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Frequently Asked Questions
  Planning for Proxy Season: 5 Ways to Engage Investors through Voluntary Proxy Disclosure
Identification Number 1501
Planning for Proxy Season: 5 Ways to Engage Investors through Voluntary Proxy Disclosure
Publication Date: March 9, 2018

To help companies plan for the 2018 proxy season, Nasdaq's Governance Clearinghouse will post a series of articles over the coming months that highlight new developments in technology, upcoming regulatory changes, and tips for enhancing your company's proxy presentation and readability.

Proxies are increasingly recognized as investor engagement opportunities, and many public companies are taking advantage of this opportunity to evolve their proxy statement from compliance documents to communication tools. The previous post in this series outlined tips for utilizing interactive proxy platforms to improve design and readability, as well as track reader analytics. In this article, we focus on enhancing proxy content to help investors better understand why your board—and its governance and compensation programs—are right for your company.

The concept of "voluntary disclosure" may seem counterintuitive, but strict adherence to mandated disclosure requirements won't always leave investors appreciating your board's view on corporate governance and executive compensation. For example, a significant concern investors have about executive compensation is how pay supports strategy, but the SEC does not require companies to disclose this.

It's also important to remember that many proxy voters are governance and compensation generalists, versus experts in your industry. If your board has adopted a strategy or risk management protocol that falls outside of accepted best practices, institutional proxy voters may not have the time or resources to research why that tactic is the right one for your particular company.

A proactive approach to guiding the investment community's perception of your company has never been more critical, as we head into a climate of collaborative activism. After reading open letters to CEOs and directors from Blackrock and Vanguard, and reviewing Morrow Sodali's 2018 Institutional Investor Survey, we've narrowed it down to these five investor concerns for the 2018 proxy season and provide tips for highlighting your board's approach to these issues.

1.   Disclose the Company's Approach to Shareholder Engagement

Vanguard's most recent open letter to board directors states that shareholder engagement "is a process, not an event." Larry Fink announced in his 2018 letter to CEOs that Blackrock's investment stewardship model has radically shifted focus from proxy voting to engagement with companies.

Investors want evidence that companies are cultivating open-ended dialogue with them, versus communicating on a transactional basis relative to specific issues or votes. Many companies disclose their shareholder engagement activity by including charts in their proxies that outline shareholder engagement events by season. Consider going a step further by adding a table that shares feedback your company has received from its shareholders, and the actions taken by the company in response to that feedback.

2.   Outline the Board's Role in Setting Strategy

"A central reason for the rise of activism—and wasteful proxy fights—is that companies have not been explicit enough in their long-term strategies," states Larry Fink. Boards that clearly articulate their role in creating (and their understanding of) their company's strategy for long-term value creation are in a much better position to have short-term decisions supported by shareholders and the investment community.

Consider including high-level disclosure of the board's role in setting and reviewing company strategy within the proxy.

3.   Demonstrate How Pay Aligns with Strategy

Companies devote entire sections of their proxies to the compensation discussion and analysis section (CD&A), but don't always make it easy for investors to answer their questions about pay: Does compensation of top executives support the company's strategy?

Consider making the CD&A section easier to navigate through the use of a "roadmap," detailed table of contents, and/or executive summary, which will help proxy voters quickly find the answers they are looking for. The executive summary at the beginning of the section will have greater impact if it includes the "why" of compensation decisions, versus just the "what."

The pay ratio disclosure rule is a mandated disclosure, but some companies also discuss gender pay equity (due to increased shareholder focus on this issue). Others are addressing the pay for performance question by including graphs or other visual elements to illustrate the alignment between pay and performance, including performance relative to peers.

4.   Prove the Quality of Your Board

The range of complex issues that boards are increasingly called upon to navigate makes it critical to have a strong, experienced and forward-thinking team in the boardroom. Investors want to determine at a glance whether the board has the independence, skillsets, tenure, age, and diversity it needs to avoid group think and identify both opportunities for long-term growth and looming threats.

It is becoming a best practice to summarize highlights of board composition visually with skills matrices and infographics. Descriptions of leadership structure, the board refreshment process and statistics, and the director evaluation process are also key data points.

Many companies do not include metrics on racial or ethnic diversity in their proxies; however, board diversity continues to be a top concern of investors and activists, so if your company has a good diversity story to tell, don't be shy about disclosing it.

5.   Highlight How the Company Manages Sustainable Growth

Investors focus on ESG issues are not going away any time soon—93% of the institutional investors surveyed by Morrow Sodali report that "ESG integration into investment decision making is either fully integrated or progressing towards full integration." These investors want companies to provide more detail around ESG risks and opportunities, including "enhanced disclosure around materiality and sustainable metrics linked to long-term business strategy."

Each year, more companies address corporate social responsibility and sustainability in their IR websites, annual reports, and proxies; many are publishing stand-alone environmental impact or sustainability reports. Consider enhancing ESG proxy disclosure by tying sustainability and corporate social responsibility efforts to results—but balance any such disclosure against potential liability concerns.

When refreshing and enhancing your company's proxy, don't focus entirely on cosmetic enhancements at the expense of robust content. Any investment in an intuitive, interactive proxy platform is wasted if investors don't understand—or agree with—your company's governance and compensation programs.

In case you missed it!

Read Planning for Proxy Season: It's Time to Consider an Interactive Proxy >>

Publication Date*: 3/9/2018 Mailto Link Identification Number: 1501
Frequently Asked Questions
  Planning for Proxy Season: It's Time to Consider an Interactive Proxy
Identification Number 1491
Planning for Proxy Season: It's Time to Consider an Interactive Proxy
Publication Date: January 30, 2018

To help companies prepare for the 2018 proxy season, Nasdaq's Governance Clearinghouse will post a series of articles over the coming months that feature new developments in technology, upcoming regulatory changes, and tips for enhancing your company's proxy presentation and readability.

Interactive proxies range in format from static PDFs with enhanced page navigation to sophisticated, multi-media documents that enhance the reader's overall experience. While only a small percentage of Nasdaq companies had some type of an interactive proxy in 2017, including East West Bancorp, Inc. (Nasdaq: EWBC), eBay Inc. (Nasdaq: EBAY), Intel Corporation (Nasdaq: INTC), Microsoft Corporation (Nasdaq: MSFT), and Nasdaq, Inc. (Nasdaq: NDAQ), we believe more companies will consider taking this step in the upcoming proxy season. There are a number of providers that offer a range of interactive proxy design and hosting services, including EzOnlineDocuments, ISS Corporate Solutions, and Mediant, with prices ranging from $3,000 up to around $20,000 depending on the provider and services selected.

In the first post of this series, Roy Saliba, Head of Product at ISS Corporate Solutions, highlights some of the reasons your company might consider adopting an interactive format as well as the nuts and bolts of creating an interactive proxy.

The Big Four: Advantages of an Interactive Proxy

1.   Increased shareholder participation in the proxy voting process

While an interactive proxy by itself will not compel a shareholder to vote their shares, it is another step that companies can take towards getting their shareholders more interested in reviewing the information in the proxy statement.

For investors, interactive proxies effectively break up an overwhelming proxy document into a better organized website with palatable sections to help foster a better understanding of overall content and key messages. Intuitive navigation, standardized presentation of data and content, and an overall better experience in digesting complex information help to engage shareholders in the voting process.

One of the key benefits for institutional investors is the integration of the ISS Corporate Solutions interactive proxy into ISS ProxyExchange, a platform used by institutional investors when making their proxy voting decisions. In an independent survey, institutional investors responded that proxy advisors' voting platforms are the primary source used to review a company's SEC filings and proxy materials, so having links to companies' interactive proxies embedded in the voting pathway allows for greater visibility for institutional investors.

2.   Insight into how investors and shareholders digest proxy content

Interactive proxy platforms embed analytics that can be leveraged to identify the sections of the proxy that are most often viewed, offering valuable insight into the key issues that shareholders are interested in or concerned about. This data enables companies to place greater emphasis on those areas in subsequent proxies and/or leverage those topics during shareholder engagement.

The ISS Corporate Solutions (ICS) interactive proxy solution currently allows companies access to a variety of analytics including:
  • geographical location of visitors
  • new versus returning users
  • type of device used (mobile/tablet/personal computer)
  • length of time visitors accessed the site
  • the specific pages viewed
  • the number of different pages viewed

3.   Increased shareholder engagement

The ICS interactive proxies were initially designed and developed in coordination with a group of institutional investors who were looking for an easier way to review proxy statements, particularly during peak proxy season. This group wanted a standardized format of searchable content to simplify the process of finding key information (versus scrolling through cumbersome PDFs or a single webpage on the SEC site). A key initial request was to streamline the overall navigation flow of the site so that readers could easily and intuitively locate content in the same manner for a large number of portfolio companies.

Retail and institutional investors alike have expressed a preference to reading proxy statements online (versus print), yet even those proxies available online in PDF format are designed for print and have not been optimized for an online experience. An interactive proxy offers companies an opportunity to tell their story in a modern and clean way on a digital platform that has been optimized to be scalable, mobile-friendly and interactive.

An interactive proxy is a strong statement by a company that it is focused on delivering the corporate governance story in the best possible way. Many companies come to think of their enhanced proxies as important Investor Relations and Public Relations assets.

4.   Integration of corporate branding

Interactive proxies allow companies to tell their governance stories using the most sophisticated technologies available today by transforming compliance documents into engaging and well-designed digital assets. The proxy statement is a key communications tool with a captive audience, but that opportunity is squandered if the information in it cannot easily be accessed or digested.

More and more companies are discovering the value of leveraging proxies to highlight key messages of their corporate governance stories. Brands are a powerful visual element of a corporation's identity, and the ability to integrate corporate colors and logos into an interactive proxy transforms it from only a compliance document into a communications asset as well.

Nuts and Bolts: Understanding the Process for Creating an Interactive Proxy

At ISS Corporate Solutions, we typically break up the process into two phases: customizing our proxy template platform for the client and populating it with their proxy content.

During the initial phase, we build out the template for a client company and customize it to match their corporate brand and identify with colors, logos, etc. This phase of the process typically takes about a week, and runs in parallel with the client creating the content of their print proxy. The second phase of populating the customized template with the actual proxy content typically takes between three to five business days, depending on how heavily stylized the print proxy is. This phase usually starts when the finalized proxy statement is sent to the printer.

ISS Corporate Solutions' interactive proxies are hosted on a separate site, so there are no specific requirements for a company's own website. However, we strongly encourage companies to add easily identifiable links to their interactive proxies on their IR sites, as companies that promote the interactive proxy on their investor relations pages and overall corporate websites see higher web traffic and increased engagement.

As companies see an increasing number of their peers adopting interactive proxies, and they become more widely used in the institutional community, we'll see continued growth in this space.


ISS Corporate Solutions (ICS) is a wholly owned subsidiary of Institutional Shareholder Services Inc. (ISS). ISS Corporate Solutions provides expertise in executive compensation, governance ratings, capital structure, sustainability, voting trends, and corporate governance research.

Publication Date*: 1/30/2018 Mailto Link Identification Number: 1491
Frequently Asked Questions
  10 Questions Your Company's Board Should Answer in 2018
Identification Number 1486
10 Questions Your Company's Board Should Answer in 2018
Publication Date: January 16, 2018

Betsy Atkins encourages companies to kick off 2018 by proactively addressing the corporate governance hot-button issues of 2018—before their investors do.

Shareholders and institutional investors are holding companies accountable to an increasingly complex slate of stewardship principles.  How can a company prepare for the corporate governance challenges in the year ahead? We asked Betsy Atkins, veteran of 23 public company boards, how companies should begin to answer that question.  Betsy's answer: focus on the answers to these 10 questions.

1. Is our company vulnerable to an activist attack or takeover?

How do you get an impartial, inside-out view of how an activist sees your company? Engage an investment bank that your company does business with to scan for weaknesses that attract activist attention. Large investment banks have practices on activist readiness and a vested interest in ensuring your company is defended.

Read More: The Rise of the Investor-Centric Activism Defense Strategy >>

2. Is the board's committee structure optimized to leverage digital transformation?

All companies are tech companies today. Ensure your company remains contemporary and embraces digital transformation by adding a tech committee to the board. Focus this committee on the future. To ensure business model vibrancy, boards need to stay on top of tech trends and new business models, and actively consider integration of them into their companies' strategies.

If adding a tech committee to your board (as many companies are doing) isn't feasible, assign that focus to an underutilized committee. Your governance committee can review workloads across committees to determine the board's best approach for identifying and monitoring emerging opportunities and risks.

Read More from Betsy Atkins: Five Ways to Digitize Your Board >>

3. Do we have a plan to accelerate board refreshment and diversity?

Costly corporate scandals continue to be linked to passive and/or weak boards with little to no diversity, which means investors and regulators will continue to beat the board refreshment drum loudly in 2018. During the 2017 proxy season, State Street Global Advisors voted against the reelection of directors at 400 companies when those companies failed to take adequate steps to add women to their boards.

From a boardroom perspective, the definition of "diversity" has eclipsed gender to also encompass age, race, global perspective, evolving skillsets, and most importantly diversity of thought.

Companies are wise to get ahead of this issue before it becomes a proxy battle or a regulatory mandate. Investors and regulators alike are pursuing campaigns to increase transparency and accountability around diversity in the boardroom. The Boardroom Accountability Project 2.0 initiative, jointly sponsored by NYC Comptroller Stringer and New York City Pension Funds, is a perfect example.

Read More about the Boardroom Accountability Project 2.0 >>

4. Are we taking ESG issues into account?

ESG issues, historically thought of as a special interest for a minority subset of activist shareholders, are going mainstream. Advocacy for ESG agenda topics began in the EU and has now transitioned to passive investment firms here in the U.S. This is no longer a "gadfly" issue and while ESG reporting will impact some industries more than others, in 2018 companies should expect it to be a standard proxy concern for major shareholder groups.

Read More from the CFA Institute: 2017 ESG Survey Results >>

5. Are we prepared to handle a real-time crisis?

A solid crisis preparedness plan is key to mitigating the impact of internal issues or external events when (or preferably before) they escalate to crisis level, especially in the age of social media where a hiccup can become a firestorm. Yet there are numerous recent examples of companies that did not execute crisis management well, and experienced catastrophic damage to their corporate brands as a result.

Start by analyzing your company's top ten enterprise risks, and ensure there is a detailed action plan in place for each of them. It's also important to set up relationships now with reputable and experienced public relations and social media firms to handle communications in the event of a crisis.

Read More: 8 Crisis Management Mistakes to Avoid >>

6. Do we have a cyber security plan and data breach policy in place?

Adopting cyber security plans and data breach policies continues to be a top priority in 2018. Boards should confirm that corporate oversight of cyber risk and data security is robust, and includes the following:

  • regular external penetration testing as part of ERM and compliance;
  • a plan for dealing with a ransomware attack, including establishing a validated Bitcoin account;
  • anti-phishing training for employees;
  • established relationships with forensic cyber experts, law enforcement, and a third-party cyber mitigation company;
  • an annual review of cyber insurance policies; and
  • a data breach policy with crisis plan in place.

Read More from Betsy Atkins: Ransomware Defense for Boards >>

7. Do we have a robust slate of future leaders?

Given that average CEO tenure in corporate America is below five years, proactive succession planning and a deep leadership bench have never been more important. Long-term CEO succession planning and leadership development should also ensure development, retention, and replacement of senior officers within a company.

Identify future leaders early and create personalized development plans to fill out the gaps in each person on your company's leadership bench. Assess internal succession candidates via regular interaction during board meetings and strategy presentations, individual meetings between directors and potential internal candidates, and internal and external feedback from a variety of sources—including meetings with stockholders.

Read More from Forbes: Succession Planning Needs To Be Your No. 1 Priority >>

8. Are we ready for individual director scorecards?

ISS will begin rating individual board members, and while there will not be a director score, per se, the report will highlight a director's shareholder vote support and the Total Shareholder Return of the company since the director started serving on the board. This information could result in a "negative halo," impacting other boards that a director serves on in a negative way so make sure to have your Investor Relations narrative ready.

9. Have we confirmed the company's culture is free of sexually predatory practices?

2017 was a watershed year for exposing the toxicity of sexual harassment in the workplace. As 2018 begins, there is zero tolerance for toxic corporate cultures that create inhospitable working environments. Nothing less than a company's overall corporate brand is at stake. Investors want to know that companies and boards are taking a proactive approach in addressing this issue, so now is the time to reconfirm there are no sexually predatory practices rooted in your company's culture. Protect your company's brand equity by ensuring that the "tone at the top" does not tolerate sexually predatory practices or gender and racial bias, and that HR conducts proper compliance training.

Read More from NAVEX Global: High-Profile Sexual Harassment Claims Show a Toxic Culture Can be a Product Defect >>

10. Do we know how our CEO's pay compares to that of the company's median employee?

Know your pay ratios heading into proxy season! CEO pay has been reported for a long time, but beginning this year companies will need to comply with the SEC's pay ratio disclosure requirement. If the gap between your company's CEO and median employee pay is extreme, this may become a high visibility issue for investors and/or activists.

Be prepared for the difficult tasks of communicating your CEO pay ratio to both internal and external audiences as well as handling the repercussions that may result from the entire company knowing the median employee's pay.

Read More from Davis Polk: Pay Ratio Disclosure Rule: The SEC's Latest Guidance Should Ease Compliance Costs for Companies >>

Read More from Willis Towers Watson: The Do's and Don'ts of CEO Pay Ratio Communications >>


Betsy Atkins serves as President and Chief Executive Officer at Baja Corp, a venture capital firm, and is currently the Lead Director and Governance Chair at HD Supply. She is also on the board of directors of Schneider Electric, Cognizant, and a private company, Volvo Car Corporation, and served on the board of directors at The Nasdaq Stock Market LLC and as CEO and Board Chairman at Clear Standards.

Revitalize Banner
Publication Date*: 1/16/2018 Mailto Link Identification Number: 1486
Frequently Asked Questions
  Five Steps to Upgrade Your Board Evaluation By Beverly Behan, Author, "Great Companies Deserve Great Boards"
Identification Number 1471
Five Steps to Upgrade Your Board Evaluation by Beverly Behan, Author, "Great Companies Deserve Great Boards"
Publication Date: December 6, 2017

Beverly Behan has worked with more than 100 Boards of Directors on board and director evaluations over the past 20 years.

While board evaluations have been adopted by nearly every Nasdaq-listed company, the standard process has often outlived its usefulness and become a rote routine. The better the board, the more sophisticated the board evaluation should be, as it offers a unique opportunity to engage directors in a vibrant conversation about the board's strengths and elicit good ideas that might make the board even more effective going forward. However, the traditional survey format wastes that opportunity by turning the board evaluation into a perfunctory compliance exercise.

What kind of results are boards achieving when they change things up in their board evaluation? Here are some examples:
  • Three years ago, the board of a midcap REIT conducted a comprehensive board evaluation using all five steps outlined herein. They entered the process with no plans to recruit any new directors, but came away in complete agreement of the need to find three new board members to address gaps identified in the board's composition. Not only did they find them, over the next 18 months, these new directors made a tremendous and positive difference in the board's operation – and gave the board, as a whole, the confidence to make some significant changes in corporate leadership that were previously considered "off the table".
  • The board of an aerospace company had a practice of diving directly into questions the moment any management presentation began. While this was considered far preferable to "death by powerpoint", management described the practice as creating a "paintball dynamic" where questions were firing before they had even given an overview on the topic at hand. It was resulting in redundancies and inefficiencies; presenters were backtracking and dialogue was unfocused. Many board members also expressed frustration. Some wondered if the most important points had even surfaced when the dialogue had finished, as many questions went to "secondary issues". When these concerns surfaced during the board evaluation, changes were immediately agreed upon that led to a far more efficient process.

  • The board of a financial services company had been including their top management in the board evaluation for some time. When they repeated this process two years ago, the board was starting work on CEO succession planning in earnest with a two-year time horizon. In-depth questions on this topic were included in the board evaluation, which yielded extremely helpful insights for the Succession Committee. As a result, the board incorporated steps into the CEO succession process that they had not previously considered and even changed the timeline. Moreover, board members felt that this exercise provided them a far richer understanding of corporate culture issues (including cultural issues around a recent merger integration setback) that became invaluable in assessing potential CEO candidates.

What, then, are the five steps many boards have been adopting to revitalize their board evaluation and achieve the types of useful outcomes described in these examples?

Switch to a Three-Year Cycle
Companies listed on the NYSE are required to conduct an annual board evaluation. However, no such requirement applies to the boards of Nasdaq-listed companies. As such, Nasdaq boards have the freedom to adopt a three-year cycle, which is the current "best practice" in Britain. British boards typically use a more comprehensive board evaluation process than most of their American cousins and conduct their evaluations every three years rather than annually. After all, a well-executed board evaluation should yield an Action Plan that may require 18 to 24 months to implement; repeating the process a year later typically delivers only marginal returns.

Interestingly, some NYSE-listed boards have adopted the three-year cycle as well – using an interim evaluation process for the two interceding years between board evaluations to satisfy the NYSE's requirements. Interim years often involve a short survey or phone calls from the Chair of the Governance Committee to talk about progress on the Action Plan from the prior year's evaluation.

Replace Surveys with Interviews
The traditional approach to a board evaluation involves a survey form where directors are asked to enter a score from 1 to 5 on a series of questions relating to the board's operations, typically with some space for write-in comments. The design nearly always consists of closed-ended questions such as "The pre-reading materials are adequate" – a format that readily lends itself to numeric scoring but rarely yields insightful or truly actionable feedback. The result is a numeric report that lacks the richness of interview commentary.

To use the example noted earlier about the board that explored CEO succession issues in its board evaluation: Asking some closed ended questions about CEO succession might yield a score with a few write-in's like "Culture is a key concern". By contrast, the interview format they did use produced insightful comments, such as: "We have a bifurcated corporate culture at the moment; our traditional, highly conservative culture is sharply at odds with the entrepreneurial somewhat "cowboy" culture of [newly acquired company]. Our next leader needs to understand and bridge these."; "Since the merger, it's as if no one has been making any decisions. I don't know if that's the board's fault or who is responsible, but what we have right now, I would call a stymied culture and people are frustrated by it."

Interviews are also more engaging for participants. Most directors appreciate the opportunity to share their views and offer constructive suggestions to make a great board even better. They are anxious to see what others have said and whether their views are unique or widely shared. And therein lies one of the reasons greater impact is typically achieved: When relative alignment surfaces through a highly engaged process, the board typically moves swiftly forward to incorporate these good ideas.

Include Senior Management Feedback
As most Nasdaq-listed company CEOs serve as members of their governing boards and routinely participate in the board evaluation. Over the past decade, however, it has become increasingly popular to gather feedback from 3-5 top company executives who are not board members, but regularly attend board and committee meetings. While some directors bristle at the thought of management "evaluating" the board, most find it illuminating to include management feedback in the evaluation. Senior executives nearly always provide worthwhile perspectives. Moreover, including management in the evaluation demonstrates the board's openness to feedback, which nearly always earns kudos and respect from the executive team. It sets the right "tone at the top" in terms of accountability.

If management is included in the evaluation, a decision will need to be made as to whether and how the results of the board evaluation will be shared with those executives who participated. Some topics are probably best limited to discussions among the board itself, such as CEO succession. Others, however, such as enhancements to board pre-reading packages and presentations, lend themselves particularly well to joint board/management discussions.

Using a Third Party
The provisions of the 2016 UK Corporate Governance Code require that board evaluations of FTSE 350 companies be externally facilitated every three years. Even UK companies not in the FTSE 350 must indicate if an independent third party was used to facilitate their board evaluation.

This is clearly the direction board evaluations are heading. In a 2015 Wall Street Journal article on the growth of this trend, Joann Lublin quotes a Spencer Stuart partner who predicts that 35% of American boards will have adopted this practice by 2020. The article suggests that this trend may be driven, in part, "as investors ratchet up their expectations for board performance". Notably, the Chairman of Vanguard, in an open letter to public company directors dated August 2017 specifically includes "effective ongoing board evaluation practices" as one of the firm's expectations for investee boards.

Strive for an Action Plan of 3-5 Constructive Suggestions for Board Enhancement
Achieving a high score on a board evaluation is not the hallmark of an effective board but rather a board evaluation process designed to suppress rather than elicit good ideas from experienced and highly capable board members. Interview-based board evaluations typically yield 3-5 worthwhile suggestions for potential board enhancement; boards with highly engaged and thoughtful directors often surface 8-10. Shifting the desired outcome can make all the difference in how the process is designed and used: From a "tick the box" compliance exercise to an ongoing continuous improvement process aimed at making a good board great and keeping a great board vibrant.


Since 1996, Beverly Behan has been conducting board and director evaluations for the Boards of Directors of public companies, having working with more than 100 boards on this issue over the past two decades: She recently authored "Board and Director Evaluations in the 21st Century: A Practical Guide for Governance Committees" which is available to Nasdaq Clearing House readers at no charge by emailing the author:


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 company, industry or security mentioned herein and nothing contained herein should be construed as legal or investment advice.

Publication Date*: 12/6/2017 Mailto Link Identification Number: 1471
Frequently Asked Questions
  What's New in Shareholder Engagement: Telling Your Own Story
Identification Number 1392
What's New in Shareholder Engagement: Telling Your Own Story
Publication Date: June 22, 2017 

Tactical communication with shareholders is critical, as shareholder activism increases and institutions begin to rely more on their own independent research and less on the opinions of proxy advisory firms. By aligning corporate messaging with investor interests and concerns, companies build better relationships with their investment communities—and in the process, eliminate information vacuums that can be exploited by activists.

Proxy statements are an often-overlooked opportunity for companies to share compelling corporate governance stories and improve stockholder engagement. Investors are keenly interested in succinct and articulate explanations of the following:

  • the company's strategic and risk management plans;
  • the company's corporate governance values;
  • why executive officers are compensated appropriately; and
  • why the company believes it has the right people sitting on the board.

By transforming proxy statements from compliance tools into highly effective communication tools, companies can improve shareholder engagement and nurture investor support for annual meeting ballots. Following are best practices we have observed (and also applied here at Nasdaq) for utilizing proxies to tell a compelling corporate story.

Engage with shareholders proactively.
In addition to building relationships and ensuring shareholders support the company's strategy, a key goal of engagement is discovering investor perspectives on their areas of focus (such as board composition, pay-for-performance metrics, and engagement). Effective shareholder engagement is a two-way dialogue, some of which ought to take place with the company's largest investors outside of proxy season. If institutional investors aren't available to meet during the off-season, take advantage of quarterly earnings calls, industry conferences, and investor presentations to engage.

Bring the proxy process in-house.
Once the company has identified investor concerns and refined its corporate story, it should consider bringing the process for writing and editing the proxy in-house. An outside consultant or vendor cannot do a better job aligning corporate messaging with investor concerns than the company itself. Complex topics such as board composition, executive compensation policies, corporate strategies, and enterprise risk management should be explained succinctly and clearly, a task best left to corporate insiders.

When bringing the proxy development process in-house, it is helpful to create a benchmark of best-in-class proxies that stand out in terms of innovation and formatting. At Nasdaq, we spent months researching and creating a "look book" of noteworthy proxies that our development team used as a reference tool to guide improvements in the messaging, readability, disclosure, and formatting of the proxy.

Enhance disclosure and transparency.
When developing the elements of the company's story that address investor hot buttons, don't settle for the bare minimum in disclosure. Transparency around board composition, executive compensation, and corporate governance builds trust and assists investors in evaluating the board's effectiveness and independence. For example, shareholders like to map the skill sets on the board to the company's corporate strategies and enterprise risks. A holistic overview of board composition—including committee assignments, tenure, experience, and diversity—can be helpful for this, as is a board skills matrix. The structure and philosophy of executive compensation should also be outlined in a thorough and very readable analysis.

Enhanced disclosure is especially important when a company has a great governance story it hasn't been sharing effectively. Through our own research at Nasdaq, we have unearthed many Nasdaq-listed companies that have quietly achieved exemplary track records with regards to board composition and diversity. However, these efforts often go unnoticed because only a handful of companies highlight board composition metrics in their proxies using charts and graphs.

Transform the proxy into a communication tool.
Different types of investors read and use proxies differently: for retail investors, it's a reading document; for institutional investors, it's a reference document. To motivate institutional investors to support the company's annual meeting ballot, proxy messaging needs to be clear and compelling (and navigation intuitive) so investors can locate topics of interest quickly and understand them easily.

Readability is key—writing content in plain English, eliminating redundancies to condense the document, and hyperlinking a detailed table of contents are all ways to enhance the readability of a proxy. Key messages should be highlighted in such a way that shareholders can't miss them: In addition to enhancing the summary to include critical information, companies can draw attention to (and summarize) main ideas by incorporating charts, matrices, graphics, and bulleted lists.

Launch an interactive digital proxy.
A growing number of investors prefer to access proxies and vote online, and interactive proxies are transforming online stockholder engagement. The intuitive framework and visually appealing layouts of interactive proxy documents make it easy for shareholders to navigate and digest proxy content on their own terms, and on any device. These interactive versions include multiple features allowing for easy search and maneuverability, such as section and sub-section headers, expanded table of contents, and linked page references throughout the document.

Interactive proxy platforms also provide companies with useful analytics regarding which sections of proxy statements, and which search terms, are most popular with shareholders. User analytic data will be valuable to companies seeking to identify proxy content elements that most resonate with investors, as well as fine-tuning digital layouts and navigation.

During the past few weeks, a number of Nasdaq-listed companies published their 2017 proxy statements using an interactive format including eBay, Inc., Intel Corporation, Nasdaq, Inc., Northern Trust Corporation, and Otter Tail Corporation.

Perhaps the most compelling piece of PR advice dispensed by Don Draper, ad man extraordinaire of the series Mad Men, was this: "If you don't like what they are saying about you, change the conversation." By taking control of their own story, corporations can do just that.

Read More about Interactive Proxy Statements Here >>

Read More about Reasons to Bring the Proxy Process In-House Here >>

Publication Date*: 6/22/2017 Mailto Link Identification Number: 1392
Frequently Asked Questions
  Seven Critical Elements of a Board Refreshment Plan
Identification Number 1347
Seven Critical Elements of a Board Refreshment Plan
Publication Date: April 3, 2017

We asked Betsy Atkins, veteran of 23 boards and 13 IPOs, to share her perspective on the art and science of board refreshment. In addition to her board service, Ms. Atkins is also well known for making very early stage investments in Yahoo and eBay through her venture capital firm Baja Corp. Following is her sage advice on structuring an effective board refreshment cycle.

1) View the corporate board as a strategic asset, not just a fiduciary.

The first step to an effective board refreshment plan is understanding why refreshment is so important. Historically, the function of boards was to act as a financial fiduciary and steward for shareholders. However, for the past decade or so, the role of boards has been evolving as boards are being held for "futureproofing" against threats, and ensuring the competitive relevance of the company.

Just as a company's leadership team is forward-hired based on long-term strategy, the board is now equivalently an asset to be reviewed for critical expertise and experience, and refreshed as needed. Unfortunately, it's still not common for a board to have a holistic view of board composition as a strategic asset, and many corporate boards still view themselves as fiduciaries.

2) Take a proactive versus reactive approach.

It's never been more important to address the topic of refreshment internally- if the board doesn't proactively think about it, somebody outside the organization is going to raise it. Index funds that were traditionally passive are now beginning to push for diversity, governance refreshment and renewal, and are raising questions on term limits and age limits.

A board should have an annual governance committee calendar with explicit agenda items, just as it does for compensation committees and audit committees. A typical governance committee refreshment calendar might run as follows:
  • Q1: Review board composition, long-term succession planning and rotation schedules.

  • Q2: Map board skill sets to the corporation's long-term strategic plan.

  • Q3: Review the board skills matrix to identify gaps.

  • Q4: Outline a plan for executing graceful rotations and engaging search firms to assist in filling gaps.
A standardized annual process for board refreshment establishes expectations on term limits from the beginning, ensures recruitment of new members is not a shotgun affair, and takes the personal element out of rotating members off the board. Board refreshment becomes a pure, professional process for identifying and filling needed skill sets.

3) Annually map board skill sets against the company's long-term strategic plan.

In the absence of a detailed vision of board composition, it's human nature to place a premium on good working relationships. Therefore, it's very important when taking a strategic approach to board refreshment to identify whether the board's skill sets align with the company's long-term strategic needs.

A board needs to look closely at its company's long-term strategy, map that against the skills around the table, identify potential gaps, and create a matrix. The skills matrix is not a one-and-done task-it's a living document, updated every year against the company's strategy. For example, the board of a bricks-and-mortar retailer planning to establish an ecommerce channel might determine it needs a board member with ecommerce, web advertising and data analytics expertise.

4) Do not let search firms drive the recruitment process.

Too often a board's decision to replace a member is triggered by a retirement, an activist, or an institutional shareholder. The result of a passive refreshment process is that search firms wind up driving recruitment by default. A far better practice is for the governance committee to lead the board through it as part of the natural refreshment cycle. That way, the board gets the critical skills it needs and new members understand from the beginning that it's not a lifetime appointment.

When refreshment is driven by a standardized process based on maintaining competitive skill sets, the board isn't caught back on its heels if a board member is suddenly incapacitated or an activist rattles the doors. It's also easier to tell a colleague that it's time to surrender their board seat to somebody who has more critically relevant experience.

5) Set guidelines for retirement or term limits.

Retirement ages are extending, because people are staying active longer and working longer. Age limit guidelines are an effective way to trigger graceful rotations and maintain director independence. The term is guideline—not mandate—because it's important to retain the ability to waive the age limit as part of governance. For example, at Berkshire Hathaway they'll likely waive any age limit as long as Warren Buffet is sharp.

Europe is leading the way in board term limits; some European countries have already mandated 10-year terms. Institutional shareholders in the U.S. are taking note and beginning to discuss term limits as a method to maintaining director independence. Term limits also keep a board's skill set fresh—but again, the governance committee has to retain the ability, by exception, to waive it. Microsoft isn't going to ask Bill Gates to step down anytime soon.

6) Don't get too comfortable with board colleagues.

It's only human that people who serve together on a board will over time become friends, just as coworkers often do. So it becomes awkward to tell a long-time board colleague that they aren't the right person going forward. To make it more difficult, boards lack the hierarchy of a private corporation. Instead they are led by a group of peers, with a lead director or a chairman who should together with the governance/nominating chair own the board makeup and refreshment topic.

Executing a proactive approach to refreshment eliminates the awkwardness of asking long-time colleagues to leave a board, because transitioning board members off becomes part of a natural, smooth cycle. The expectation is set from the beginning that board appointments are not for life.

7) Measure boardroom diversity using a holistic set of benchmarks.

Diversity shouldn't be measured strictly by gender. What boardrooms need is diversity of perspective: gender diversity, ethnic diversity, international diversity, entrepreneurial diversity, and don't forget technical diversity as technology is the biggest disrupter of virtually every business.

Betsy Atkins serves as President and Chief Executive Officer at Baja Corp, a venture capital firm. She is currently Lead Director and Governance Chair at HD Supply. She is also on the board of directors of Schneider Electric, Cognizant and Volvo Car Corporation. She also served on the board of directors at Nasdaq LLC and as Clear Standards CEO and Chairman. She is also on the SAP Advisory Board, among many others.

A self-proclaimed "veteran of board battle scars," Ms. Atkins will be collaborating with Nasdaq to produce a series of corporate governance "nuts and bolts" articles. Stay tuned for an upcoming interview with her about the importance of executive sessions as a risk mitigation strategy.

Do you have a question about corporate governance for Betsy Atkins? If so, please send your question to and we may address it in a future post.
Publication Date*: 4/3/2017 Mailto Link Identification Number: 1347
Frequently Asked Questions
  BDO's 2017 Meeting Alert: Preparing for Your Company's Annual Meeting
Identification Number 1340
BDO's 2017 Meeting Alert: Preparing for Your Company's Annual Meeting
Publication Date: March 20, 2017

Nasdaq talks to Amy Rojik, a Partner with BDO USA, LLP’s Center for Corporate Governance and Financial Reporting, about their 2017 Shareholder Meeting Alert and how corporate governance topics have changed in the wake of the 2016 election.

Q: What are some of the topics that corporate management and boards may want to be prepared to address in connection with their 2017 annual meetings?

A: This season, there is no shortage of topics to be considered. We have compiled several along common themes pertaining to: growing anticipation for promised deregulation, trade and tax reform under the new administration; readiness to execute on significant accounting standard changes that go beyond financial reporting and will impact systems and operational considerations for companies; transparency of communications and disclosures related to cyber-breach and cyber-readiness; use of non-GAAP metrics; and responses to whistle-blowing and ethics compliance along with conduct of shareholder meetings themselves. Global economic and M&A concerns continue to confound many companies with international operations and global customer bases as well as the scrutiny of director time, expertise and diversity relative to the boards they serve.

Q: How has this list changed since 2016’s proxy season?

A: The most notable changes stem from the 2016 election results and how the new administration is positioning itself in gaining congressional approval for its deregulation and reform goals. These changes are intended to ease the burden for corporations, particularly smaller organizations, in terms of compliance, tax measures, and trade arrangements to promote U.S. businesses on a global stage. While there is great anticipation about this agenda and much focus on recent Executive Orders, there remains a significant amount of work to be done that will require full collaboration with Congress to not only appoint and get new regime leaders in position, but to provide detailed plans of action that Congress can consider and approve.

Some of the areas addressed in the prior year have changed a bit in scope for 2017. Last year, the issue of “overboarding” was very prominent as proxy advisor firms had unveiled plans to oppose non-executive directors serving on more than five boards. This year, the overall composition of the board is under examination. The ever-growing subject matter that the modern board must address highlights the need for those charged with governance to demonstrate diverse thinking, a wide breadth of knowledge, and the ability to execute oversight responsibilities given the time requirements such duties demand.

Growing uncertainty around the implementation of previously planned executive compensation disclosures, internal controls under Sarbanes-Oxley and other proposed regulations are now in question under the Trump administration that will require boards to stay abreast of regulatory developments.

Cybersecurity, M&A and global economic concerns remain - and will continue as hot-button corporate governance issues in 2017.

Political contribution concerns, leveraging data, succession planning, and proxy access are not as prominent on this year’s agenda, but they remain relevant concerns that boards should be prepared to address should they be raised by shareholders.

Q: What are the strongest influencers driving shareholder concerns (e.g., the new administration, global economic challenges, geo-political unrest)?

A: Yes, yes, and yes - and at the pinnacle is transparency of communications related to these concerns. The U.S. is under a sizeable microscope given events in recent months that impact not only domestic concerns but also global markets as the U.S. rolls out new policies, regulations and diplomatic strategies designed to protect U.S. interests and spur growth for our corporations. While there is currently much talk and speculation, the devil will be in the details as rulemaking and policy begin to crystalize. Shareholders will want to hear that the company is remaining vigilant during the shifting landscape in the current political environment, and that it has plans in place for a number of alternative outcomes. Companies will need to be knowledgeable and transparent on how changes may impact them from a variety of angles including taking stock of tax planning strategies at the state, federal and international levels. Businesses also need to consider where their global operations may be in terms of favorable importer/exporter trade practices should the sentiment of “American protectionism” continue to rise.

Companies hoping that cyber breach stories will just go away are deluding themselves as cyber-attacks are becoming more sophisticated. The impacts of these events can be so profound that organizations are strongly advised to be thinking through worst-case scenarios that look beyond their own operations to further include consideration of the potential exposure their third-party business partners may present. Boards should be analyzing the company’s resources as well as the resources directly accessible by the board. They should also be discussing the value in performing cyber risk assessments and having such measures validated by independent advisors to determine the efficiency and effectiveness of the organization’s cyber risk management system.

Continuing with the transparency theme:
  • Disclosure is critical for companies across a variety of other fronts. Scrutiny by the SEC of non-GAAP measures used by public companies continues to be front and center in terms of why such metrics are necessary and how they are disclosed. Moreover, unprecedented accounting changes being brought about by new revenue, leasing, and financial instrument standards are requiring significant effort and receiving considerable attention by regulators - particularly regarding how companies have assessed the impact of implementation and how they are portraying that to the markets within annual and interim required disclosures under SEC SAB 74.
  • Corporate growth through M&A activity is not new, but recent failed transactions highlight the need for boards to have sound due diligence and integration policies in place to ensure successful bids.
  • Finally, last year’s highly publicized Wells Fargo scandal has put whistle-blowing programs – or their failure – in the spotlight. Management and boards of directors must be able to ensure that strong compliance, controls, and ethics messaging and training exist within corporations.
The concept of holding virtual or on-line shareholder meetings (versus hosting in-person events) is another newer area that is getting some attention – both positive and negative. Companies pursuing this new means of interactive communication must be able to clearly communicate the benefits – cost savings and greater participation - while proactively addressing any negative perceptions – selective engagement - associated with the new technology.

Q: Your paper states that engagement is a two-way street, with investors holding up their end of the bargain. Do you think the investors are ready for it?

A: Most major investors—especially BlackRock, State Street and Vanguard—have equipped themselves for engagement, and most are committed to strengthening their engagement capability. Engagement is strongly supported by FCLT Global (not-for-profit organization dedicated to developing practical tools and approaches that encourage long-term behaviors in business and investment decision-making) and all of the major investor associations.

Q: Can you point to some additional pieces of thought leadership and/or learning opportunities to help companies prepare?

A: BDO’s Center for Corporate Governance and Financial Reporting contains a variety of resources, including the BDO 2017 Shareholder Meeting Alert. Within the alert itself, we point directly to additional thought leadership and educational programming germane to specific topics of interest and encourage our readers to explore such resources according to their interests.

 BDO USA, LLP is a professional services firm providing assurance, tax, advisory and consulting services to a wide range of publicly traded and privately help companies. Amy Rojik is Partner, National Assurance and has been with BDO for 13 years.
Publication Date*: 3/20/2017 Mailto Link Identification Number: 1340
Frequently Asked Questions
  Interactive Proxy Statements Transforming Online Shareholder Engagement
Identification Number 1319
Interactive Proxy Statements Transforming Online Shareholder Engagement
Publication Date: Februrary 8, 2017

Nasdaq reported last year that “interactive proxy statements are revolutionizing the way companies tell their corporate governance stories.” Designed for web browsing versus print browsing, the features of interactive proxies continue to evolve, making it easier for shareholders to locate the information they want and to access shareholder voting platforms.

A number of providers offer a range of interactive proxy design and hosting services, including EzOnlineDocuments,  ISS Corporate SolutionsRR Donnelley, and Mediant. Nasdaq spoke with Rich Andrews, CEO of EZOnlineDocuments, a provider of online proxy services since 1998, to find out how interactive proxies have begun to impact online shareholder engagement: “Interactive proxies visually marry corporate branding with a vastly superior user interface that anticipates intuitive reader navigation and offers robust searchability. The user analytics of our clients’ interactive proxy statements show that 80% of online readers don’t bother looking at the linked PDF version of the proxy statement at all—they engage solely with the interactive version.”

Interactive proxies allow online readers greater control over which elements of the proxy they choose to engage with. Companies can leverage that behavior by tracking analytics in real time to anticipate investor concerns and improve shareholder engagement. Online proxy platforms also make it easy and cost-effective to highlight important corporate messaging by embedding videos and graphics within the proxy. According to Andrews, “The sections of our clients’ interactive proxies that are most popular are tiles navigation, proxy summary, election of directors, ‘Meet the Board’, executive compensation, and videos.”

To the online reader, there is a profound difference between the experience of reading a static PDF and navigating an interactive proxy platform. Progressive Nasdaq-listed companies are offering interactive proxies that are much easier to navigate than their PDF version. To compare, see how each of these companies provide stronger branding and a better user experience in their interactive versions: Atlas Air Worldwide (interactive proxyPDF version), Galena Biopharma (interactive proxyPDF version), and Inovalon (interactive proxyPDF version).

According to a recent study conducted by EZOnlineDocuments, 80% of S&P 500 companies have invested in making their websites responsive to mobile devices, yet only 11% of them created interactive proxies during 2016. “Most companies don’t realize that static PDF proxy statements are not engaging online readers. And they may not fully meet SEC compliance standards for readability and searchability of online proxies,” said Andrews. (His company’s website summarizes certain of the SEC's rules for posting proxy materials online.)

So why aren’t more companies utilizing an interactive format for proxy statements?

“The greatest hurdle is that many companies are satisfied with meeting the bare minimum of SEC requirements for online proxies. They fail to take into account that static PDFs are not optimized for online reading, that reading a PDF online is a cumbersome and time-consuming process for investors and shareholders,” shared Andrews. “The second hurdle is cost. Most companies don’t realize that the cost of interactive proxy statements isn’t prohibitive at all and that it’s nothing near the substantial investment most companies have already made to improving the mobile responsiveness of their websites.” Research indicates that the cost of developing a standard interactive proxy statement is reasonable, with prices starting as low as $3,000 up to around $15,000 depending on provider and services selected.

Rich Andrews and his colleagues foresee further evolutions in proxy design and content on the horizon as companies begin to digest and leverage data from online proxy analytics. “Reformatting content so that it’s accessible via ‘click-to-learn’ navigation, like our ‘Meet the Board’ feature, is becoming increasingly popular,” shared Andrews. “Online readers primarily engage in content that is structured that way. We also expect companies to evolve their proxies by redesigning the summary so that it is entirely readable on the phone and tablet. We tell our clients to stop thinking landscape and start thinking Wall Street Journal—information is best presented on mobile platforms in columns and tiles to optimize online reader experience and engagement.”

Taking into consideration the recent growth of mobile web browsing (it has now eclipsed desktop browsing), it seems clear that interactive proxy statements offer significant opportunities to improve shareholder engagement.

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 company, industry or security mentioned herein and nothing contained herein should be construed as legal or investment advice.

Publication Date*: 2/8/2017 Mailto Link Identification Number: 1319
Frequently Asked Questions
  Nasdaq Talks to . . . Tom Kloet, Thirty-Year Industry Veteran, about Risk Management and How It Fits into the Audit Committee Mandate
Identification Number 1314
Nasdaq Talks to . . . Tom Kloet, Thirty-Year Industry Veteran, about Risk Management and How It Fits into the Audit Committee Mandate
Publication Date: January 30, 2017

Tom Kloet is a thirty-year veteran of the stock exchange industry — a former CEO of both the TMX and Singapore Exchange, he’s served on nearly a dozen boards (both corporate and non-profit) and joined Nasdaq’s board of directors in 2015. He is Nasdaq’s current audit committee chair. Given this breadth of experience, we asked him to share his thoughts on the essential ingredients for building and maintaining an effective audit committee and how risk management fits into today’s audit committee mandate.

Q: How does a company go about building an effective audit committee?

A: It starts with attracting a mix of professionals who have a variety of executive and board experiences. It’s not sufficient to just gather a group of accounting or finance professionals. For example, at Nasdaq, the members of our audit committee represent a broad and varied mix of executive, financial, operating, technology, audit and risk backgrounds. As a result of those different backgrounds, I believe we’re better able to effectively consider and discern what the key risks of the organization are—and where those risks and financial reporting intersect—so that we give our shareholders the value of looking at our business in a very holistic way.

Q: You talked about the importance of different professional backgrounds of audit committee members. What about the personal dynamics of people on the committee? What are the characteristics of a strong audit committee member?

A: Individual characteristics of audit committee members should parallel or support a group dynamic that drives a board towards excellence. So along with a broad mix of executive, operating, risk, technology, audit and finance backgrounds, you want individuals with a commitment to excellence, a willingness to work and perform as a team, and keen attention to detail.

Boards and audit committees of today should be composed of professionals who put the interests of the various stockholders, stakeholders, employees and communities in which they operate at the front of their mind as they work through their responsibilities, on either an audit committee or a board. Those same characteristics that you’d want in strong board members also define who will make a strong audit committee member.

Q: What are the attributes of an effective audit committee chair?

A: The audit committee chair has to have strong financial and risk management acumen, so previous experience as an operating executive in finance is very helpful for anyone chairing an audit committee. Now, that can come from several different experiences—it doesn’t necessarily have to be that the chair is a CPA. Previous experience can be related to corporate finance or banking, so long as the chair understands the financial reporting the company has to do and the requirements that go along with that.

And what is becoming more prevalent for audit committee chairs is deep experience in risk management—particularly for financial services companies—because in many cases, audit committees are now tasked with monitoring a myriad of complex risks faced by an organization.

Q: Speaking of risk, should public company boards form a separate risk management committee?

A: There’s not a one-size-fits-all approach for how corporate boards should deal with risk management, but companies should examine carefully whether to create a separate committee. Risk management oversight should vary with the individual company’s business, its board composition and the risk profile the business operates within.

Nasdaq doesn’t have a separate risk management committee. Risk management falls to the audit committee for oversight, and we actively report up to the full board on corporate risk issues, exposures, and how they are being monitored.

Q: How do audit committees ensure they’re proactive in monitoring and managing risk?

A: I think it starts with understanding the enterprise risk management program of the company, along with a core understanding of the potential risks the enterprise faces. It’s an iterative process that continues to grow as the company evolves.

Equally important are the committee’s skills of asking both the right and the difficult questions and its willingness to probe. Audit committees have a variety of risk reports they receive at regular intervals through their meetings; it’s critically important to take all that data and convert it into meaningful conversation, to investigate the current and potential risks that are important and that need to be monitored. From there, the board or audit committee needs to determine that management has the appropriate infrastructure and processes in place to monitor those risks.

Q: Nasdaq Listing Rules require that a company’s audit committee be entirely compromised of independent directors. But how does a company ensure that audit committee independence is really meaningful, versus just addressing the conflict of interest issue?

A: First, there’s the usual process of annual questionnaires and assessments to ensure the governance committee understands any connection points between the board members (including the audit committee members) and management or the company in general.

Beyond that, it’s an ongoing observation to determine the independence of thought of individual board members. How do they handle various situations that come up? Are they showing independence in thought as well as in fact? Ideally, you want board members who can wear the hats of various stakeholders as they’re reviewing material and asking questions.

Finally, back-end assessments—conversations between the audit committee chair and various board members—should take place to discern the independence of the particular board member they’re speaking to.

Q: What should companies think about as they prepare for the 2017 proxy season, in terms of effective disclosure surrounding their audit committee?

A: When I read public company proxies, I want to learn what was important to the audit committees as they were adjudicating their responsibilities. Don’t just republish the charter (which most companies share on their website anyway); outline for stakeholders what the board did during the year to execute the audit committee’s charter’s mandate.

I would suggest companies begin by reviewing their past proxy disclosures to see if the company has let stakeholders into the mind of the audit committee: Did the company share how the board evaluated risk, what oversight it had of the risk management process? Did the Board evaluate the independence of the company’s external auditors and how did it oversee their work and that of the internal audit department? Did the board meet independently in executive session with various department heads? What did the board do during the year to ensure that oversight of the company’s risk management processes evolved as the organization evolved?

Q: How does a board chair build effective relationships between the audit committee and the board, and between the audit committee and company management?

A: I’ll tackle these separately, as they are two very different types of relationships.

As audit committee chair, I try to be very transparent with the board, as we’re executing some of the mandate that belongs to all of us as independent directors. I’ll report at every board meeting what we've done at the audit committee meetings in between board meetings, so the board has a comprehensive view as to the depth of the work of the committee. It’s important to solicit questions from the board while giving them those highlights, and to invite them to ask questions of myself, the CFO, the heads of IT or internal auditing. I also invite the other audit committee members to report on anything I might leave out during my report or field questions from other directors. In this way, we offer full transparency to the board without replicating all the work we did.

With respect to the relationship with corporate management, some of that culture is set by the audit committee chair, as well as the CEO and CFO of the organization. Nasdaq has a very healthy culture between the company management and its board, including the audit committee. We have active participation from a number of management’s key support and business areas regularly at the audit committee meetings and executive sessions alone with key leaders.

Having a healthy respect between management and the board stems from understanding what each other's roles are and the importance that both parties bring to the success of the enterprise. The board is not management—we are independent directors with a governance role. Our job is to fearlessly ask questions and be willing and able to have the kind of honest discussions that help the enterprise overall.

Q: How should the audit committee structure its relationship with external auditors?

A: Managing the relationship between the audit committee and the company’s independent public accounting firm is an important responsibility of an effective audit committee. It’s general practice at most public companies these days for the independent public accountants to attend the audit committee meetings (with the exception of executive sessions).

That’s our practice at Nasdaq. The two partners from our auditing firm attend audit committee meetings, and they actively participate. I will call on them periodically to jump in on a conversation, all the time being respectful of not violating or impairing their independence. We also meet in executive session with the independent auditors at the end of every committee meeting.

We’ll schedule additional meetings with the independent auditors to share any unexpected developments at the company that we’d like their view on, or to ensure that communication is flowing well between management and the auditors. And offline, I’ll speak to the audit partner ahead of every audit committee meeting to get an understanding of what’s on our auditors’ minds as they’re doing their work.

And as a result of all that, our auditors get a feel for the things that are on the minds of the committee and vice versa.

Tom Kloet was the first CEO and Executive Director of TMX Group Limited, the holding company of the Toronto Stock Exchange, TSX Venture Exchange, Montreal Exchange, Canadian Depository for Securities, Canadian Derivatives Clearing Corporation and the BOX Options Exchange, from 2008-2014. Previously, he served as CEO of the Singapore Exchange and as a senior executive at Fimat USA (a unit of Société Générale), ABN AMRO and Credit Agricole Futures, Inc. He also served on the Boards of CME and various other exchanges worldwide. Mr. Kloet is a CPA and a member of the AICPA. He is also a member of the U.S. CFTC’s Market Risk Advisory Committee and was inducted into the Futures Industry Association Hall of Fame in March 2015.
Publication Date*: 1/31/2017 Mailto Link Identification Number: 1314
Frequently Asked Questions
  Larry Fink's Advice for CEOs as They Prepare for Proxy Season
Identification Number 1312
Larry Fink's Advice for CEOs as They Prepare for Proxy Season
Publication Date: January 26, 2017

Each year, Larry Fink, CEO of BlackRock (the world’s largest investor), crafts his annual letter to “advocate governance practices that BlackRock believes will maximize long-term value creation.” In this year’s letter, dated January 24, Fink wants to know how public companies are incorporating “the underlying dynamics that drive change around the world” into their strategic planning process.

He provides an overview of geopolitical events of the past 12 months and global labor market dynamics and says he wants CEOs to answer these two questions:

“How have these changes impacted your strategy and how do you plan to pivot, if necessary, in light of the new world in which you are operating?”

Fink also highlights how environmental, social, and governance (ESG) factors relevant to a company’s business can provide essential insights into management effectiveness and asks that CEOs discuss the following issues as they engage with stakeholders during the 2017 proxy season:

  • Sustainability of the business model and company operations as they relate to environmental, social, and governance factors. “A global company needs to be local in every single one of its markets.”

  • The company’s priorities for investing in research and technology as well as the development and long-term financial well-being of employees. “The events of the past year have only reinforced how critical the well-being of a company’s employees is to its long-term success.”

  • How capital allocation strategy balances returning excess capital to shareholders with investment in future growth. “Companies should engage in buybacks only when they are confident that the return on those buybacks will ultimately exceed the cost of capital and the long-term returns of investing in future growth."

Fink advocates for corporate and government policies that will help shift “the tide of short-termism afflicting our society”, including:

  • a capital gains regime that rewards long-term investments over short-term holdings;
  • if tax reform includes reduced taxation for repatriation of cash, an explanation of whether they will bring cash back to U.S. and if so, how they will use it;
  • improved corporate capacity for internal training and education of employees to better compete for talent in a global economy;
  • development of a more secure retirement system for all workers; and
  • a concerted effort to build financial literacy in the workforce to help solve the retirement crisis.

Fink warns that where companies are not making sufficient progress toward creating long-term value, “we will not hesitate to exercise our right to vote against incumbent directors of misaligned executive compensation.”

Read Larry Fink’s 2017 Corporate Governance Letter to CEOs >>

Read Larry Fink’s 2016 Corporate Governance Letter to CEOs >>

Publication Date*: 1/26/2017 Mailto Link Identification Number: 1312
Frequently Asked Questions
  Taking Your Proxy Statement from Good to Great by Ron Schneider
Identification Number 1292
Taking Your Proxy Statement from Good to Great by Ron Schneider
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.
Publication Date*: 12/8/2016 Mailto Link Identification Number: 1292
Frequently Asked Questions
  Glass Lewis to Allow Companies to Review Data
Identification Number 1286
Glass Lewis to Allow Companies to Review Data
Publication Date: November 21, 2016

Glass Lewis has announced that it will allow certain companies prior access to the data it relies upon in making proxy voting recommendations about the company. Glass Lewis will allow the company to review key data points used in its analysis, such as information about the company’s board composition, governing documents, auditor, compensation practices, summary compensation data and equity plans, before a full research report is published for institutional investor clients. The company will have 48 hours to confirm that the data accurately reflects the information publicly available to shareholders or to provide any suggested corrections to Glass Lewis. This Issuer Data Report will be available to a limited number of companies on a first-come, first-served basis. Companies must enroll no later than January 6 or before the company limit is filled.

Learn more >>
Publication Date*: 11/21/2016 Mailto Link Identification Number: 1286
Frequently Asked Questions
  Shareholder Proposals with Social Agendas Hit Record High
Identification Number 1267
Shareholder Proposals with Social Agendas Hit Record High
Publication Date: October 14, 2016

Who are the shareholders submitting proposals? What are their motives? What impacts are they having on corporate governance? Answers to these questions can be found in the Proxy Monitor’s 2016 Annual Report on Corporate Governance and Shareholder Activism, survey of the experiences of the 250 largest publicly traded American companies. A summary of the findings follows:
  • The shareholder-proposal process continues to be dominated by a small group of shareholders. Six “corporate gadfly” investors (individuals who repeatedly file multiple common shareholder proposals at a large number of companies) sponsored 33% of all proposals, while institutional investors and labor-affiliated institutional investors (such as Teamsters’ Union and public-employee pension funds) sponsored the remaining 67%.
  • Shareholder proposals are increasingly aimed toward making social and political changes. In fact, 50% of all shareholder proposals involved social or policy concerns. Corporate governance proposals made up another 39%, and executive compensation related proposals accounted for the remaining 11%.
  • With the exception of proposals related to proxy access and shareholder majority voting rules, shareholder proposals rarely win majority support. Only 3% of shareholder proposals received majority support, while shareholders continue to reject overwhelmingly proposals relating to social or policy concerns.
The authors of the report stress that “increasing activity on the part of certain shareholders pursuing social and policy agendas should not be confused with broad shareholder support for these activists’ pet issues.” However, they go on to note that “[d]espite this broad shareholder opposition, shareholder activists with social or policy concerns have continued to introduce shareholder proposals with little to no chance of passage, year after year. The costs of such activity fall on the corporation—and hence other shareholders.”

The report also includes a number of recommendations designed to mitigate the expenses associated with processing shareholder proposals, including these:
  • The SEC should revisit its 1976 rule forcing companies to include most issues on their proxy ballots.

  • Force shareholder-proposal sponsors to reimburse the corporation at least some portion of the direct costs of assessing, printing, distributing, and tabulating their proposals, if any proposal fails to receive majority or threshold shareholder support.

  • The SEC should revise its rule permitting companies to exclude resubmitted shareholder proposals, if they fail to garner minimum threshold shareholder support within the preceding five calendar years.
Read the full report here >>

For more information on corporate gadflies, read A Gadfly’s Perspective on Harvard Law School Forum on Corporate Governance and Financial Regulation and Gadflies at the Gate: Why Do Individual Investors Sponsor Shareholder Resolutions?
Publication Date*: 10/14/2016 Mailto Link Identification Number: 1267
Frequently Asked Questions
  Tech, Basic Materials Sectors Disclose Least About Board Diversity, Study Finds
Identification Number 1268
Tech, Basic Materials Sectors Disclose Least About Board Diversity, Study Finds
Publication Date: October 14, 2016 

According to a new Equilar study, only 12.8% of S&P 500 companies disclosed board member diversity in terms of race or ethnicity in their most recent proxy statements. Technology companies trailed almost every other industry in terms of diversity disclosure, with only four (5.7%) firms disclosing information in their 2016 statements, followed by basic materials companies (consisting mostly of oil and gas companies), with only one reporting. Despite this, tech companies have improved board diversity in recent years after having the largest percentage growth of women on boards during the last five years (14.4% in 2012 to 21.0% in 2016); however, that growth was not enough to reach the overall S&P 500 average (21.3%).

Read more from Equilar >>
Publication Date*: 10/14/2016 Mailto Link Identification Number: 1268
Frequently Asked Questions
  Tips and Tricks of Proxy Season Engagement from the World's Largest Asset Managers
Identification Number 1153
Tips and Tricks of Proxy Season Engagement from the World's Largest Asset Managers
Publication Date: April 28, 2016

Global governance experts Michelle Edkins of BlackRock and Glenn Booraem of Vanguard shared best practices of proxy season engagement during a recent webinar. For companies seeking to avoid unpleasant surprises when the votes are counted, the following is a synopsis of the tips and tricks of proxy season engagement from the perspective of the world’s largest asset managers.

Understand the difference between off-season and proxy season engagement

As the date of a company’s shareholder meeting approaches, the nature of engagement necessarily changes: the closer to the meeting, the more narrow the asset manager’s focus becomes on the specific ballot issues at each company on which they will vote.

Off season, investors want to spend substantial time covering a broad range of issues in the context of the company’s strategy for creating long-term shareholder value, including governance, compensation, and (especially) board composition.

Familiarize yourself with institutional investor voting guidelines

The proxy voting guidelines and approach to engagement for BlackRock and Vanguard are available on their websites. In addition, BlackRock publishes quarterly voting and engagement reports highlighting their stance on current issues. Investors also seek to ensure that companies understand their broader perspective through direct engagement with management out of season.

Don’t assume your investors will vote with ISS, Glass Lewis, or proxy advisor recommendations

Institutional investors rely heavily on the common format provided by the proxy advisors to find exactly the information they need quickly during the busy proxy season. However, their decision making process is completely independent of the voting recommendations of the proxy advisors. (Companies often make the mistake of filing supplemental materials as rebuttals to proxy advisors, assuming that investors will share the same concerns as the proxy advisors.)

And don’t assume because ISS and Glass Lewis have no recommendations that your company’s position is also consistent with investor voting intentions—there are plenty of instances when investors voted against companies that weren’t flagged by ISS or Glass Lewis. And investors often take a totally different view on activist slates than that of ISS or Glass Lewis.

Tell your best story in the proxy statement

It’s important to make your best case in the proxy statement, especially when opposition over particular concerns is anticipated. This is where prior engagement with shareholders is critical: frame your proposals in a way that is proactively responsive to their issues and concerns.

Investors don’t just look at proxy statements to vote—it’s also how they prepare for out of season engagement. To the extent that there is an important story to be told or a perspective to be clarified on an issue, use summaries liberally to pull that up front. The easier it is to find and understand, the better investor analysis is going to be—presumably in the company’s favor.

Use supplemental materials sparingly

Use supplemental materials to clarify misunderstandings or share significant last minute developments. (Although putting out supplemental materials is preferable to arranging last-minute meetings or calls with analysts.) For companies that have established relationships with their institutional buy-side analysts, it is perfectly acceptable to email analysts to share significant last-minute developments which may impact voting.

Don’t engage proxy solicitors to pester large investors about votes

Investors prefer to minimize unnecessary contact during proxy season, particularly with proxy solicitors. They will use solicitors as scheduling agents, but for clarification on important issues investors want to speak directly to decision makers.

Large investors ALWAYS vote, so proxy solicitors don’t need to call to solicit votes.

Call if a vote doesn’t go the way you expect it to

Votes against management are used sparingly. Whenever possible, investors prefer to have conversations about voting rationale before voting to clarify and reconcile decisions that may be at odds with broader positions.

That said, if there is confusion about a specific vote that went against expectations, ASK what your investors meant rather than trying to read into it yourself.

Tell a holistic diversity story

Companies should communicate their diversity philosophy, approach, and long-term goals in their website and proxy materials. Investors take a long term view on diversity and prefer to engage off-season on the topic, versus responding reflexively by voting.

Investors are seeking a holistic understanding of how the various components of diversity (gender, ethnicity, experience, tenure) lead to the ideal board composition for maximizing long term shareholder value, including:
  • the board’s understanding of the various components of diversity currently;
  • what the board aspires that diversity mix to be in the context of long-terms strategy;
  • the process for identifying the skills a company has vs. the skills it may need for the next generation; and
  • how diversity targets will be met over time, as well as how board evaluation and assessment factor into that process.
Read more:

BlackRock: Proxy voting guidelines for U.S. securities
Vanguard: Vanguard’s proxy voting guidelines
Blackrock: Corporate Governance & Responsible Investment Report: Americas
Publication Date*: 4/28/2016 Mailto Link Identification Number: 1153
Frequently Asked Questions
  Why CEO Succession Planning Disclosure Matters
Identification Number 1158
Why CEO Succession Planning Disclosure Matters
Publication Date: March 9, 2016

CEO succession planning is one of the most important responsibilities of a corporate board. Institutional investors--BlackRock, CalPERs, and CalSTRs among them--are calling for robust disclosure of CEO succession planning in their corporate governance policies. Shareholders submit proxy proposals on the issue. But does CEO succession planning disclosure make a difference in the success or failure of a company in transitioning to a new CEO?

According to Does CEO Succession Planning Disclosure Matter, a new study by the Investor Responsibility Research Center Institute, it does. Companies that successfully execute CEO transitions are far more likely to have disclosed CEO transition plans to shareholders. On the other hand, 63% of companies that did not execute a successful transition provided little or no disclosure. The report also reveals that while such disclosure is increasing, it is overall lacking among the majority of companies surveyed.

Among the key findings of the report were the following:

  • 24%of the issuers surveyed provided no disclosure regarding succession planning in the two year period prior to the CEO change.
  • When disclosure was provided, it was relatively poor: just over half the issuers surveyed disclosed who had responsibility for the succession planning, 10%disclosed how often the board reviewed succession planning, and 2% of issuers described the board’s process for identifying CEO candidates.
  • Less than one in ten companies surveyed mentioned the existence of an emergency plan for replacing a CEO, for example in the event of death or incapacitation.
Also of interest was that 20% of companies executing transitions had to replace the new CEO within a two year period. Of those companies, 48% of the CEOs resigned.

Publication Date*: 4/20/2016 Mailto Link Identification Number: 1158
Frequently Asked Questions
  Building Investors' Trust through Transparency
Identification Number 1157
Building Investors' Trust through Transparency
Publication Date: March 29, 2016 

Transparency around the composition and qualifications of a board builds trust, as it helps investors evaluate the board’s independence and potential effectiveness.  With this in mind, Nasdaq took a close look at the board composition disclosure in our recently filed 2016 Proxy Statement to ensure that our presentation reflected important emerging trends in disclosure and could serve as a roadmap for our listed companies as they drafted their proxies.  It is in this spirit that we expanded our board disclosure to include:  

  • A board skills matrix, identifying the skills, knowledge, experience and capabilities of each director most relevant to help the board meet both current and future challenges.
  • A director qualifications analysis, detailing the tenure, age and skills of board members and illustrating the cognitive diversity of the board, with a range of experience, knowledge and perspectives.
Nasdaq also provided enhanced discussion of board, committee and individual performance assessments throughout the proxy, explaining the mechanics of how the board evaluation process is conducted and utilized. 
Publication Date*: 3/29/2016 Mailto Link Identification Number: 1157
Frequently Asked Questions
  Interactive Proxy Statements: A New Way to Engage Shareholders
Identification Number 1178
Interactive Proxy Statements: A New Way to Engage Shareholders
Publication Date: December 1, 2015

In recent years, regulatory and corporate governance developments have made public company engagement with shareholders, increasingly important and several recent innovations provide companies with new and exciting ways to do it. These include: real-time, two-way interaction between a company’s board and shareholders and online videos to introduce board members and management to shareholders.

Now, some companies engage shareholders another way: through an “interactive” version of their proxy statement.

Interactive proxy statements are revolutionizing the way companies tell their corporate governance stories. To see an example of this, compare Microsoft's 2015 Interactive Proxy Statement with the Word version or compare Otter Tail Corporation’s latest Interactive Proxy with their PDF version. Through sophisticated user interfaces, advanced search capabilities, easy access to a shareholder voting platform, and accessibility to materials from a variety of mobile devices and tracking analytics, interactive proxies allow companies to bring their reports to life for shareholders.

Interactive proxies provide easier access to information for both retail investors and institutional holders. Even for sophisticated investors, proxy statements can be long and difficult to digest. In fact, according to a 2015 survey by RR Donnelley, Equilar, and the Rock Center for Corporate Governance at Stanford University, 55% of investors believe that the typical proxy statement is too long while 48% believe that proxy statements are difficult to read and understand, which leads to investors reading only 32% of the document, on average. Interactive proxies address many of these complaints, providing shareholders with the ability to go directly to different sections of the proxy or search for specific references or terms. These capabilities allow investors to spend more of their time analyzing relevant information rather than trying to find the information they need.

Interactive proxies also benefit companies. Interested in knowing what information is important to investors? Interactive proxies can include sophisticated behavior tracking analytics that allow companies to know the most popular sections and search terms for shareholders, as well as how much time people spent viewing certain sections. Companies can use this information to help them anticipate investor concerns, structure presentations, and guide discussions.

Interactive proxy design and hosting services have client portfolios that include many marquee public companies. We identified a number of companies offering a range of services at various price points, including EzOnlineDocuments, iiWisdom, and RR Donnelley (NASDAQ: RRD).

Publication Date*: 12/1/2015 Mailto Link Identification Number: 1178
material_search_footer*The Publication Date reflects the date of first inclusion in the Reference Library, which was launched on July 31, 2012, or a subsequent update to the material. Material may have been previously available on a different Nasdaq web site.
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