Proxy Season 2023 – Prepare, Prepare, Prepare

This title is a common refrain for public companies, and it never loses importance.  So, we provide here a number of things we think companies should pay particular attention to in 2023.

  • Review what went well and not so well at last year’s meeting, doing whatever is necessary to preclude the latter. One example might be ensuring the final meeting script the Chair uses is free of ANY “speed bumps.”
  • Decide as soon as possible if the 2023 meeting will be a virtual shareholder meeting (VSM), an in-person one, or a combination of the two – aka hybrid meeting. There are good reasons for each approach, depending on the company’s circumstances.  And like with most things in life, the decision which way to go can often be traced back to “the money.”
  • If you think you might need a proxy solicitor this year, RETAIN ONE – EARLY! There are three reasons for this: i) the sooner you get the solicitor on board the less expensive it will likely be; ii) the solicitor will need as much time as possible to understand your situation and determine how to achieve your goal(s) – and then actually achieve them; and iii) taking away the stress of going it alone to achieve quorum or get a sufficient “for” vote on a key proposal when that appears in jeopardy is totally worth the solicitor’s likely low-five-figure fee.  Indeed, the fee is almost negligible when compared to the cost of your lawyers and/or a last-minute-retained solicitor in a “rescue” scenario.
  • Have become familiar with the beneficial retail shareholder component of your investor base, well in advance. If it is high, if a lot of those holders own through Schwab or TD Ameritrade and others who no longer vote routine proposals discretionarily, and if you do not have a solicitor on board with the skills necessary to reach such investors and get them to vote, that is now a major red flag.  Deal with it, again, as soon as possible.  And lastly, be cognizant of the extent to which many asset managers now, like Blackrock, are allowing their underlying retail investors to vote their shares directly (“pass through voting”) rather than have the fund managers do so.  This is a brand new dynamic needing scrutiny.
  • Be aware that Broadridge and your stock transfer agent might have suggestions and tools that will help you, early on, get a satisfying vote result. Explore all that, at the outset of the process.
  • Make sure you have retained the inspector of election you want well in advance, before the proxy statement is filed. Otherwise, such a person could be nabbed ahead of you by another company with exactly the same meeting date and time.
  • If you have an activist investor looking to put forward his/her own director(s), be cognizant of the now mandatory universal proxy card for your meeting.
  • Be up to date on ESG issues, and anticipate questions about them that might surface at the meeting. Of course, this includes making yourself aware (in advance) of how ESG might even impact your vote results.  For example, directors and officers who appear too much or too little influenced by, or supportive of, ESG could see effects of that in board member votes, say-on-pay and other proposals.
  • Do not fear tough questions from shareholders at the meeting; indeed, invite them! Anticipate the toughest ones, to the extent possible.  A good Chair should be prepared to smoothly field them, route them to the best responder, and thus enhance an already positive impression of the company.
  • Very simply….OVER-PLAN, and happily accept the anti-climax experienced after a ho-hum meeting.

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