Proxy Issues 2011, As We See Them

Everybody is talking about proxy issues, for good reason.   Change abounds on multiple fronts:   legal, regulatory, procedural, technological…even philosophical, considering “corporate social responsibility” concerns.   Details are widely available, so we will not repeat them here; but, perhaps the reader would like to know how we group them, and in some cases foresee their future:

1)  Dodd-Frank Legislation

  • Say-on pay, including how often…as well as how much in a corporate action
  • Compensation proposals being non-routine
  • Compensation committee members, and consultants, being independent
  • Allowing claw-backs on unjustified bonuses
  • Whistleblower protection and rewards
  • Conflict minerals and resource extraction disclosure
  • Proxy access…when and if it survives legal challenge

2)  SEC Concept Release on Proxy Plumbing

  • Keeping OBO/NOBO as is, or allowing access to OBOs just for shareholder meetings
  • Distribution and tabulation processes, and associated costs
  • Over-voting, under-voting and vote confirmations
  • Advance voting instructions, like Client Directed Voting
  • Data-tagging proxy materials
  • Regulation of proxy advisory groups

3)  Changes in Proxy Solicitor Landscape and Activities

  • Alliance Advisors, EagleRock, Laurel Hill, Phoenix Advisory Partners
  • Expansion of solicitation into the larger arena of corporate governance consulting

4)  Virtual Annual Meetings

  • Are they inevitable?
  • If so, only in a “hybrid” scenario…with some form of physical presence?
  • How does one deal with challenges like presentation of a shareholder proposal?

Our general “take” on all the above is…

  • Executive compensation scrutiny and advisory  shareholder approvals are surely permanent, but the challenge of this  for corporations will be largely mitigated by repetitive annual scrutiny and approvals, in  most cases
  • Proxy access will be enabled in some fashion, but will actually occur less than five times a year
  • A way will be found in the next two years to make OBOs generally known for shareholder meetings
  • Broadridge will continue to dominate proxy distribution and tabulation, while also making process and pricing adjustments that will soften its image as a monopoly
  • Over-voting and under-voting will not be eliminated, but their extent will lessen
  • Advance voting instructions have possible unintended consequences that need official study before broad legal and regulatory mandates occur
  • Proxy advisory groups will be regulated, quite extensively
  • Proxy solicitors will continue to morph in the near and medium term
  • Virtual annual meetings are here to stay, in some form or other – and will grow in popularity

With  all that is going on in the world of proxy it behooves public companies to  network and monitor the trade press regularly.    For our part, we will keep track of important happenings and report them here.