Electronic Participation in Shareholder
Inviting Comments on Board Advisor's
Views of "Fifth Analyst Call"
Karen Kane, a board communications advisor at
Karen Kane Consulting and
former board secretary of the Federal Reserve Bank of Chicago, has invited participants in the Forum's
"E-Meetings" program to comment on her views, presented
below, of opportunities for corporate boards to
adapt an institutional investor group's proposal of a "Fifth Analyst Call"
as an effective means of managing communications with shareholders.
For background reference, the "Fifth Analyst Call" proposal and broader
interests in "pre-meeting meetings" have been addressed in the following:
Your comments will be welcomed, either informally or in statements to be
reported to other Forum participants.
GL – March 22, 2011
Chairman, The Shareholder Forum
c/o Lutin & Company
575 Madison Avenue, 10th Floor
New York, New York 10022
March 21, 2011
Enlightened Companies: Step Up and
Co-opt the Fifth Analyst Call
Here’s the challenge: major
and influential global institutional investors embrace a “Fifth Analyst
Call” as a concrete, easy-to-implement solution to improve “open and
constructive dialogue” with US boards of directors on the topic of the
company’s governance. Others in the investment community, beginning with the
companies themselves and including analysts and investors—both professional
as well as “retail” investors—see problems in the details. Rather than
abandon the idea, enlightened companies could refine the concept of the
Fifth Analyst Call to improve upon a proposal beyond serving the narrow
interests of this coalition to make it a fair process that
corporate managers can properly use to serve all investors equally.
Since the quarterly analyst call focused on the company’s quarterly results
has been such a hit, institutional investors reasoned, why not have a “Fifth
Analyst Call” with a focus on corporate governance? The investors proposed a
standard of corporate governance issues for the agenda including governance
framework and philosophy, board structure, effectiveness and succession
planning, audit and/or risk committee matters and of course compensation.
What’s really at issue here is the opportunity for boards to gain direct
control of communication with investors rather than through the intermediary
of a proxy firm like ISS. This enables the company to define the issues with
shareholders themselves rather than letting it be defined for them. Boards
should initiate investor outreach, but how they do it should be customized
for each board. Boards are not a one-size-fits-all commodity when it comes
to shareholder communication. All boards should be listening, developing
channels to receive shareholder intelligence, getting a better sense of
where their shareholders stand on key issues such as director competencies,
independence and executive compensation issues.
Some boards will see this opportunity as a constructive way to define the
shareholder issues and decide how they want to engage. For others, such
communication raises the specter of the board assuming executive
responsibilities for messaging, something many boards strongly resist. Yet
this is another example of the kinds of decisions boards must make
individually, company by company in light of their competitively
differentiated efforts to win the support of shareholders. Many see
governance communication as a board-centric role while other boards may
simply want to provide oversight and ensure consistency. Some boards are
blessed with members who are accomplished speakers and thought leaders. Why
not utilize such board members as a company resource in defined situations?
However, once the board designates a member to “speak for the board,” it
must commit to adequate preparation as well as board agreement about the
While the original Fifth Analyst call limited the audience to selected
institutional investors, management could choose to open it up to all
investors by webcasting it. Not only would it nullify any Regulation Full
Disclosure concerns, but would also serve to enlarge the dialogue between
boards and investors. Should the topic of the call or webcast be restricted
to governance only, or are there occasions for the company to expand beyond
governance and voting issues?
By creating venues to listen to shareholders, companies better understand
their concerns. Scheduling the conference call or webcast in conjunction
with the proxy and prior to the annual meeting may give management and
directors a better perspective on how the proxy is being received. They may
begin to see how the legal language proves more confusing than helpful. It
could even result in improving the proxy language going forward.
Most importantly, companies that embrace the concept of the “Fifth Analyst
Call” would demonstrate that they respect and value their shareholders,
which is the true basis for a long-term relationship.
Karen Kane Consulting
1415 West 22nd Street, Tower Suite
Oak Brook, Illinois 60523