Strong foundations

While NRG had one of the most challenging and outstanding years of its history, the reason the company took home the award for small to mid-cap corporate governance team of the year was the solid groundwork it had undertaken over several years. ‘What made us stand out this year is that we had already built a strong governance infrastructure,’ explains Tanuja Dehne, deputy general counsel and corporate secretary at NRG.

The thing that really grabbed the judges’ attention, and led to NRG winning over a high-caliber short list that included Burger King, Qwest Communications and Xerox, was the outstanding shareholder outreach and disclosure program that underpinned the successful defense of an unsolicited takeover attempt.

The small secretariat team at NRG submitted more than 250 SEC filings in the 10 months to June 2009 and, as Dehne explains, conducted an unprecedented number of board meetings. ‘With meetings happening once a week or several times a month, we had a lot of materials to coordinate and distribute,’ she says.

Dealing with the intense situation of a takeover required a sophisticated information delivery system. ‘Implementing and using an electronic board book facilitated the increased number of meetings,’ explains Dehne. ‘Rather than emailing directors the information, which has its own discoverability issues during a takeover situation, we were able to leverage the culture of distributing materials electronically that we have developed over several years and which was strengthened during the process.’

In addition to the increased workload resulting from the takeover, the governance team integrated two new board members during 2009, and added another in October 2008. ‘The new members gave us a chance to take a look at our director education policy,’ recalls Dehne. ‘Our board education policy requires directors  to do several things, including visit a plant. To help facilitate this, we routinely conduct board meetings near our plants. This makes it easier for directors to meet with key members of management.’

Directors are also required to routinely visit the company’s headquarters and regularly meet with executive management. This helps directors keep up with trends effecting NRG’s business. The third element is attending a formal director education program, preferably one approved by RiskMetrics.

‘What we did differently this year, as there was going to be a very steep learning curve for the two new directors because of the takeover defense, was to create a menu of items directors could choose from – a sort of best-in-class list of programs we provided to directors. This included contact with investor relations experts, regulatory compliance specialists and climate change teams. All this had a knock-on effect in that several of the existing directors also joined in some of the programs we had made available to the new directors.’

No contest

‘A major accomplishment this year was the planning and execution of the contested annual meeting,’ highlights Debra Fry, assistant corporate secretary. ‘It was unlike any meeting we had ever planned. It was unprecedented in terms of the date, location, security, webcasting, the number of people in attendance, ensuring all employees were informed on all relevant issues and getting the board in place.’

With regard to electronic delivery of information, NRG’s governance team has automated quite a few items that take place throughout the year. These include board evaluations, director and officer questionnaires and Form 5 questionnaires, along with a plethora of other tasks that would usually involve a lot of paper going back and forth. The board is comfortable with the automated electronic system. ‘It makes day-to-day management of the governance team more efficient in terms of tabulating data and obtaining meaningful and timely responses,’ says Dehne. ‘We provide IT support and laptops to the directors and all the tools they need to get things done. I strongly recommend that boards go electronic: it facilitates the process so the governance teams can focus on the substance.’

Dehne and her team are not resting on their laurels, however. They are looking to next year and preparing for another challenging 12 months. Some of the main areas of focus are the Shareholder Bill of Rights Act of 2009, risk oversight, executive compensation and say on pay, and the team is already talking with the board about what these changes may mean. ‘We are ahead of the curve because the board is very engaged and in some cases has already started to deal with these areas, particularly with regard to risk management,’ says Dehne. ‘In terms of operational, day-to-day issues, we in the governance team will look to further automate our overall board calendar and make sure we are covering all the topics we need to cover.

‘Staying ahead of the curve with the operations of the company is also important, and we will continually keep the board informed of all the transactions that the company is involved with.’