasts.
The committee members need an understanding of the regulatory environment in which the company operates. They must also understand the extensive laws, governmental guidance and industry practices regarding the development and operation of an effective compliance program. The report asks, ‘Can a board objectively and credibly measure whether the company’s compliance program is effective when their only source of information is the same compliance officer whom they are required to oversee?’
For this reason, an experienced compliance officer could add invaluable expertise to the board generally and the audit committee in particular. In addition, as companies strive to implement effective ethics programs, ethics officers could also be on the director recruitment radar. Corporate secretaries, with their intimate knowledge of board function, meeting dynamics and regulatory compliance, have also found their way onto the board. The coming years may see this trend develop which will place even more pressure on the market for talent in this area.
Overall, demands on the compliance, governance and ethics functions are causing a shift from these roles being ‘part-time’ jobs to being highly skilled specialist positions. If they desire to remain at, or rise to, the top of the newly established professions, practitioners must change the way they view themselves. Only then can they present themselves in the best possible light to current and prospective employers.America’s corporate leaders may feel as though they have woken up in boot camp. As the 2007 proxy season looms large, CEOs, their boards, in-house legal teams and those tasked with corporate reporting and compliance are mustering their troops, checking their defenses and, in many cases, drawing up battle plans.
For those looking to get through proxy season unscathed by messy shareholder proposals or costly proxy fights, Corporate Secretary asked Institutional Shareholder Services (ISS), Glass Lewis and DF King what companies should be doing to get prepared.
Almost everyone agrees this year will see more shareholder campaigns and proxy contests than the last few. Rick Grubaugh, SVP, M&A and corporate proxy solicitation at DF King explains: ‘Companies disclosing jaw-dropping compensation are going to face withhold campaigns against members of the compensation committee. These can be launched at the eleventh hour and can have a significant impact.’
Robert McCormick, vice president of proxy research and operations at Glass Lewis, agrees: ‘It is highly probably that new disclosures of executive compensation will result in a higher level of withhold votes against members of the compensation committee. The wow factor is going to be significant because investors can now see a total for previous years’ compensation. Much of this data was previously available, but never all in one place and in an easily identified manner. That is going to shock a lot of people and it will lead to some action against the people that were on the committee at the time those payments were made,’ he says.
Pay for performance
Other issues that received high-level support last year will likely raise their heads again, according to McCormick, in particular those related to tying pay to some form of performance standard. Also, proposals seeking that shareholders have some sort of ratification of the compensation committee report will likely increase. These were brought at four companies in 2006 and each received very high-level support – an average of 40 percent, which is very high for a first-year proposal.
Majority voting will continue to be a big issue. At least 150 companies are likely to see proposals on this subject. Some companies have taken significant steps in this area and received very high levels of support. However, most are taking some sort of middle- ground approach like Pfizer, and these are receiving a reasonable amount of support.
Returning to compensation, McCormick feels that while high levels of pay will disturb some investors, it is not a universal problem: ‘Total amounts have not really changed year-on-year. Even if pay levels are high, and many of them are going to be, shareholders are much happier if they see that pay is tied to some sort of performance standard. They want not just a vague statement saying that payments are tied to performance but a little more detail. The CD&A should include some basic performance metrics and a discussion of how they were met. For example, they achieved 80 percent of target levels and therefore they received 80 percent of their bonus.’
‘Obviously, there is a line between discussing some of the performance parameters and divulging potentially competitive information,’ McCormick continues. ‘I think it is okay for a company to say we have parameters based on components of the following metrics: total shareholder return (TSR) and return on investment (ROI). That is basically market information so it isn’t that bad to disclose. It is definitely possible to present a general overview without divulging anything that is going to impact the business.’
While majority voting and executive compensation will be the most high-profile issues, it is important not to forget about some other perennial favorites of the activist community. Anti-takeover provisions will be a problem for some companies this year, according to McCormick. Last year, for example, was the first time that a majority of S&P 500 companies did not have classified boards. ‘This makes it far more difficult for the companies that still have classified boards because it removes the argument that everyone else is doing it, so we are too,’ he says.
More than in the past, communication is going to be the key to avoiding protracted battles. Proxy solicitation firms should be able to assist in identifying investors that are likely to present issues or to vote in a particular way. Grubaugh highlights the need for not waiting until a problem arises to start talking with shareholders: ‘Early engagement is important because approximately two-thirds of proxy contests where a dissident pre-files go away before they even get to a vote.’
Grubaugh further highlights the need to stay up to date with your shareholder base. ‘Ownership will have changed since the last proxy season and it is vital to understand who the shareholders are at the record date.’
Don’t forget the advisers
It is a good idea to understand the influence of the various advisory firms like ISS and Glass Lewis on your shareholders. Some of them will listen to ISS or others’ recommendations and some investors will not, so you must understand this so as not to waste effort in talking about the wrong issues with the wrong groups, explains Grubaugh.
Active communication with proxy advisory firms is very important. There is a tendency to take an adversarial view of advisory firms but this is not generally useful. If it emerges that you are going to get a negative recommendation, then you should talk with the advisory firm to get that issue changed before the recommendation comes out. Once the recommendation is out, it is a lot more difficult to handle.
One significant difference that we are going to see in 2007, says Grubaugh, is the approach of some companies toward the activist community. CEOs and boards have been willing to negotiate and make major concessions, like giving up a board seat to a dissident. ‘There is most likely going to be a lot more pushback this year. There is a growing feeling that some companies have been too quick to give up too much. They will most likely start to pick and choose which dissidents they will negotiate with and which ones they will fight,’ he says.
But it is not just corporations that benefit from increased engagement. In many cases activists are more likely to achieve a desired result through a conciliatory approach. They can often achieve much greater levels of influence and change through in-depth engagement than through proxy votes or fights.
If the only time a company hears about an issue is via a proxy contest, it is hardly surprising there is resistance. The company may not know why investors are voting the way they are or even which investors are voting. ‘This is not a particularly efficient way to effect change,’ says McCormick.
The experts concur that there is more to this proxy season than tactics. Beyond ensuring efficient filing and reporting structures and expanded compensation disclosure, companies striving for a painless proxy season should focus on a strategy of active engagement with investors, proxy advisory and ratings firms and the media.
