Now’s the Time to Start on Your Annual Meeting Briefing Book, as Ethics and Compliance Issues Jump to the Top of Activist and Issuer Agendas

Back when the Volkswagen scandals first began to break - which seems like ages ago now - we warned readers that ethics and compliance issues were certain to move to the top-of-mind where shareholders of every stripe are concerned.

And this quarter, we have seen unrelenting attention, including protracted governmental hearings and widespread consumer outrage over ethics and compliance breaches at Mylan NV and at Wells Fargo Bank, which in our book was the very model of a company with a strong ethics and compliance culture – and with a strong infrastructure in place to support and defend it. (Full disclosure; We bank with Wells Fargo, along with BofA and JP Morgan Chase too; we are stockholders in all three - and we keep, and intend to keep, our brokerage and retirement accounts with WFB, where we know – and value – and trust our Advisor, but where, to tell the whole truth, we make most of our own investment decisions on our own.)

As we go to press, we see an electorate that clearly distrusts ‘big business’ – and where many seem to think that big business, including the press – and political insiders – are literally in cahoots to “screw the average person.” If this isn’t a strong set of warning signs as we begin to gear up for the 2017 Annual Meeting Season, we can’t imagine what would be.

Here’s another observation that a good friend made over dinner that really resonated with us: “I really don’t see how individual investors can consider owning individual stocks anymore. We used to think we knew who the good companies were – and who the great business leaders were. But today, how can we possibly know? And how can we possibly insulate ourselves, and our stock portfolios, from unpleasant surprises on the ethical and compliance fronts, except by avoiding individual stocks and buying ‘funds’ of some sort or other…which may not be so trustworthy either?”

So here are our top takeaways as we start thinking about 2017:

Now, as the headline says, is really the time to start on developing the questions that are likely to be asked at your 2017 Shareholder Meeting given the current, highly and rightly skeptical environment where corporate governance issues are concerned – and on fine-tuning the answers, entering them in your briefing book – then critiquing them carefully to be sure they are not just robust – but fully cover your entire business spectrum…and that they are fully “on the money.”

Pay special attention to executive compensation matters, and to your clawback policies, and philosophies, which we think will be the subject of many more probing questions than ever.

More important we think, is to use this exercise to shape the main corporate message your company wants to convey to its most important constituents in its Annual Meeting and Proxy Solicitation and Voting materials – to instill a sense of confidence - and to make your top messages jump to the fore. This is definitely NOT going to be a good year for “bare bones disclosure” – or for low-budget productions that fail to appeal to “the human element” or to fully convey the corporate culture…if it is one to be proud of, that is.

If your company is one of the “most admired” – or has some of the most admired and/or best-selling brand names…you’re in luck – and should showcase it up front…highlighting your commitment to staying in the forefront.

If you are not, or are not perceived to be among the lucky leaders, you would be smart, we say, to stake out high goals here – and to rigorously explain your plans and programs to get there – and the milestones you intend to achieve. But do not grandstand – and do not make any of this up: We’ve seen enough of THAT this year on the political scene…and it will come back to bite you, we guarantee.