Let’s start with the potential shocker: Just as we were locking up this issue came news from Vanguard, which is rolling out a new policy to vote in most cases against directors who hold two or more board seats in addition to their own company’s seat…starting now. We haven’t seen firm numbers yet on just how many director candidates will be affected - but we guess there will be a lot.
We would hope that Vanguard will be “open to discussion” in cases where a board is well-diversified overall - and where a company can make a good case that targeted directors make an unusually strong contribution in the overall mix…so readers, if this affects your company’s slate, start your engines now!
Also, if ever there was a strong case for “reaching out” to retail investors, and making special efforts to gain their votes for the management slate…this is IT. With that in mind, let’s move on to…
Must-Read Proxy Materials as you Prep for your own Meeting
Following his shout-out to GE [not usually one of the OPTIMIZER’s favorites] for its new and leaner look and reader-friendly feel, our great friend and master-blogger Broc Romanek beat us to the punch by blogging, most appropriately, about the Bank of America’s 2019 Proxy Materials.
BofA was our own top-pick in 2017 - and tied for first place with Pepsico in 2018 for the best overall presentation of proxy materials. And so far, it’s number-one with us again… for the third year in a row! Absolutely Must-Read materials we say.
Here’s Broc’s take on the “notables” where we agree completely:
Proxy Statement:
- Succinct presentation of key facts about director nominee skills, qualifications & diversity
- Board’s self-evaluation processes, including enhancements made in response to director feedback
- Board’s oversight of risks, including conduct & culture, and cybersecurity & information security
- ESG activities, including deployment of capital for sustainable growth, being a great place to work, and focus on equal pay for equal work & workplace diversity.
Annual Meeting Webpage:
- Director interview videos [again this year, we’d note - and a major plus, we think, in giving investors a very favorable impression of the leadership] - discussing the company’s focus on responsible growth
- Interactive proxy statement
- Director photos, bios and highlight of skills/qualifications
- Additional soliciting materials highlighting key performance, governance, compensation, environmental, social & human capital management metrics
Donations to Bring Out the Vote:
- For the third year, the company is donating $1 for every shareholder account that votes [promoting] the company’s efforts to “get out the vote.” The charity this year is the American Red Cross - (2017; Special Olympics; 2018: Habitat for Humanity)
Please see our article on the incredible 49% increase in retail voting this program has generated over two years. The OPTIMIZER is hoping that the selection of the Red Cross will not lessen voter support this year, and that, in fact, there will be further building…which we will report on in our next issue.] .
Broc also blogged out a few notables from IBM’s 2019 proxy statement:
- ‘Lead Director’ letter
- Donation for each stockholder account that votes provided to AnitaB.org (an organization that “connects, inspires, and guides women in technology”) [An excellent choice of a non-profit org, we say - and exceptionally well-highlighted in the “packaging” - and in overall presentation to recipients]
- Enhanced political contributions & lobbying disclosure
- New environmental & climate change risk disclosure
- Enhanced CSR disclosure – including full page devoted to mapping practices to the U.N. Sustainable Development Goals [Three cheers for this, the OPTIMIZER says]
Also in the “great minds think alike category” Broc also blogged about the Prudential materials; “I don’t think a year has passed that I haven’t blogged about what Peggy Foran is doing with her company’s proxy.”… And the same is true for the OPTIMIZER…Among the “notables” that Broc noted…
- First three pages are a fold-out on the company’s ESG program [Very impressive, say we.]
- Alignment with the Investor Stewardship Group’s framework [and a wonderful model for others to use, as Broc’s colleague Liz Dunshee blogged later.]
- Companywide initiative around culture
- Two director videos [A ‘first’ for Prudential, we think. Very glad to see this catch on!]
Broc’s colleague Liz Dunshee also identified another set of Must-Read Materials; Regions Financial’s Proxy: “Bringing It All Together”: “After Broc blogged last week about GE’s “Letter to Shareholders,” a few loyal readers reached out to gush about the proxy statement that was recently filed by Regions Financial. One person said it was “unreal – totally changes expectations around proxy disclosures.” And this comment explains why: “It’s like a proxy statement, proxy advisory data report on governance practices, consolidated sustainability report [emphasis ours] and review of every shareholder hot topic rolled into one. It’s worth checking out if you’re looking for sample proxy disclosure on virtually any topic – it was even cited by CII in its recent report on best practices for board evaluation disclosure.” Here’s a link to the Edgar version.
- But better, we think, to go to the Regions Investor page for easier and far more enjoyable viewing…
ANY DOUBTS ABOUT THE IMPORTANCE OF “SUSTAINABILITY” THESE DAYS AFTER SEEING ALL THE BEST DISCLOSURE PRACTICES NOTED ABOVE?
HERE ARE TWO MORE ITEMS TO PONDER…
- The University of Miami Business School is Now Offering a Master of Science Degree in Sustainable Business:
Your editor in chief was pleased to attend a forum on governance issues, sponsored by Broadridge and hosted by the University of Miami, where the Dean of its B-school, Professor John Quelch - a deeply experienced corporate director both here and in the U.K. -also served as a highly thought-provoking panelist, along with luminaries like Bob McCormick, Managing Director of PJT Camberview, Bob Lamm, Chair of the Securities and Corporate Governance Practice at Gunster et al, and a senior advisor at Deloitte, Christina McGuire Managing Director, Proxy Voting and Governance Research at BNY Mellon, Michael McCauley, Senior Officer, Investment Programs and Governance at mega-investor Slate Board of Administration - Florida, and Mark Preisinger, Director of Corporate Governance, The Coca-Cola Company. - After the meeting, Quelch - an Oxford grad and a former Harvard-B-school professor - and former Dean of the London Business School and the China Europe International B-school (!) shared the impressive new MS brochure with us, highlighting…A Focus on Business;…Data-Driven and Informed by Science [aside from the strong B-school faculty, the program will draw on the university’s “world-renowned Rosenstiel School of Marine and Atmospheric Studies and its industry-leading Department of Civil Architecture and Environmental Engineering]; and Emphasis on ESG - “all three of the pillars of sustainability.” And - as the Dean also pointed out, Miami is a living laboratory when it comes to the opportunities and threats of climate change! We were mightily impressed.
- Further evidence for our prediction that 2019 would be a year of unprecedented “engagement” by retail investors - including employee-investors - some 4200 Amazon employees have signed a letter to management in support of an employee-introduced shareholder proposal to dramatically lower the company’s carbon footprint. As we write, we are betting that Amazon will agree to adopt most if not all of what’s called for in advance of the Meeting.
ON THE OTHER HAND…HOW’S THIS FOR A SHAREHOLDER MEETING RALLYING CRY? “BURN MORE COAL!” … COUPLED WITH POTENTIALLY INCENDIARY “FLOOR PROPOSALS.” SURE TO GENERATE HEAT FROM BOTH SIDES AT ELECTRIC COMPANY MEETINGS THIS YEAR
Can you believe it? A massive series of shareholder-proposal initiatives and “engagements” - led by the very kinds of folks that have been trashing the shareholder proposal system as a waste of shareholders’ time and money??
Sure enough, a former Trump campaign official and lobbyist and a former exec, and lobbyist ex of Peabody Coal have been filing shareholder proposals under the “Burn More Coal” banner that will require electric utilities to issue detailed reports on the costs and benefits to shareholders of carbon-reduction activities, which, they contend, are…guess what???… A waste of shareholders’ money, as they think the reports will verify!
To date the clearly well-financed proponents have ‘engaged’ with 21 electric companies - where at least two proposals are on ballots this year, and where at least one other company will, in accordance with their bylaws (Ouch!) allow them to enter a “floor proposal” on their issues this year.
Readers; if your company still allows so-called “floor proposals” please bone up on the vote-counting and the even more important governance issues here via our website - and vow to eliminate the ability for shareholders to introduce them by amending your bylaws if it’s at all possible to do so without a shareholder vote on the item itself.
We also say, consider doing it even if a vote is required - since no proposal should be presented for a vote at a meeting that has not been seen by over 90% of the shareholders - and usually (but not always) has not been reviewed by holders with more than 90% of the voting power either. Maddeningly, both ISS and Glass Lewis automatically vote AGAIST allowing board proxy committees to vote against clearly egregious proposals that arise “from the floor.”
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