The Chairman’s “Briefing Book”: Time For A New Look

Corporate Secretaries, meeting planners, IRO folks andothergovernanceprofessionalsaskabout Annual Meeting Briefing-Book practices at virtually every conference on such matters we’ve ever attended. But, as far as we know, there is no list of best practices for building a really good book out there – ‘til this one, we hope.

Some of the interest in Briefing Books is a vestige of the old, old days – when gadflies like the Gilbert brothers would always ask “Were there any changes in the bylaws since the last meeting?” (Still a good question to ask, we think, though no one seems to ask anymore)…and “How much did you pay your auditors for audit services – and for other non- audit services last year?”…and the nutsiest Gilbert question, “How many of the votes on each matter were cast by ‘unmarked’ proxy cards?’”- a statistic that many companies still religiously collect and place in their briefing books, even though the Gilberts, and their questions, are long gone.

In any event, as we always point out about shareholder meetings in general, “One briefing-book size andshapedoesnotfitall”: There ISaneedtohave different strokes for different folks – and for different yearstoo–  dependingonhowyourcompanyhasfared – businesswise and in the press – and whether or not there are “hot issues” surrounding your industry or your company. And yes, in our experience, there are important issues with how much of a ‘control freak’ your own Chairman may or may not be.

So in our own book, every year ideally requires a fresh look at the issues – and at the book itself – and what needs to be in there – and what is simply a waste of staff time – and yours – and your Chairman’s valuable time too.

The best model we’ve ever seen dates back to our old days at Manufacturers Hanover Trust Company – where each year, about 45 days before the scheduled meeting date, a memo would go out from the Legal Department (now, typically, the “Legal and Compliance Department”) to the heads of each of our many business units. It would remind them of the impending meeting and ask each unit head to promptly report back in writing on any event or threatened event in their unit that a stockholder would be likely to ask about – and, of course, to follow up right through the morning of the meeting should there be new developments.

Talk about a good governance best practice! We still think the soul-searching alone is worth the effort – not to mention the coming clean part – where a failure to disclose and discuss anything important enough to be in the book would end, implicitly, with a death sentence.

This is probably a good time to briefly address the “front part” of the briefing book – the script – and rules of conduct – which should specify that (1) all questions must be addressed to the meeting Chair; (2) that questioners must wait to be recognized, then identify themselves by name, as shareholders or proxy holders; (3) that their questions during the official “business portion” of the meeting must relate directly to the matter being considered, per the agenda; (4) that general questions about the business will be dealt with immediately following the conclusion of the “business portion” and (5) that questions or statements about personal business matters should be addressed in person, to designated staffers at the back of the room, after the meeting is concluded and (6) that anyone who is deemed out of order will be removed from the room after one ‘fair warning.’

This is also the time in the script for the Chair to refer to the printed Rules of Conduct that each attendee should have had placed directly into their hands before they enter the hall, we say…which should cover the kinds of personal questions and statements that are out of order, time and turn-taking limits, etc. – and ideally, for the Chair to review them briefly, with emphasis on sections that may be potential flashpoints in a given year.

Now for the briefings themselves: We are strong believers in short briefing books. Why? First, because good Chairmen have no patience with, nor should they have patience with written materials that are not short, pointed and keenly focused on the most important issues at hand.

The old “kitchen sink approach” – where staffers try to anticipate everything under the sun that could possibly be asked is truly a waste of everyone’s valuable time and attention. And, apropos, and an even more compelling set of reasons, (1) there is absolutely nothing wrong with the Chairman saying, “I don’t have the answer to your question at my fingertips, so we will get back to you after the meeting with the specifics” and (2) the very idea that a Chairman should know, or pretend to know the answer to every question under the sun is simply stupid – and (3) it presents an image of the “Imperial Chair” that is both insulting to our intelligence and dangerously hubristic, both for the chairman and for you briefing-book compilers. (Just an aside here, years ago we had a client that used a “kitchen sink approach on steroids” – where a four inch thick briefing book had answers to each and every conceivable question, that a crew of people who were literally behind the curtain could instantly post on the Chairman’s teleprompter! Every year we feared that the curtain might fall, revealing the Wizard of Oz-like enterprise for all to see.)

A few words on anticipating – and dealing with questions aimed at Officers and Directors: As we point out whenever we discuss Annual Meetings, the “First Commandment” - which should never be broken - is that “All questions must be directed to the Chair of the meeting.” But that is not to say that the Chair should not be free to ask a company officer – or a director – and specifically the Chair of a key board committee, we’d note – to answer a shareholder’s question. In fact, we think that doing this judiciously is fast becoming a “best meeting practice” – not just to overcome the Wizard of Oz factor, but because any rational person would expect the BEST answer to come from the person in charge – like the Chair of the Comp or Audit Committees, for example.

Four related points on having Officers and/or Directors answer questions:

1. The most important point, by far, is never “wing it”: Any such decisions should be made in advance - and shared with the intended recipient of the question – and with the answer(s) rehearsed and critiqued and polished beforehand.
2. A very important related point, often made by our great friend and keen meeting-practitioner and observer Peggy Foran, of Prudential, is to “Make sure that all your potential speakers are ‘ready for ‘prime time.’” Face it, some really great operating officers, and some outside directors too, are not all that good at stand-up speaking, even when rehearsed, so better to be safe than sorry.
3. It is often a very smart tactic – if one knows there are “issues” that are almost certain to come up – to act proactively, and to preempt the question by having, say, the Chair of the Compensation Committee briefly summarize the committee’s careful work before a vote to ratify the comp plan(s) is taken.
4. Something fairly new, but that’s bound to increase in today’s governance environment: Be prepared for stockholders to push back if they ask to hear from the Chair of a key committee and the Chair of the Meeting refuses to comply. It is almost impossible to refuse to honor such requests these days - and digging in one’s heels may end up as page-one news – or worse.