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The Optimizer Interviews Jay McHale & Bill Jackson Of Computershare/Georgeson

“Gentleman: 2015 set an all-time record for mergers, acquisitions and spin-offs. With a truly astonishing $4.7 trillion in deals announced, and with so many of the deals involving “mega-cap companies”, we imagine that the impacts on Computershare and on Georgeson Were significant ones. So... for starters....”

WHAT DO COMPUTERSHARE CLIENTS GAIN FROM A RELATIONSHIP WITH GEORGESON?

Georgeson has been a part of Computershare since 2004. The pairing of a transfer agent with a proxy solicitation and corporate governance consulting firm has provided many benefits to our clients. Georgeson specializes in consultation before, during and after shareholder meetings, including any contested situations. Additionally, Georgeson is unparalleled in managing complex corporate actions; our knowledge and experience in these particular areas is extremely helpful to Computershare clients as they don’t have to go far for help.

WHAT ASPECTS OF COMMUNICATION ARE MADE EASIER BY UTILIZING BOTH COMPUTERSHARE AND GEORGESON?

Shareholder communication is vital during a major transaction, and clients using both Computershare and Georgeson appreciate that our organizations work seamlessly together. Clients gain the peace of mind of having two industry leaders managing the details of the plan and execution of the strategy.

For corporate actions, Computershare can act as the depository while Georgeson can act as information agent and strategic advisor. Georgeson recognizes that communicating complex corporate actions to shareholders can be a tremendous challenge and provides fully integrated communication programs that present shareholders with clear, consistent information, even in the wake of the most complex mergers, acquisitions, spin-offs, rights offerings and other corporate transactions. Combining extensive knowledge of the mechanics of each transaction with scalable communications center support means that our combined teams can handle deals of any size, including cross-border transactions.

As a result of the long-standing relationships we’ve built with the institutional investor community we are well-suited to connect our clients to their institutional shareholders. In addition to conducting outreach to institutional investors, Georgeson has a dedicated call center with a well-established reputation for successfully reaching retail shareholders in order to take their vote over the phone via our proprietary TeleVoteTM system.

Computershare and Georgeson have a comprehensive information security program that addresses data security, data access and data security awareness.

HOW HAS THE PROXY SOLICITATION INDUSTRY CHANGED?

The Dodd Frank Wall Street Reform and Consumer Protection Act was passed into law in 2010. One of the main objectives of the Act was to create more stringent rules on executive compensation and corporate governance. In doing so, companies had to not only adjust to new regulations and reporting requirements but a new corporate governance environment altogether. This is where our job as your strategic proxy solicitor comes in: we help our clients understand shareholder issues and provide guidance on how to best communicate with stakeholders.

The four most relevant topics today are shareholder engagement, shareholder activism, proxy access, and executive compensation (“Say on Pay”).

SHAREHOLDER ENGAGEMENT

The last 5 years have seen a tremendous increase in engagement between issuers and investors. This new era represents year-round engagement efforts between issuers and their investors; whereas engagement in the past had more commonly occurred in the few months leading up to a company’s annual meeting and often only when there was a particular concern, now issuers are speaking with their shareholders year-round on issues related to executive compensation, director elections, activism, and other governance related topics.

The impetus for engagement varies among issuers, yet centers on similar themes of increased transparency, greater interest in communication and openness with top investors, an interest in building and maintaining strong relationships with investors, and warding off potential activism.

SHAREHOLDER ACTIVISM:

Georgeson specializes in working with companies who have activists in their stock. In today’s environment no company is immune to the possibility of shareholder activism. We assist our clients with:

  1. Conducting vulnerability assessments and identifying likely activist strategies
  2. Analyzing the shareholder base and undertaking a shareholder support analysis
  3. Preparing for engagement and creating “ready teams”

PROXY ACCESS

In 2015, 110 proxy access proposals were submitted by shareholders, with the New York City Comptroller’s Office sponsoring 75 of them alone. As a result, the total number of shareholder proposals in 2015 was at its highest level in the past five years. A total of 462 corporate governance shareholder proposals were submitted in 2015. We expect to see another wave of shareholder proposals in 2016, with proxy access as the leading issue. With regard to proxy access, like all shareholder proposals, Georgeson analyzes a client’s particular shareholder base in order to provide various what-if scenarios regarding the probable vote outcome(s).

EXECUTIVE COMPENSATION

While most say-on-pay (“SOP”) proposals easily pass, there are many that fail or receive low levels of support, making these companies vulnerable to future shareholder activism and opposition to director elections. The main reason for low levels of support on SOP proposals from shareholders and proxy advisory firms continues to be perceived “pay-for-performance disconnects,” where CEOs’ pay levels are misaligned with their company’s stock price performance. Companies that underperformed relative to peers without a corresponding decline in CEOs’ relative pay often face difficulties passing their SOP vote. Other problematic pay practices that are common factors for negative votes include:

  • Special awards to CEOs
  • Peer selection and benchmarking
  • Lack of performance goals or their rigor
  • Concerns over employment agreement provisions
  • Time-based retention grants

Companies that develop a prudent plan with the assistance of a proxy solicitor consisting of: a proactive outreach to shareholders and proxy advisory firms, a review of past executive pay practices, and a habit of making changes as appropriate can turn around a failed or low shareholder vote on their SOP.

As the proxy solicitation industry changes, we quickly adapt and redefine our service offering to effectively advise our clients in a timely manner. We aim to proactively guide our clients through the changing landscape. One of the most prominent topics every year, executive compensation, is constantly changing and we are adept at managing those changes for our clients to avoid any pitfalls. If the company is concerned about obtaining the votes they need to pass a certain ballot item, or if they want to avoid support for an item that is not management/company friendly, Georgeson is ready to step in at a moment’s notice to devise a strategy for how to talk about the issue with investors and then immediately set up appointments with investors to speak with them about their concerns.