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Director Questions for the 2011 Proxy Season

Director Questions for the 2011 Proxy Season. What Boards Should Ask Themselves and Management. Largest Shareholders. Who owns 3% or more of our stock? Which shareholders are likely to work together to form a group owning 3% or more?

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Director Questions for the 2011 Proxy Season

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  1. Director Questions for the 2011 Proxy Season What Boards Should Ask Themselves and Management

  2. Largest Shareholders • Who owns 3% or more of our stock? • Which shareholders are likely to work together to form a group owning 3% or more? • Who are the 25 largest shareholders and their respective and total ownership percentages? • Who are our investment decision contacts at those 25? Our voting decision contacts? • What are Their Hot Buttons, Who are their Proxy Advisors and Where do we stand?

  3. Level of Engagement with Shareholders • Does our situation warrant the CEO’s sending out a separate report each year? • Does our situation warrant a multi-disciplinary, inside-outside team working on a year-round basis? • Does our situation warrant annual (or less frequent) third party perception studies?

  4. Level of Engagement with Shareholders • Does our situation warrant shareholder surveys by management? • Does our situation warrant an increase in non-deal road shows? • Does our situation warrant paying incentive compensation to the IR team based on the type and nature of the stockholders who remain with, or newly invest in, the company?

  5. Level of Engagement with Shareholders • Does our situation warrant a separate report to the shareholders from the Board? • Does our situation warrant the year ‘round use of “ambassador directors” with management for 1-on-1 meetings with key shareholders? • Does our situation warrant the establishment of an Investor Relations Committee of the Board?

  6. CEO Compensation • Does it change direction (not necessarily in direct proportion) with TSR? • Can it be easily explained in chart format? • Should Say on Pay be done annually? • Closer touch with shareholders? • More “routine” than making it a “big event” every two or three years?

  7. Transforming the Proxy Statement • Does it comply with SEC requirements? • Does it neatly present the data used by third party proxy advisors? • Is it user friendly for shareholders? • Board cover letter? • CEO cover letter? • Executive summary of key information? • Are there highlights, call outs and summaries for each large section? • Is it multi-colored and in plain English? • Are key points demonstrated with charts and graphs? • Are we handing out free gifts to increase shareholder participation?

  8. Board Composition • Board and Committee Leadership strong? • Are any directors not contributing? • Are any directors vulnerable? • Do we have tough-minded directors who will sustain that toughness of integrity in the face of recurring threats from special interest shareholders? • Does the board have high levels of mutual respect and confidence among all members sufficient to work and stand together in difficult situations?

  9. Contested Elections • In our case, should we keep our staggered board? • Would it be better to run a full board nominee slate against the single or 25% shareholder nominees rather than running one or two board nominees against one or two shareholder nominees? • In our case, should we reduce the ownership percentage requirements and increase the number of nominees that shareholders may present?

  10. Nomination & Voting Process • Do we have appropriate nominee notice, conflict of interest, confidentiality, disclosure, qualification and other relevant provisions in governing documents? • Do we have well-structured, comprehensive, understandable nomination and voting procedures to assure fair participation by all shareholders? • Do our corporate governance and committee charters contain appropriate vetting requirements for board and shareholder nominees for directors?

  11. Nomination & Voting Process • What is our Schedule 14N “window period” for 2011 (between 150 days and 120 before the anniversary of the date we mailed the proxy statement last year)? • Do we have procedures in place so that management is monitoring EDGAR for Schedule 14N filings and the board is notified immediately upon such filing having occurred? • Do we have procedures in place to respond?

  12. Ready for Shareholder Proposals? • Majority Voting? • Easier shareholder director nominee requirements? • Right of 10% shareholders to call meeting? • Right of voting by majority written consent rather than requiring a meeting? • Stock ownership and extended retention? • Diversity? Other?

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