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proxy season
Proxy News
Proxy Season News Roundup: Week #1
Publication Date: January 13, 2017

Is your company ready for the 2017 proxy season? Each week we help you prepare by rounding up recent news articles of interest.

Nasdaq Talks to…Don Kalfen of Meridian about Preparing for CEO Pay Ratio Disclosure
Publication Date: January 11, 2017

Should public companies still plan on implementing the CEO Pay Ratio rule given that President-elect Trump has promised to repeal or reform Dodd-Frank? Nasdaq sat down with Don Kalfen of Meridian Compensation Partners to find out. Don leads Meridian’s Technical Team and has more than 20 years of consulting experience in executive and director compensation and related issues.

The Pay Ratio disclosure rules—drafted by the SEC and mandated under Dodd-Frank—become effective in 2017 and, for calendar year companies, apply to their first annual report, annual proxy or information statement filed in 2018 . Don’s interview with Nasdaq resulted in a robust nuts and bolts guide to the CEO Pay Ratio rule, including an overview of the rule, who must follow it, and how to calculate the required pay ratios, as well as his views on its (lack of) merit.

During our conversation, we asked Don to share his thoughts on whether the incoming Trump administration will repeal the CEO pay ratio rule:

President-elect Trump’s specific view on the CEO pay ratio are not known. However, Mr. Trump’s view on Dodd-Frank are clear: The President-elect will seek the repeal or sweeping reformation of Dodd-Frank. This could result in the repeal of the CEO pay ratio along with the other Dodd-Frank disclosure mandates. Further, over the past several years, Congressional Republicans have routinely introduced bills to repeal the CEO pay ratio. Despite these hopeful signs, at this point it would be premature to write off the Pay Ratio rule. It may be well into the summer of 2017 before the fate of Dodd-Frank and its various disclosure mandates start to become clear. Until then, we are advising companies to operate under the assumption that the Pay Ratio will go into effect in 2017, with initial public disclosure in 2018.

Don also shared his advice and planning steps for companies to begin preparing for the rule in advance of the 2018 proxy season:

Until the fourth quarter of 2017, for a calendar year company it is too early to determine a CEO pay ratio that complies with the Dodd-Frank requirements and the SEC rule on the pay ratio disclosure. A calendar year company is required to determine the covered employee population from which to derive the pay ratio as of a company-selected date occurring in its fourth quarter. Only after this determination has been made may a company calculate a compliant CEO pay ratio.

However, we suggest companies undertake the following planning steps during the current calendar year, and into the start of 2017 to get ahead of the curve:

Identify covered entities (and covered jurisdictions) and means of data collection. A company should identify each covered entity (i.e., every consolidated entity for financial statement purposes), the jurisdiction(s) of the entity and the means of collecting applicable employee pay data from each entity. This, importantly, includes how the company will collect data (e.g., via the company’s country specific HRIS system, by hand input on paper documents, etc.), and determine currency conversions.

Determine employee exclusions. Once covered entities are identified and how pay data will be collected, a company should determine if any employees from covered entities may be excluded from the covered employee population (e.g., 5% exclusion of non-U.S. employees, countries where data privacy laws raise issues, independent contractors, etc.). In this regard, a company should consider retention of legal counsel to determine the extent to which non-U.S. employees may be excluded by reason of data privacy laws.

Determine covered employee population. Next a company should determine whether the median employee should be identified from the entire covered employee population or a subset of the employee population based on statistical sampling techniques. A company may need to retain a statistician to determine the appropriate sampling techniques.

Agree upon pay definition for determining median employee. A company should then determine how pay will be defined for purposes of identifying the median employee and to what extent pay may be annualized for certain categories of covered employees. Note, the pay definition for this purpose could be W-2 reported pay, base salary, or other consistently applied measure.

Conduct a simplified calculation based on U.S. employees only. A company should determine sample CEO pay ratio based solely on its U.S. employee population or a subset of this population. This will help a company further refine its processes for developing its CEO pay ratio disclosure and help to surface issues for resolution. Finally, this may provide some indication as to what will be the disclosed CEO pay ratio, and create a more informed expectation on how a company may need to develop disclosures regarding the pay ratio.

To read our full interview with Don Kalfen, click here.

With over sixty associates in ten offices in the U.S. and Canada, Meridian Compensation Partners provides executive compensation consulting and corporate governance services to over 500 major publicly traded and privately held corporations. Their core services include board level advisory services, compensation program design, research and competitive market intelligence on executive pay, and corporate governance matters.

Top Cybersecurity Concerns for Every Board of Directors: People
Publication Date: January 4, 2017

This is the second of a four-part series of white papers authored by Cybersecurity expert John Reed Stark. This series -- published for the first time on Nasdaq’s Governance Clearinghouse --outlines a strategic framework for boards of directors to effectively analyze and supervise corporate cybersecurity risks.

Companies can invest heavily in top-of-the-line security software and state-of the-art systems, but without the proper approach toward their IT employees, those efforts will be for naught. This article focuses on a board’s cybersecurity oversight pertaining to a company’s most important cybersecurity resource (and threat): its employees.

Given the tumultuous risk associated with cyber-attacks, boards of directors and C-suite executives must address cybersecurity not as an IT issue, but rather as an issue of governance. Boards and C-suite executives should establish a cross-organizational team that regularly convenes to discuss, coordinate and communicate cybersecurity issues and is supported by outside cybersecurity response firms and law enforcement agencies.

This paper provides an overview of cybersecurity governance areas that involve people, including:
  • Cybersecurity recruitment and retention
  • Top-down commitment to cybersecurity
  • Employee cybersecurity training programs
  • Digital forensics/data breach response firms
  • Law firms specializing in data breach response
  • Pre-breach law enforcement liaisons
The first paper in this series provided an overview of the critical components related to the governance practices, policies and procedures of a strong cybersecurity program. The remaining papers in this series will broadly cover the following topics:
  • Technology: the technical systems that provide the foundation for cybersecurity infrastructure.
  • Data Mapping and Encryption: the board’s oversight responsibilities with respect to two of the largest enterprise undertakings in the field of cybersecurity: encryption and data mapping.
By using these white papers as a guide, boards of directors can become not only more preemptive in evaluating cybersecurity risk exposure but they can also successfully elevate cybersecurity from an ancillary IT concern to a core enterprise-wide risk management item. 

Read John Reed Stark’s White Paper on Top Cyber Security Concerns for Every Board of Directors: People >>

Read John Reed Stark’s White Paper on Cybersecurity Governance >>

John Reed Stark is President of John Reed Stark Consulting LLC, a data breach response and digital compliance firm. Formerly, Mr. Stark served for almost 20 years in the Enforcement Division of the U.S. Securities and Exchange Commission, the last 11 of which as Chief of its Office of Internet Enforcement. He also worked for 15 years as an Adjunct Professor of Law at the Georgetown University Law Center, where he taught several courses on the juxtaposition of law, technology and crime, and for five years as managing director of a global data breach response firm, including three years heading its Washington, D.C. office. Mr. Stark is the author of, "The Cybersecurity Due Diligence Handbook," available as an eBook on Amazon, iBooks and other booksellers.

top 10
Governance Clearinghouse: 2016's 10 Most Popular Articles
Publication Date: December 27, 2016

Here are 2016's most popular articles. They covered a range of topics such as board diversity, excellence in governance, cybersecurity, proxy statement innovations, and more, and remain as relevant now as when we published them.

1. Looking Beyond the Numbers: Women on Public Company Boards.  Nasdaq took a close-up look at the women who are changing both the gender parity equation and the boardroom dynamics of publicly listed companies.

2. U.S. Chamber of Commerce Releases Plan for Next Administration. Learn more about the U.S. Chamber’s recommendations to remediate regulations and market inefficiencies that it believes are stifling economic growth and job creation.

3. Nasdaq Listed Companies Recognized for Excellence in Governance.  See which Nasdaq issuers were recognized at the 2016 Corporate Secretary's Corporate Governance Awards for exhibiting best practices in governance, risk, and compliance.

4. Eliminating the Diversity See-Say Problem: Lessons from the Clinton Campaign.  Nasdaq spoke with the Clinton campaign’s Chief Diversity Officer to see what public companies could learn about advancing diversity in the workplace and the workforce.

5. Nasdaq Talks to . . . Andrea Hoffman about Competing for the Talent Companies Need to Grow and Innovate.  Nasdaq spoke with Andrea about tapping the diverse elite talent pool, truly diversifying corporate boards, and digitizing the diversity innovation business model.

6. Nasdaq Talks to . . . Eric Thornburg, CEO of Connecticut Water Service, about the Role Board Diversity Plays in Strengthening Corporate Governance and Improving Company Performance. Eric shared his thoughts on how a diverse culture contributes to the overall success of the organization and how gender parity has strengthened corporate governance and improved company performance.

7. What Makes a Great Board? Find Out from Veteran Director Betsy Atkins.  Betsy Atkins, a scholar of board behavior, veteran of 23 boards and 13 IPOs, shared her views on best practices for building an effective board.

8. Top Cybersecurity Concerns for Every Board of Directors: Cybersecurity Governance.  Cybersecurity expert John Reed Stark outlined a strategic framework for boards to effectively analyze and supervise corporate cybersecurity risks.

9. Taking Stock of Diversity.  Nasdaq EVP and General Counsel, Ed Knight, delivered this speech talking about why he believes the boards of public companies should be as diverse as their investors and customers.

10. Taking Your Proxy Statement from Good to Great.  Read this Outside Insight post to learn about all the latest trends and innovations that will inspire you as you prepare for the upcoming proxy season.

product spotlight
MeetX and Directors Desk: Tools to Help Strengthen Governance, Increase Engagement and Provide Greater Insight to your Board and Leadership Team
Publication Date: December 16, 2016

Nasdaq Corporate Solutions’ MeetX and Directors Desk are designed to provide paperless collaboration for Board of Directors and Leadership teams. Matt Healy, Head of Board and Leadership at Nasdaq, described these products and how they can help companies and their boards.

Q: What are MeetX and Directors Desk and how will using these tools benefit my company?

A: MeetX and Directors Desk are online solutions designed specifically for the purpose of improving communication between a company and its Board of Directors and leadership teams. With MeetX or Directors Desk, you have access to the agenda, attendees, logistics, and support materials right at your fingertips. You can share, review, and provide feedback all in a highly secure environment.

As the economic and regulatory landscape changes, and technology continues to evolve, many boards have adopted board portals such as Directors Desk and MeetX. At many large companies, the features of a board portal can also be beneficial to the executive leadership teams. In a mobile enterprise, leadership teams are often dispersed and they have communication needs that go beyond email and paper. They need a secure environment where they can share documents confidentially, and they also need tools to conduct secure meetings and a way to drive initiatives and make decisions when they are on the go. As a result, CIOs at these companies are seeking a common platform for both the board and leadership processes. These board portals give directors greater visibility, streamline the board book creation process, and tighten information security. They can also help your leadership teams access the most relevant materials and information in one location.

Q: What should a company look for when evaluating board and leadership technology?

A: When evaluating new board and leadership technology, we believe companies should look for a solution that, at a minimum, provides the following five key features:
  • Evolve from paper. Though paper may be cumbersome, expensive and slow, it has the advantage of giving board and leadership teams control over who sees what and when they see it. When you replace this process with a board portal, the technology needs to have the equivalent ability to differentiate access between various users (this is called “content segregation”).
  • Two-way communication. For years, the board portal was a one-way communication tool used between the general counsel and the directors. Now portals are shifting to two-way interactive capabilities that can improve decision making by providing greater efficiency and allowing directors to focus on the substantive issues rather than minutiae.
  • Online-offline syncing. Board portal technology uses an electronic “briefcase” (an encrypted folder designed for storing sensitive documents and personal notes) to give directors mobile access to materials even when they’re offline. Information in the briefcase is automatically synced when Wi-Fi is restored. It lets the general counsel push new materials directly to the directors’ devices (usually an iPad) to ensure that they have the latest information.
  • Protection against discoverability. Making the board book accessible on a director’s iPad creates potential legal exposure if the director forgets to purge the information at the end of the quarter. To eliminate this risk, the board portal system must have centralized control so that downloaded content and directors’ notes can be purged remotely by the person assigned this role.
  • Engaging visuals. When you change a long-standing process, you have to offer an incentive. The board portal user experience needs to be more intuitive and engaging for directors than the paper board book, taking maximum advantage of the rich graphics and animation capability of the iPad.
Our tools Directors Desk and MeetX have these features and more, including but not limited to automating the board meeting process, going beyond boardbook access, making online-to-offline transparent and cutting cost, time and paper.

Q: Why did Nasdaq enter the Board portal space?

A: Initially, our very own Board of Directors at Nasdaq were users of the Directors Desk portal. Imminently, we realized the importance, efficiency and options that board portals presented to our listed companies. In 2007 we acquired Directors Desk, officially entering Nasdaq into the board portal market. With the ongoing success of Directors Desk the opportunity to quickly scale our business presented itself, and so earlier this year Nasdaq purchased Boardvantage, more than doubling the size of our Board and Leadership offering. As Adena Friedman, Nasdaq’s President and soon-to-be Chief Executive Officer recently stated, “We have to follow our strategy, our strategy is to continue to broaden out and expand the services we offer to the businesses we’ve created.”

Q: How can I find out more?

A: To learn more information regarding our Board and Leadership products, please contact us. To learn more about MeetX, please contact us here. To learn more about Directors Desk, please feel free to visit our website.

outside insight
Taking Your Proxy Statement from Good to Great
Publication Date: December 8, 2016 

This article was written by Ron Schneider, Director of Corporate Governance Services with Donnelley Financial Solutions.

Companies are constantly innovating and pushing the boundaries of traditional proxy statement disclosure, inspiring others about what can be accomplished. Proxy innovations should align with a company’s corporate culture and support business, corporate governance, and proxy solicitation goals. Donnelley Financial recently published its 2016 Guide to Effective Proxies that is intended as a tool to help inspire and guide companies in improving the visual appeal and clarity of their proxies, as well as develop a style and format that is right for their organization.

There is no one perfect proxy or CD&A that all other companies should emulate; rather, there are many excellent proxies that work well for their companies at particular points in time. Even these successful proxies must evolve, as performance changes from year to year, areas of investor focus shift, and the key messages companies wish to highlight change.

The best place to start when refreshing the proxy is ensuring you know your audience.

Understand that different investor types read and “use” proxies differently.

For retail (i.e., individual) or employee investors – it’s a reading document. The printed and mailed proxy is the most effective and proven way to maximize retail voting participation. For employee shareholders, electronic reminder notices and follow up campaigns can be effective in generating voter turnout.

For most institutional investors – it’s a reference document. The larger institutional investors that have dedicated corporate governance, engagement and voting teams report that they use proxy advisors as screening tools, along with their own internal policies and review. These institutional investors then use proxies as reference documents. If your company is flagged by a proxy advisor or investor on an issue, that investor will likely do a deeper dive into your proxy before voting to see what you are saying about the issue. Here, navigation is critical as the investor will want to find the section or topic quickly. In this case, what’s written needs to be clear and compelling if it is to help that investor “get to ‘yes’” and support you.

Many of the larger institutional investors access online versions of the proxy – but where? Our research shows that ISS’s voting site is the top destination of major investors, and this may well continue with ISS’s recent purchase of iiWisdom, a creator of enhanced online proxies. In advising clients, we first focus on the filed and printed version of the proxy. We then ask: What else do you want to do with the enhanced online proxy, whether through a company-branded hosting site, additional color (which doesn’t cost more in a digital environment), enhanced navigation, links to videos and other interactive features?

Know the top areas of investor focus.

Through our primary research with institutional investors about their use of proxy statements, Donnelley has confirmed that the top areas of institutional investor focus are:

  1. Boards – Their independence, skills and qualifications, diversity, tenure and refreshment.
  2. Performance metrics – How do pay plans work, and does “pay support strategy”?
  3. Pay for Performance Alignment – Do you connect how you pay executives with how they and the company have performed or do you let proxy advisors and others tell this story for you? Perceived Pay for Performance disconnects are a primary driver of negative Say on Pay votes.
  4. Peer Companies – How are peers used and selected? What is the rationale for changes from year to year? Are the majority of peers size-appropriate for your company?
  5. Engagement – If you conduct regular engagement with investors, are you taking sufficient credit for this practice? You want to make sure others you haven’t or can’t engage with are aware of your efforts.

Engage with investors to develop relationships and understand informational needs.

Engagement in this context is defined as company (management, board or both) interaction with the governance teams and proxy voters at institutional investors, especially outside of proxy season when you are “chasing the vote.” These conversations typically involve relationship building, learning about investor views, hot-button issues and informational needs, as well as clarifying important aspects of the company’s story.

This engagement over governance and compensation issues typically supplements the traditional IR dialogue about company strategy, performance and outlook.

Many of our clients report that such outside-of-proxy-season (or post-meeting) engagement has been instrumental in helping them better understand how investor informational needs are not bounded by SEC disclosure requirements. It also helps them sharpen and target their messaging accordingly, helping investors better understand their companies and why they make the decisions that they do. Clearer proxy messaging helps secure investor support and also can mitigate the impact of inevitable negative proxy advisor recommendations.

Understand the relationship between content, navigation, design and context.

Content is key, as your content reflects the reality of your company, your practices and how you tell your story. Design can help make content more visible and impactful, but you can’t design your way out of a weak story. Efforts to do so likely will be seen through, which can damage your credibility and reputation.

Ease of navigation is critical, particularly for institutional investors and others using the proxy as a reference document. Not all readers gravitate to the same sections or topics for all companies they own. If you are satisfied that your content adequately and effectively tells your story, why not make it easily located and accessible? In other words, why risk key content being missed and overlooked? Navigational tools include detailed Tables of Contents, CD&A roadmaps, clear section headings and sub-headings, and page headers and footers. Online proxies should feature hyperlinked tables of contents, drop-down menus, key word search functions and other features that promote rapid and easy navigation.

Design should support the messages, and can include company-specific branding (such as branded document covers, enhanced navigation systems, page footers and web-hosting sites), as well as visual elements that by definition draw the reader’s eye and make key points quickly and impactfully.

  • When you are discussing performance achievements, why not use graphics?
  • When discussing peer companies or performance metrics, why not use a tabular format?
  • When discussing governance and compensation practices, why not use a checklist?
  • When discussing a process such as pay-setting, succession planning or investor engagement, why not use a timeline?

We’re not suggesting that every page has to feature visual elements, but increasingly, long passages of dense text risk losing readership and retention. At Donnelley Financial, we believe in “design with a purpose” as opposed to “design for design’s sake.” In other words, design can and should support and reinforce key messages and ease of location.

Context is crucial to helping investors understand and appreciate your governance and compensation programs and why they are appropriate for your company. For example, the SEC does not require companies to explain how pay supports strategy, yet that is the number one question investors have about executive compensation. Context is particularly important if you have certain practices that may not be considered standard or best practice, yet believe are appropriate for your company and thus its efforts to generate shareholder value.

Also, consider the fact that most of the proxy voters at larger institutional investors are not portfolio managers who are experts about your industry and company, but rather are governance and compensation generalists. They do wish to cast thoughtful, company-specific votes on many issues, but lack the time and resources to do in-depth research including reading the annual report, your IR website or analyst research reports. For this reason, we are seeing more companies spoon feed some business context within the proxy statement. Often this context and content are borrowed from the annual report cover letter or MD&A, or company investor relations messaging. This business content often is contained in a robust CEO or board cover letter, proxy summary or CD&A summary.

“I know my proxy is in need of a refresh, but where should I start?”

We hear this daily from clients.

Engage: First, if you haven’t yet engaged with your larger investors on corporate governance, compensation and other proxy-related issues, start developing those relationships now. During this process you may receive some valuable feedback on the quality and clarity (or lack thereof) of your current disclosures. If you are not ready for that step, review our latest survey of institutional investors about proxy statements, titled “Deconstructing Proxy Statements – What Matters to Investors.” By reading the survey data, you will get a better idea how institutional investors consume proxy statements and what can make your proxy more useful to them.

Benchmark: In addition to the governance leader companies whose proxies we may admire and even envy, take a look at the proxies produced by your peers. Your investors may own many of your peers, and they may compare the quality and clarity of their disclosures to yours. Do you appear to be making an equal effort to communicate clearly and help investors understand your company and actions?

Incremental refreshment: Remember that proxy evolution is often just that – an evolutionary process that initially takes two to three years before achieving your ultimate goal. Even then though, your philosophy should not be “set it and forget it,” since performance, investor interests and the key messages you wish to highlight may vary from year to year.

Specific areas in which we have helped clients begin a process of proxy improvement:

  • Modernize the document’s look and feel with a company-branded cover page, clearer fonts, and improved navigation via a robust table of contents and page headers and footers.
  • Add a new proxy summary at the beginning.
  • Highlight aspects of board diversity and skills via diversity graphics, and various types of skills matrices (both traditional, check-the-box matrices as well as “matrix-lite” versions that highlight board skills without naming which directors possess those skills).
  • Update and make the CD&A more visual and layered in its disclosure flow.

Start with a couple of these points one year, and then add another one or two more each subsequent year. Simply by making incremental improvements, you may be amazed at how far you will progress in just three years’ time!

Download Donnelley Financial’s 2016 Guide to Effective Proxies >>


Ron Schneider is Director of Corporate Governance Services at Donnelley Financial and can be reached at

Donnelley Financial helps thousands of companies deliver accurate and timely business communications to investors, regulators and other stakeholders on our global delivery platform. A single point of contact helps you stay on top of the dynamic regulatory landscape and create, securely store, localize, analyze and disseminate critical business content for regulatory compliance, capital markets transactions, shareholder communications and language localization.

The views and opinions expressed herein are the views and opinions of the author at the time of publication and may not be updated. They do not necessarily reflect those of Nasdaq, Inc. The content does not attempt to examine all the facts and circumstances which may be relevant to any particular situation and nothing contained herein should be construed as legal advice.

company spotlight
Nasdaq Talks to . . . Eric Thornburg, CEO of Connecticut Water Service, about the Role Board Diversity Plays in Strengthening Corporate Governance and Improving Company Performance
Publication Date: November 29, 2016

This article is the first in a series that spotlight Nasdaq-listed companies successfully tackling corporate governance challenges.

While the progress thus far towards achieving gender parity on public company boards may seem slow, we took a closer look at the data after this most recent proxy season and found shining examples of companies making significant progress towards gender parity. Connecticut Water Service, Inc. (CTWS) is one such company. With a board of directors that includes five women among its eight members, it is one of only 14 Nasdaq companies that has reached or exceeded 50-50 gender parity on its board.

Nasdaq recently spoke with Eric Thornburg, CEO of Connecticut Water Service, Inc., and asked him to share his thoughts on how a diverse culture contributes to the overall success of the organization and how gender parity has strengthened corporate governance and improved company performance.

Q: Why has your company, a public utility led by a male CEO, nonetheless, been so successful at finding and retaining qualified female directors when many companies are struggling to tap into this same talent pool?

A: It really came about by first putting forth our core values and our stewardship responsibilities as a drinking water utility. Achieving gender parity wasn’t a goal that we set out to achieve. Rather the goal was about building a culture on the board to drive the success of the organization—not just financially, but also from a customer satisfaction and employee engagement standpoint. We also wanted the culture to support our commitment to environmental sustainability.

While it was important to look for directors who had the necessary business skills, it was also important that we find the right people to help us build on that culture. And what we found, as we insisted on both, is that it led us to recruit and onboard some really outstanding directors, the majority of whom happened to be women. Our business success has been a direct result of building a team that represents and supports the culture of the company. And along the way, it allowed us to achieve gender parity.

Q: What do you think other public companies can learn from your company about building a diverse board?

A: I think companies can be more creative about how they onboard new talent, like expanding the number of directors on their board in order to bring in additional skillsets versus waiting until a director retires. This creates an opportunity for a cultural hand-off to the next generation of board members. Through attrition and retirement, board numbers naturally drop back down to an optimal size.

That strategy definitely made a difference for us. Connecticut Water had a much bigger board 10 years ago and once we had the people in place to support our business goals and culture, we gradually brought the board size back down to where we’re comfortable. This allowed us to improve our overall skill set on the board in a quicker fashion.

Q: How has gender parity in the boardroom impacted your company’s corporate governance and organizational performance?

A: It’s been transformative for us as an organization, for a number of reasons.

For almost 100 years, our company operated solely in the state of Connecticut. We developed a strategic initiative that called for our company to diversify by moving into another state. One of our board members, Heather Hunt, is one of the few individuals in the country who has actually been a public utility commissioner in two states—Connecticut and Maine.

Heather’s background and experience in Maine has aided us in making a number of significant acquisitions in Maine since 2012, which has grown our company 35 percent. She was able to knowledgably discuss the business climate in Maine, had very constructive relationships there, and was a really strong voice on the board regarding risk management. She was invaluable in those acquisitions.

And just a couple of years ago, we were the successful proposer to become the region’s water supplier to a portion of Connecticut that included the University of Connecticut. We were in competition with a number of other significant utilities. Our corporate governance chair, Mary Ann Hanley, is an attorney who has also served two governors in Connecticut. Her understanding and knowledge of state government was critical. She was my go to person. I’d ask for her advice and she’d recommend the people I needed to talk to. Mary Ann was the real force on the board that helped us successfully deliver that transaction. This agreement was a significant win for us and for our shareholders because we will be the water supplier to the University and surrounding region for 50 years to come.

We’ve also instituted an excellent enterprise risk management program in the past couple of years. This initiative was led by Lisa Thibdaue, who is chair of our audit committee. Lisa was an executive at Northeast Utilities, obviously a much larger utility, so her ability to “scale up” our approach has been very helpful.

People talk about utilities as being “a simple business”, but a water business is among the most capital and labor intensive of all businesses. We are heavily regulated from water quality to environmental and service standards. Scale is incredibly important, but we’re still a local business. During the past decade, we’ve delivered world class customer service and experienced dramatic growth while protecting our brand through very effective risk management at all levels of the company. Our board has driven that process.

Q: Is your company’s executive leadership team as gender diverse as your board? How does your company nurture and develop its pipeline of female executives?

A: Yes, our executive leadership team is diverse as well and we’re really proud of that. We have three women and three men serving as senior officers, so it goes further than just the board. We have made a conscious effort to recruit more women to serve throughout our business. It definitely helps for the young women in our organization to see that we have very prominent women on our board and as part of our senior leadership team.

Q: Has it been difficult to find qualified female executives to serve on your executive leadership team and the board?

A: I believe when companies make diversity about just achieving a certain number, they miss out on a lot of opportunities. What has made us successful is creating a business culture that engages stakeholders. And that’s led us to more women directors and officers.

We’ve done a bit of recruiting with professionals, which can be helpful. But mostly we’ve taken our time and engaged our own directors in helping us to find the right candidates. Recruitment and vetting of new directors is the responsibility of the entire board at our company, not just the responsibility of the corporate governance committee. The entire board is engaged and talks about what skillsets we’re looking for in a new director. They all have a stake in bringing on new directors who can be successful and add to the dialogue. Having directors who know and understand the culture we’re cultivating has been key to our success. We’re looking for people with different viewpoints and skillsets that also align with our common culture.

Once we identify a candidate, we go through a long assessment process. We don’t bring them on board, unless we’re convinced they are a good fit and possess the right skills. We aren’t really interested in recruiting the “intrepid CEO” type of a board candidate, that isn’t what we look for. Instead, we recruit people who embody the service ethic that we try to create here, who really know how to work well as part of a team, aren’t afraid to step up and raise issues of concern and are willing to listen to what others have to say. These traits make a difference throughout the entire organization and set the tone for leadership throughout the company, not just at the board level. I think this approach has contributed greatly to our success.

Q: It sounds as though Connecticut Water has made diversity and an inclusive corporate culture part of its brand.

A: Absolutely. For the long term success of a utility, or any public company for that matter, you really do have to take care of and serve customers, shareholders and employees. A tangible example of how we do that can be found in our executive compensation program. Naturally, it is heavily weighted in total shareholder value and earnings per share, but through the leadership of our Lead Independent Director, Carol Wallace, we have included a component for customer satisfaction, measured by a third party. We also have a component for employee engagement and satisfaction. While it is definitely not typical for utilities to have an employee satisfaction number as part of executive compensation, it works and I believe in it.

On the board level, we try to be efficient and a good steward of our board members’ time. Carol ensures every voice is heard. I can say without hesitation that no one fears being that one voice at the boardroom table asking for more information or expressing concerns about an issue. And as CEO, I recognize that’s in service to me as well. These are tough times and challenging responsibilities we face. I’m not afraid to step back and take a little more time to consider a decision or think more about an issue because the board trusts me to do that. Our board has created an open, collaborative environment while taking very seriously the stewardship responsibilities that it has in delivering safe drinking water and shareholder value.

Connecticut Water Service, Inc. is a $625 million public utility company trading on Nasdaq’s Global Select Market under the ticker symbol CTWS. The company’s core business is supplying public drinking water to customers in Connecticut and Maine. The company also operates water and wastewater facilities on a contractual basis, offers customer service line protection programs, and provides bulk deliveries of emergency drinking water.


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In the News
It’s Time for Companies to Improve Board Diversity Disclosure
Publication Date: January 12, 2017

In this post on the National Association of Corporate Directors’ Board Leader’s Blog, Nasdaq highlights its research, which indicates that many companies have a compelling story to tell about their board composition and diversity of age, gender, race, and skill sets. As companies prepare for the upcoming proxy season, Nasdaq encourages them to consider some simple disclosure enhancements that will increase the transparency around their diversity, including disclosing not only a board member’s gender and age, but also their ethnicity, skills, and experience.


Three Ways Shareholder Engagement Has Evolved in 2016
Publication Date: January 6, 2017

Boardroom Resources examines three trends in shareholder engagement from 2016. First, while there may previously have been resistance, institutional investors now expect direct engagement with board members. Second, institutional investors agree that companies should focus on long-term value creation. And, third, during 2016 best practices for engagement between shareholders and boards have emerged.

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Nasdaq Issuer Advocacy in 2017
Publication Date: December 30, 2016

Nasdaq's EVP of Listing Services Nelson Griggs reflected on Nasdaq's advocacy efforts and highlights areas where Nasdaq will engage with the new administration in 2017. In this post, Griggs notes Nasdaq's involvement in issues including the disclosure of short positions, proxy advisory reform, and the shareholder proposal processes, in addition to identifying other areas which can be improved for public companies.

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EY Center for Board Matters: Top Board Priorities for 2017
Publication Date: December 21, 2016

The EY Center for Board Matters expects Boards to increase focus on six priorities in 2017. These priorities include, among others: overseeing competitive strategy in a world of disruption and convergence; navigating the dynamic geopolitical and regulatory environment; optimizing long-term capital allocation strategies; and strengthening board composition through strategic alignment.

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Center for Audit Quality Publishes Tool to Assess Implementation of New Revenue Recognition Standard
Publication Date: December 20, 2016

The Center for Audit Quality has released Preparing for the New Revenue Recognition Standard: A Tool for Audit Committees. This publication is designed to help audit committees assess a company’s implementation of the new revenue recognition standard taking effect for many public companies on January 1, 2018. The tool explores the core principles of the standard and assists audit committees in determining the status of implementation plans as well as assessing the impact of the new standard on the organization. The report also identifies other considerations, such as transition decisions and new disclosure requirements.

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Preparing for the 2017 Annual Meeting and Reporting Season
Publication Date: December 16, 2016

To assist companies as they begin to prepare for their 2017 annual meeting and financial reporting season, Skadden has released its annual list highlighting essential matters to consider. Skadden’s list encourages companies to focus on corporate governance, executive compensation, and disclosure matters, and advises companies to access proxy advisory guidelines and consider shareholder approval trends. Skadden also reminds companies that most will need to include their second vote on the frequency of the say-on-pay vote in their 2017 proxy.

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Considering a virtual-only annual meeting?
Publication Date: December 12, 2016

A virtual-only annual meeting is held exclusively online, without a physical meeting location. This is permissible for a Nasdaq-listed company, provided it that it is allowed under the respective governing state law and shareholders have the opportunity to ask questions of management. In a recent client alert, Gibson, Dunn & Crutcher explores the increasing popularity of virtual-only meetings and reviews their benefits and challenges. The client alert also highlights the views of some investors and the proxy advisory services towards virtual-only annual meetings, and identifies certain issues for the company to consider.


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