All's (Not) Quiet on the Governance Front
IRC Domain 7: Strategic Counsel and Collaboration and Domain 10: Corporate Governance
Summary by Michael Ferreter
Panelists:
Shep Dunlap, Vice President, Investor Relations, Mondelez International
Christina Maguire, Managing Director, Proxy Voting and Governance Research, BNY Mellon
Kern McPherson, Senior Director, North American Research, Glass Lewis
Moderator: Jane McCahon, Senior Vice President - Corporate Relations and Corporate Secretary, Telephone & Data Systems
Key Takeaways:
- Outreach to passive and governance-oriented investors is a relatively new activity for IROs that requires a different approach and a different team than traditional investor outreach.
- Build your relationships before you need them, and before proxy season begins. Internally, identify and engage partners from legal, the board and other areas of your company. At the target firm, use your primary contact (analyst or portfolio manager) as an ally and include them in the dialogue with the corporate governance contact.
- Get out in front of your company’s soft spots. Be prepared to discuss board composition, executive compensation or environmental/social issues. Know what’s misunderstood about your story.
Summary:
Jane McCahon introduced the panel by noting that passive investors believe they can influence long-term performance through better corporate governance. It’s important to understand their perspectives because these investors will own your stock essentially in perpetuity.
Kern McPherson said your emphasis should be on stewardship when designing a plan to seek engagement with passive investors. Because governance conversations have different participants and outcomes, IROs should to target the dialogue to the key people involved. Is your investor focused on compensation, ESG or board composition? Know the key issues and build your plan from there.
Shep Dunlap discussed the various participants in an effective communication plan: the general counsel, corporate secretary, compensation committee chair, proxy solicitor and key board members, in addition to the IRO. This team needs to be a partnership, with people who will speak up and challenge ideas. Check to see if there is any disconnect within this team.
Christina Maguire described her firm’s preferences and approach when engaging with companies. She recommends having a six- to eight-page slide deck focused on governance, using data primarily from the executive summary in the proxy statement. Maguire added that BNY Mellon wants to understand how board members will help propel the organization strategically into the future. “We want individuals with futuristic knowledge,” she said.
Finally, when engaging, know what you want your audience to remember. What’s the key message? Simplicity and clarity of messages are important, the panelists said, as with any traditional investor meeting. The deck is a pre-read or leave-behind – don’t feel compelled to discuss every slide.