Posts Tagged ‘Proxy’

Gift bags and a chat with shareholders

December 13, 2016

Gift bag. Isolated

A nice feature on the Estée Lauder annual meeting ritual – a gathering of mostly older ladies dressed to a T, gathering for a continental breakfast “beautifully displayed,” a gift bag of cosmetics, and genteel conversation – lightens up p.1 of The Wall Street Journal today.

It is a nostalgic image, of a time when shareholders formed bonds of loyalty and companies cultivated that. As today’s headline says, “Estée Lauder’s Annual Meeting Is a Pampered Affair.” The shareholders’ questions, of course, dealt with issues of makeup.

I’m a fan of annual meetings and have attended many. A few, mostly consumer companies, offered product samples or showed off their wares. Some had the atmosphere of a reunion, including firms with many retiree-shareholders, where the focus was more internal than external. Some have been family affairs, revealing sons and daughters of the founder as mid-level executives (that tells you something). An occasional meeting has brought confrontation between activists and a CEO. Some at company locations have included tours. Coffee, or even breakfast, is a nice touch.

To me, the more personal events are nice. I can’t argue that these affairs pay for themselves, but they make a kind of statement, “We care about you, our shareholders, our owners. We report to you.”

Of course, the investor relations team is likely to provide planning and logistical help for the annual meeting. This brings me to my point: Whether large or small, all-business or old-home-days, an annual meeting is about reporting to shareholders, answering their questions and receiving any input. It is like a one-on-one with the big institution, but democratized.

I think it’s too bad when companies, noting that only a handful of investors will attend, reduce the annual meeting to a reading of the lawyers’ script, going through the motions of voting on board seats and executive pay, and then adjourning after 10 minutes. They say it’s because no one attends but, then, why would anyone? It’s a vicious circle – and becomes a pointless date on the corporate calendar.

In my experience, annual meetings also can bring out the deepest concerns of shareholders. “Are you planning to cut the dividend?” was the first question at one I attended. “What’s your plan to turn around declining sales?” “Is the strategy failing?” “Will this acquisition destroy value?” Real questions. Investor relations in the relationship sense.

So I say, bring on the gift bags, a video of the new plant – but, above all, an explanation of the strategy for next year and how we are going to build the value of the business for the future. What do you think?

© 2016 Johnson Strategic Communications Inc.

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Having your say on pay

May 19, 2011

As the new reality of “say on pay” votes by shareholders settles in, a guiding strategy for companies should be to have your own say. Investor relations professionals (and senior execs) need to learn how to communicate more clearly and proactively on pay and governance.

By last week, 20 U.S. companies had lost (failed to get 50% support in) say on pay votes so far in 2011, according to a posting today on the CFA Institute blog by Matt Orsagh. He notes that say on pay votes are essentially a communication tool:

The institutional investors we talk to — and it is institutional voters who cast the vast majority of these votes — tell us that they have no interest in setting pay, that compensation committees should do that.  What they do want is to be listened to when they feel there is a disconnect between pay and performance, and to have constructive conversations with companies about how to set things right.

But why wait until shareholders slap you in the face over a disconnect? The “Across the Board” column in the NYSE Magazine second-quarter edition suggests three areas of pre-emptive action on executive compensation issues:

  • Publish readable proxies. “Too often proxy statements are viewed as – and written like – legal documents,” NYSE quotes Ken Bertsch, president of the Society of Corporate Secretaries and Governance Professionals. “… too many companies still try to cram too much information into too few pages with very little explanation about compensation policies and how they were developed.” Bertsch cites the CD&A in General Electric’s proxy as a model of clarity.
  • Launch a campaign. More companies are taking their governance and executive compensation stories on the road – meeting with big investors or holding conference calls on pay issues. Stephen Brown, TIAA-CREF’s governance guru, says companies like Avon Products are sending senior governance officers or independent board members to these meetings. (TIAA-CREF has published extensive policies and advice to companies here.)
  • Welcome shareholder views. Communication is, after all, two-way. Patrick McGurn of Institutional Shareholder Services cites the example of Pfizer inviting portfolio managers in to meet with execs for open-ended discussions on governance, pay and compliance issues. PFE has a Contact Our Directors page on its website, too. McGurn also suggests a “fifth analyst call” every year – to discuss governance issues rather than quarterly numbers.

My experience has been that corporate lawyers often guide the strategy on governance issues – and micromanage tactics like the wording of proxy statements. IR professionals, whose job is to communicate, should be more involved.

What’s your thought? Any best practices or examples of how to interact with institutional investors (or retail, for that matter) on governance and pay issues?

© 2011 Johnson Strategic Communications Inc.

Annual report in two pieces

April 13, 2011

As an investor relations person, I love this time of year. I enjoy working on clients’ year-end reporting, of course – but it’s also a time when I get to experience IR from the other side, as a member of the audience.

Believe me when I say I am a small shareholder of a few companies (not of any clients, by the way – a separate issue). But when the mail brings an annual report, proxy statement and voting materials, I love it! I dive into those reports, to review companies’ performance and see what they’ve done in the way of presentation. And I vote my proxies, as a believer in letting management know where I stand.

Let me share an example: the annual report in two pieces.

One of my reports came from Shore Bancshares, Inc., a smallish bank holding company based in Maryland and listed on Nasdaq. What made it different was the two pieces: a front section with shareholder letter, financial highlights and marketing stuff like bank locations, and a black & white 10-K. (Results were uninspiring – not the point here.)

Not dramatic or unique … but offering two pieces strikes me as a good solution.

The Shore “marketing” annual report, 8 bound pages all on cover stock, has one page of financial highlights and graphs, a 2-page shareholder letter, a page of locations with maps of the market, board and officer lists and an large photo of the board arranged around antique furniture, and contact info for the banks and insurance offices. The cover says Presence. Stability. Strength. Knowledge. Well, OK.

The 10-K, of course, provides data on competitive position in each of the markets, six and a half pages on risks, revenue and expense breakouts, detail on the assets and issues in the loan portfolio, and so on. It’s red meat for the shareholders.

The marketing version is perfect for a coffee table in a bank branch, another accessory to make customers feel comfortable banking there. The 10-K is not so reassuring for the lay person but useful for investors deciding to buy, hold or sell.

Banks are classic examples of companies whose annual reports have at least two audiences: shareholders or potential investors on the one hand, and customers on the other. Bank customers may see the annual report as an assurance of security for their money, though we might hope the FDIC provides even more solid backing.

The other day I walked into my own bank, in Kansas City, and there was a stack of glossy new 2010 annual reports. I picked one up, of course. But this one, a front section and 10-K bound together, ran 160 pages – really overkill for my needs as a depositor. As a bank customer, if I see assets are substantial and the bank has earnings – and maybe a photo assures me the officers or board members are not motorcycle gang members – I’m OK with leaving my money in that bank.

An investor needs the details. So here’s an idea: If your annual report is serving two different audiences, one approach is to print it in two pieces – send both to shareholders, and give the summary version to customers, vendors and employees.

© 2011 Johnson Strategic Communications Inc.

SEC has its say on pay

January 25, 2011

The Securities and Exchange Commission adopted final rules on “Say on Pay” and other executive compensation requirements under the Dodd-Frank Act of 2010.

Starting now, most companies must get an advisory vote of shareholders on executive compensation at least every three years. And ask stockholders how often they want to offer their say on pay. And get input on “golden parachute” arrangements to take care of execs in mergers. And add disclosures, of course.

Only the smallest public companies (less than $75 million in float) get a reprieve: They won’t have to implement say on pay votes for two years, in 2013.

The SEC website provides a good summary of the provisions and a video of Chairman Schapiro’s comments today, and the text of the final rule. Look for more explanations from law firms and comments from corporate governance gurus.

More than just studying up, investor relations officers should talk through say on pay – and all issues around executive compensation – with their senior management and legal teams. This is the thrust of the National Investor Relations Institute’s counsel in a NIRI “Executive Alert” today:

Since President Obama signed Dodd-Frank into law on July 21, 2010, NIRI has reinforced its long-standing advice that members become more involved in their companies’ corporate governance process. Investor relations professionals are the primary conduit between companies and Wall Street, and are ideally suited to provide the executive team and board of directors the insight into shareholders that will be critical as these shareholders become more active and influential in corporate governance matters.

Executive pay and your company’s plans for putting these issues before shareholders will likely come up in conversations with investors, especially institutions, in the coming days. Preparing a Q&A or “talking points” would help keep management and IR on the same page with the legal beagles.

The say on pay rule isn’t surprising. In my mind, it’s not terribly helpful, either. But let’s face it: Astronomical paydays for high-visibility CEOs are tremendously unpopular. I hear gripes about fat cats’ pay from all kinds of people, including bankers, institutional investors, high net worth people and – gasp – Republicans.

The SEC rules for say on pay are a classic case of Washington’s reflex to “do something” each time the economy goes through a crisis. So … we’ll implement.

© 2011 Johnson Strategic Communications Inc.

Getting real on compensation

November 20, 2009

If you work with the proxy statement or other communications on executive pay, you should read the Nov. 9 speech by Shelley Parratt, deputy director of the SEC Division of Corporation Finance, to the 4th Annual Proxy Disclosure Conference.

Parratt calls on companies to improve the quality of their Compensation Disclosure & Analysis sections – giving clearer, more specific analysis and better explanation of performance targets. She suggests starting over with a blank page, if necessary.

Mostly, Parratt’s comments offer a philosophy for disclosure on compensation. She notes that companies tend to respond with good disclosure once the SEC reviews their proxies – but don’t pay much attention if the SEC doesn’t come calling. Going forward, tangling with the SEC on the CD&A could hurt corporate reputations:

Any company that waits until it receives staff comments to comply with the disclosure requirements should be prepared to amend its filings if we raise material comments. Now is the time to engage in a rigorous analysis to develop meaningful, coherent and comprehensive executive compensation disclosure.

While the SEC staff may appear to serve as your editor from time to time, the CD&A is your story to tell, not ours. Read our guidance. Read the publicly-available comment letters. Take a fresh look at the disclosure requirements. Pay attention to what the market is looking for. Your disclosure will be better if you do.

Concern about pay levels isn’t limited to SEC officials and politicians with a polulist bent. Even the biggest investors can get upset about compensation – as in today’s Wall Street Journal story on mutual funds that are big holders of Goldman Sachs:

Some of the largest shareholders in Goldman Sachs Group Inc. have urged the Wall Street firm to reduce the size of its bonus pool, arguing that it should pass along more of its blockbuster earnings to investors…

For a lively take on the potential for more asset managers turning activist on pay, watch the Yahoo! “Tech Ticker” commentary by Aaron Task and Henry Blodget.

Take-home message for the 2010 proxy season: Write the CD&A as if you’re sitting across the table explaining your pay policies to one of those concerned investors.

(Thanks to the panelists at the Kansas City NIRI meeting Nov. 17 for calling this SEC staffer’s speech to our attention.)