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2010 Proxy Season

Introduction to 2010 Proxy Season Hot Topic

January 2010

The annual corporate electoral process – the “proxy season” for shareholders – is shaping up to be a period of intense communication for a number of public companies in 2010. 

There are new rules from the Securities & Exchange Commission regarding public communication on the qualifications for nominees standing for election to corporate boards.  What are their skill sets…their experience in board matters…their education and background…why they are qualified to represent the interests of the shareowners who elect them?  These will have to be spelled out for proxy voters.  (This also includes presenting the same justifications for board members now serving who may not be up for election.)

The opening of “proxy access” to shareowners under SEC Chair Mary Schapiro’s reign seems to be encouraging long-term shareowners (with specific levels of holdings) to consider becoming more involved in the director nominating process.  “Democracy” may be said to be coming to one of the last prominent holdouts in the American society, the publicly-held corporation (or at least the most widely-held companies).

The issues that some shareowners and their asset managers care about are in some cases becoming much more important year-to-year for owners and advocates.  Continued globalization of business activities puts the corporate supply chain policies, practices and behaviors in sharper focus, and thus specific issues related to human rights, labor rights, diversity, treatment of indigenous peoples, forestry management, environmental management and many more dimensions of corporate activities are very much in focus for shareowners and the asset managers they hire.

The SEC recently issues its interpretation of “climate risk” responsibilities for corporate issuers.  If the board and C-suite know or believe that there are specific material risks, concerns, and critical issues facing the corporation concerning climate change, these should be disclosed to shareowners.  Shareowners and their coalitions (such as the Investors Network on Climate Risk, and Ceres which manages INCR) are focused on climate change risk issues and were the drivers of repeated requests to the SEC to issue the guidance, which finally occurred this year.  Shareowner focus on attendant climate risk issues and corporate reporting (or non-reporting) on the issue will be very evident in this year’s [shareowner] proxy campaigns.

Then there is Say-on-Pay – the submission of executive compensation plans by the corporate board to shareowners for an advisory (non-binding) vote – a growing number of companies are now agreeing to do this and shareowners are demanding that more companies in portfolio consider adoption of this practice.

There has been a steady linkage of unacceptable behaviors (as seen by some shareowners and advocates) with actions on executive compensation, bringing traditional corporate governance issues (such as compensation) into intersections with civil and social issues of concern.  The financial performance of the issuer is [of course] of paramount importance, yes…but.  The “but” is that for a growing number of asset owners and managers, the policies, practices, behaviors and Key Performance Indicators (KPIs) on ESG issues (environmental, social and governance) is also very important, and for some owners, is a determinant of investment decision-making.  The issues involved get debated at proxy time.

And the primary arena in which contests of will between owner and board, owner and corporate management on ESG issues gets public attention is the annual proxy season.

Accountability Central editors present the news, commentary and research (publicly-issued) surrounding many of these contests in the proxy arena here for your information.  We’ve archived the 2008 and 2009 proxy seasons for your retrieval.  All years are searchable in A-C.  We invite your comments in the A-C – share your views with others interested in the corporate proxy season and the issues in the headlines.

The Editors



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