Top 10 proxy circular quick fixes: getting a head start on 2016

By now, your 2015 annual meeting is a thing of the past, and the flurry of post-meeting activities – filing your voting results and digging down through the paper to the wood on your desk – is mostly done. So now what?

How about taking a wee bit of time – while the meeting is still fresh in your mind and you’ve heard from all your eagle-eyed directors about the typo on page 49 – to set yourself up for engaging disclosure in your 2016 circular?

Engaging disclosure is not just about the specifics, like whether you disclosed the educational session your directors attended in order to help shareholders appreciate your board members’ commitment to continuous learning. It is also about how you disclose everything in your circular, and whether or not the document makes your shareholders want to read it or throw it away.

Engaging disclosure is always transparent, easy to follow and easy to find, while a well-written proxy circular is the foundation of all shareholder engagement. There are a number of great reasons to put extra effort into making a reader-friendly circular, even though many shareholders will simply trash it.

Firstly, perhaps they won’t toss it out if it’s actually written to appeal to them. The proxy circular is a great opportunity to share your company’s governance story and its executive compensation story – the two big areas that can leave your organization vulnerable to investor activism.

Secondly, it provides an excellent resource for you, your executive team and your directors regarding all of your company’s governance and key compensation practices. It is much more valuable to have a resource that is easy to read and understand than one that regurgitates legal language and only talks about items required by law.

Lastly – and most importantly – good disclosure builds trust with shareholders and stakeholders alike. When people don’t understand your disclosure, they assume you are trying to hide something. Why would you give the same shareholders that your investor relations team works so hard to win over through crisp, clear investor roadshows, a barely readable document that makes them suspicious of your motives?

Presented below are my top 10 proxy circular quick fixes, and some examples of great – and not so great – 2015 Canadian circulars.

1. Set the table (of contents)

The first thing I look for when reviewing a circular (I go through at least 100 each year) is the table of contents. Believe me, first impressions do matter. When I see an old-school table of contents that is just a long list of items, I have to resist the urge to just set the circular aside and move on to another one because I know it’s going to be hard to find the items I’m seeking out.

Your table of contents should be easy to find and easy to read. For example, check out the table of contents TELUS uses – it’s on the inside front cover of the circular and is small and easy to navigate. On the other hand, I had to dig down to the fourth page of Thomson Reuters’ circular to find a page-long table of contents, written half in all capitals (which are harder to read) and full of those little dotted lines so beloved of compliance-style circulars.

2. Seeing is believing

Beyond just providing a great table of contents, make sure your readers can visually navigate your document. Remember to include page numbers throughout and add an accent color or marking on each of the sections or section pages. Magna did a great job with that this year, making it super-easy to move through the major sections of its circular, because it put a different color at a different height along all of the pages in each section and matched that information up with the contents table.
A pet peeve of mine is when companies change the numbering at the end of the document, starting each appendix with a letter and renumbering from 1, like Methanex does. I like to have a sense of the overall length of the document right away, and that numbering format leaves me to do the math.

3. Take out your branding iron and use it

Make sure you take every opportunity to brand your circular. Using your logo (and colors consistent with it) throughout will help you become instantly recognizable to your stakeholders; it’s another way to build familiarity, and familiarity leads to trust. Goldcorp did a great job of branding this year, creating a document that co-ordinates with its overall corporate brand and helping stakeholders engage by making information simple to find.

In the same vein, remember that how your document looks and feels on paper is important even if you are using notice and access. Some of your shareholders will still get paper copies (most likely because they really want them), and printing your 1,000 or so proxies on thin onion-skin paper that bleeds through (like Manulife does) can turn a great document into one nobody wants to read.

4. Waste not, want not

Make sure to use every page. Even if you are formatting the document so every ‘chapter’ starts on a right-hand page, avoid the ‘This page left intentionally blank’ label. With all of the context we can add, all the story and flavor, there’s no excuse not to use every page, including the inside front and back covers. Rogers, in its miniature circular, makes sure to use every available page to tell its story.

5. Give me the cliffs notes

Although it’s common in the US, Canadian companies are just beginning to get the hang of adding an executive summary for the proxy circular itself and for executive compensation. While there is no requirement to include these disclosures, they provide great value. They give you the opportunity to share the highlights of your story, the key items of business and some of the major factors affecting compensation decisions – all of which help engage your stakeholders.

Vermilion Energy made sure to provide information on its business, compensation programs and meeting details in the first few pages of its circular this year, and Scotiabank used a ‘letter to shareholders’ format to provide an overview and context for its executive compensation disclosure.

6. Go beyond the regulations

Don’t make a game of not providing useful information just because it’s not technically or legally required. Help your shareholders to quickly understand the big picture by sharing valuable information and statistics. For example, the attendance record or number of meetings directors attend is required and is helpful information, while on the other hand, the percentage of meetings attended is not specifically required but is more helpful in understanding director engagement. Yes, your shareholders can do the math, but when you leave it to them to figure out, they may feel like you are hiding something. One tip to improve in this area is to review your tables and see whether any of them could benefit from adding a ‘total’ line at the end.

7. Watch out for foreign languages

I’m not referring to real languages like French, Spanish or Chinese; I’m talking about industry- specific languages like ‘legalese’, ‘compensationese’ and ‘environmentalese’. Here you need to be doubly diligent – disclosure has to be clear to anyone outside of the industry, but must accurately reflect any specific requirements. It’s easy for a plain- language expert to recommend taking out the words ‘general’ or ‘special’ from the notice of meeting, but you have to ensure legal requirements are met.

Unfortunately, the same goes for many headings for required compensation tables, such as ‘Opening present value of defined benefit obligation’ or ‘Non-equity incentive plan compensation’ – they are not easily understood by all shareholders, but counsel are often reluctant to change them because they are set out in that language in the regulations.

8. Size matters – just not in the way you think

There is a lot of feedback that proxy circulars are getting too long, but that’s only one side of the story. A short proxy circular can be very hard to navigate and understand, while a long circular can truly engage a reader and share the most important information.

National Bank’s circular weighs in at a hefty 106 pages (some of which are sadly blank) and is a great example of a long but truly engaging circular. At the other end of the spectrum, there is no shortage of law firm-style circulars (see Catamaran’s) that are shorter, but not nearly so sweet.

9. Tell your story with pictures

Humans are hard-wired to respond to a good yarn, and increasingly my clients are seeking disclosure that feels like a bedtime story. My response? ‘Don’t forget the pictures.’ No bedtime story worth its salt leaves out pictures, and the same is true for disclosure. Tables, graphics and charts improve our understanding of complex data by showing relationships among items or how a process works over time.

BCE uses pictures to its advantage in its circular every year. This year, it started with a cover that proclaimed ‘Results speak volumes’, and then went on to tell that story throughout the document in words and graphics.

10. create a pocket-sized version – and use it

I can’t take credit for this idea – it was a colleague who used to have major contracts printed in small booklets that suggested it for the proxy circular. But I think I upped the game when I began carrying my mini-circular to every meeting and discussion with stakeholders, both as a reference and so I could mark up suggested improvements. Now companies like Rogers and RBC are providing mini-circulars for all shareholders who get paper copies.

Canadian companies are embracing the idea that the proxy circular can be a true communications document that helps them engage with stakeholders while continuing to meet its regulatory role. How will your 2016 circular stack up?

Sylvia Groves is president and creative director of Governance Studio in Calgary.