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Preparing for the Shareholder Advisory Votes, and the Concept of Engagement
(The following post originally appeared on ONSecurities, a top Minnesota legal blog founded by Martin Rosenbaum to address securities, governance and compensation issues facing public companies.)
February 14, 2011
I thought Valentine’s Day would be a great time to talk about engagement.
In this case, I’m talking about “engagement” by public companies with their shareholders. A lot of commentators these days are talking about engagement in the context of the new shareholder advisory votes regarding executive compensation (Say-on-Pay and the frequency vote) required under the Dodd-Frank Act.
In his Byrd Watch report released last week, “The Permanent Engagement Campaign for Say on Pay/Say on When Votes,” Francis Byrd of Laurel Hill Advisory Group gave a nice summary of engagement issues to be considered by public companies. After he discusses concrete steps companies should consider he describes his concept of a “permanent engagement campaign” – i.e., one that doesn’t end on the date of the annual meeting:
Once upon a time, shareholders voted in accordance with management and the logistics of the proxy vote was the greatest difficult companies faced in electing directors and approving corporate actions. Those days are gone forever. There are no routine annual meetings. Whether your SOP vote is approved by a wide or narrow margin (or defeated) you will need to maintain your engagement teams and continue on-going dialogue with your investors.
Another interesting document is the set of Global Corporate Governance & Engagement Principles published by BlackRock, a major asset manager and institutional investor. The document lists BlackRock’s general global policies for evaluating governance of its portfolio companies. I thought the interesting part was the last section, where BlackRock talks about its own internal oversight of its decision-making progress as it relates to voting shares. In other words, this describes how a large shareholder responds to engagement by its portfolio companies.
The New, Slimmed-Down Version of the Say-on-Pay Rules
The SEC just released the Federal Register version of its final rules on Say-on-Pay, the frequency vote and Say on Parachutes. This version, thankfully, is only 39 pages (including the cover page), compared to the 152-page beast that was available previously. Always a relief – the same useful information, but much lighter in my briefcase. On Valentine’s Day, I can once again truly say I love the SEC . . . .
