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I know it seems like I’ve got proxy season on the brain lately but I thought this piece from Morrow & Co. was really well done and worth passing along.
After reading it, here’s my question to you: is blindly following the recommendation of a proxy advisory services firm a cop out on the institutional investor’s part? I think I do.
Don’t get me wrong - I understand the role that ISS and Glass Lewis (among others) play in today’s corporate governance… and it’s an important role. We need them on that wall.
I just find it hard to believe that an institution that has invested enough time and resources required to take a position in a company’s equity does not allow itself to take a position in that same company’s proxy. What am I missing?
If you’re like me, you likely expected the 2010 proxy season to be much more combative than it is shaping up to be. For the most part, it was eerily quiet despite what seemed to be ideal conditions for activists to assert/insert themselves - from lingering depressed valuations to hoarded cash on the balance sheet, among other things.
My colleagues and I recently spent some time sorting through what’s already occurred this current proxy season with an eye towards preparing for 2011. Our thoughts on the subject can be found here.
Be curious to know how this lines up with your experience in 2010 or expectations for 2011.
I had an interesting conversation with the head of one of the premier proxy solicitation firms in the country last week who said that, to this point, the anticipated wave of companies actively preparing for the new rules of engagement in this year’s proxy season has yet to hit shore.
Talk? Yes. Action? Nope.
Am I surprised? Is Too Tall Jones really too tall?!!?
Boys and girls, proxy season is closer than you think. Now is the time to start digging into your shareholder base to see how the votes may fall and with whom you may need to spend a little more time talking through the issues on the ballot. Now is the time to start expanding your proxy biographies for directors to include specifics on how that individual’s experience will help accelerate the company’s growth plan. Now is the time to start resetting investor expectations as the global economy continues to recalibrate. Now is the time to start taking a close look in the mirror at your governance practices and protocols and gauging how they stack up against your industry, as well as best practices.
I fully realize that I can worry about things a little sooner and/or a little longer than most folks. But, let me ask you this: where’s the harm in being truly prepared?
Following on the heels of an economic period like none other in recent history, the upcoming proxy season will be anything but “routine.” Incentive plans, executive compensation, use of cash and board composition will be among the issues drawing heightened scrutiny. Regulatory changes will spawn more shareholder proposals from institutional investors and impact director elections. Activist hedge funds are expected to be even more aggressive and opportunistic as they look to restore their capital levels. The changes in broker voting rules will likely only further complicate matters.
On Wednesday, December 9, at 12:00 noon (ET), my colleague, Keith Mabee (vice chairman of Dix & Eaton), will lead a discussion of the various activist issues facing management this proxy season, with Martin Ellis, president and chief executive officer of Agilysys (Nasdaq: AGYS); Chris Hewitt, a Jones Day partner who advises public companies on corporate and securities law matters, and other issues; and Rachel Posner, senior managing director and general counsel of Georgeson, Inc., a world leader in proxy solicitation.
I hope you’ll plan to join us for this webinar - which is being powered by the good folks at Shareholder.com.
We’ll also be live tweeting from the event via @D_and_E. I’m sure the discussion will spur at least one blog posting here, if not three.
In the meantime, are there certain questions you’d like to be sure we have the panel address?
While waiting for my panel to begin at the Shareholders Communications Symposium in Chicago, I was able to catch Ron Schneider of BNY Mellon speak about the upcoming proxy season. He said that companies ought to brace themselves for the fact that the changes in broker voting rules (among others) will transform proxy contests into proxy campaigns, which will require ongoing communications with shareholders in order to win. He went so far as to say that soon there will be no “routine” proxy items.
I hadn’t thought about it that way but, after some of the proxy battles I went through last season, it makes a lot of sense to me. Companies are going to have to work harder to get the support (read: votes) they need. That’s one reason why I feel so strongly about the concept we announced last week about educating and engaging investors via the Web in 2010 and beyond. Is this how you see it playing out? And, if so, then when is too early to start planning for next year’s proxy season?
The Altman Group just put out a great summary piece on the new broker voting rules. The change should make for a whole new ballgame come next proxy season… and, perhaps, put an end to the sneer folks give me when I bring up retail investors.
