Investors and U.S. corporate issuers came
together as never before in 2007 to address a wide range of concerns and
to better align views on corporate best practices.
That trend is expected to carry into 2008,
observers on both sides of the divide say, particularly if the Securities
and Exchange Commission empowers shareholders by eliminating undirected
"broker" votes in uncontested director elections, and allows investors to
nominate corporate directors.
If these key regulatory changes are
approved later this year, investors will have additional tools to bring
companies to the negotiating table, analysts say. These changes may also
provide some activists an incentive to initiate "vote no" campaigns,
But such campaigns may never materialize
if, as expected, the trend toward engagement and away from confrontation
continues. While a substantial increase in the level of shareholder
proposal withdrawals is the most tangible evidence of the trend toward
dialogue, other indicators also suggest that engagement is taking root and
is measurably altering the governance landscape.
The creation this spring of an
investor-issuer working group to tackle the nuances of advisory voting on
executive compensation is one key example. The decision by pharmaceutical
giant Pfizer—a governance trailblazer on such issues as director
resignation policies and compensation disclosure—to formally engage its
top shareholders is another.
Meanwhile, the growing use of the Internet
to foster and promote communication between corporate managers and owners,
coupled with the relative paucity of high-profile "vote no" campaigns
during the 2007 proxy season, also serve as potent reminders that
investors and corporate issuers are favoring constructive engagement over
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