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
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
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
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 (http://thevaluealliance.com),
a board advisory firm.
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