(More) Proxy Disclosure Guidance

By Randi Morrison posted 06-06-2017 05:14 PM

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Further to last week's Rants to Riches post: Proxy Disclosure Reform: Here's How, this most recent post on proxy disclosure from Gunster Securities and Corporate Governance Practice Group Co-Chair and Society member Bob Lamm is worth sharing and - for most of you - tucking away (just briefly) in your 2018 proxy statement working file until you have time to recover from your 2017 meeting.

Here is just a sampling of the sound suggestions shared in this post:

Manage your proxy statement “real estate” to maximize user-friendliness and create an optimal flow: Think about where things go. For example, if your company is owned largely by institutions (and perhaps even if it’s not), should you lead off with an endless Q&A about the annual meeting and voting, discussing such exciting topics as the difference between record and beneficial ownership and how to change your vote? Some of it is required, but consider taking out what’s not required and moving what is required to the back of the book.
Use executive summaries: Investors like them, and even the SEC has more or less endorsed their use. Think of it this way – whatever you think of ISS, it does a great job of summarizing your key disclosures, albeit not with your company’s best interests in mind. Why pass up an opportunity to convey your key disclosures with those interests in mind?
Simplify, simplify, simplify: Use plain English, infographics, tables, and bullet points to tell your story. Don’t state every single factoid that supports your board’s position. Lead off with your conclusions rather than building to them, because your readers may not get that far (especially if you’ve put them to sleep by then).
“Humanize” your board: This isn’t in most lawyers’ wheelhouses, but you need to demonstrate that your directors are the right ones for your company and are intelligent, engaged and committed. As one major investor has stated, proxy statements should demonstrate why it’s better to elect each nominee than to leave his/her seat empty at the board table. The SEC’s rules on “skill set” disclosure were supposed to do that, but anyone who’s drafted those disclosures knows that they became useless before the ink dried. Some companies have developed innovative approaches to this challenge, such as linking bios to online videos or including a personal statement for each director/nominee("...")
Explain what your committees do, rather than what they are: The SEC rules regarding key committees are antiquated and, frankly, silly; is it really necessary to say that your audit committee operates under a board-approved charter that can be found on your website? Of course, you have to disclose this, but that doesn’t mean it’s all you should disclose. Chances are your committees work very hard; why aren’t you justifying their existence by explaining what they did?

These and the balance of Bob's recommendations are certainly worth consideration.

Access numerous additional resources on our Disclosure Reform, Annual Meeting, and 2017 Proxy Season topical pages.

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