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Note: Timothy Smith of Walden Asset Management, quoted below in support of reported corporate practices encouraging expanded investor communications, has been a member of the Program Panel for the Shareholder Forum's "E-Meetings" public interest program to establish standards for electronic communications associated with annual meetings.


Fortune (as published by, March 14, 2011 column



Can shareholders and management make it together?

Like the farmer and the cowboy, shareholders and management can be friends too -- maybe not close friends. Signs of newfound respect are percolating between the two, often quarrelsome, parties.

By Eleanor Bloxham, contributor

Informal polls of corporate board directors find that about 5% view the proxy as a marketing tool for the board and the company. But that may be changing.

As proxy season gets underway, some early, behind the scenes discussions between shareholders and companies are exhibiting a welcome break from the past: a new tone of respect.

Tim Smith, Director of ESG Shareowner Engagement at Walden Asset Management, says the new requirement for say on pay -- giving shareholders a voting voice on executive compensation -- is a big part of the reason for the changes he is seeing: "Say on pay is stimulating more dialogue," he says.

Managers and directors don't want the headache of no votes on executive pay packages -- and they don't want unhappy shareholders.

This is a welcome change from the past, when corporations almost always viewed shareholders with opinions as either annoyances or downright enemies. A slammed door and a "not-invented-here" policy were de rigueur corporate responses to shareholder proposals.

But two companies early on in this proxy season plan to take a different tact. They may not agree with shareholders, but they aren't going to be so quick to judge.

One is Gentex (GNTX), where the board has decided not to oppose a shareholder proposal for majority voting, which requires that a director receive at least a majority of the votes to be elected. Instead of objecting, the board at Gentex plans to have no recommendation on the way shareholders vote, according to a letter sent to shareholders that Fortune obtained. Instead, the company will present views on the pros and cons of the proposal and leave it to the shareholders to decide.

St. Jude Medical (STJ) will also take a muted approach toward a shareholder proposal to declassify its board, which would mean that all board members would come up for election each year rather than just a few, according to a letter to shareholders obtained by Fortune.  Shareholders view declassification as a way to promote accountability of all members on the board on at least an annual basis.

St. Jude plans to state in its proxy that it won't oppose the proposal and will not make a recommendation to shareholders. St. Jude's board also plans to express that it wants to use this proposal as an opportunity for shareholders to express their views without being influenced by any recommendation the board might make.

St. Jude's board will also spell out considerations for and against a classified board. Taking it one step further, the board also plans to state that it will abide by the vote of shareholders on this proposal.

This "is a respectful and responsive posture for what is only an advisory, non-binding vote. Hopefully this is an approach we will see more of," says Walden Asset Management's Tim Smith.

Proposals to declassify the board and require majority voting are almost always popular with shareholders, so it's not like these companies are going out on a limb. Just the same, less strife and more reasonable dialogue are welcome indeed.

Eleanor Bloxham is CEO of The Value Alliance and Corporate Governance Alliance (, a board advisory firm.


© 2010 Cable News Network. A Time Warner Company.




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