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Comments of John C. Wilcox

April 4, 2011

invited response to

March 22, 2011 Forum Report:

Inviting Comments on Board Advisor's Views of "Fifth Analyst Call"


John C. Wilcox, whose comments are presented below, is chairman of Sodali Ltd., a consultant to global companies. He is also a consultant to TIAA-CREF, where he had been the senior vice president and head of corporate governance from 2005-2008, and was previously chairman of  Georgeson. For his recently distributed proposal of a director's "duty to inform" referenced in his comments below, see

 March 31, 2011 in The Harvard Law School Forum on Corporate Governance and Financial Regulation: "The Directors’ Duty to Inform"



Comments of

John C. Wilcox

April 4, 2011



It should come as no surprise that the “Fifth Analyst Call” is widely opposed by companies, their lawyers and their communications advisors. Although the idea makes sense, the fact is that directors of U.S. companies are not ready for open dialogue with their investors, even on a narrowly defined topic such as corporate governance and the annual meeting. The reason they are not ready is because U.S. companies – and boards in particular – are generally on the defensive in their communication with shareholders.

Instead of communication, U.S. companies practice disclosure. Disclosure is defined by prescriptive rules and enforced by liability and regulatory penalties, forcing directors into a compliance mode with little freedom to talk about what really goes on in the boardroom. It is no wonder that directors shy away from questions about board process and decisions, or that their legal counsel warn them about Reg FD, or that CEOs worry about multiple voices confusing the marketplace. These are very real problems. They exist because the U.S. has chosen a rules-based, strict-compliance, liability-enforced system of corporate governance that constrains communication, makes boards and shareholders mistrustful of each other and relies on adversarial modes of engagement.

There is a better way. The UK is the best example with its principles-based, comply-or-explain system of corporate governance. The UK is not a paradigm, but its approach to governance allows companies and boards to take charge of communication with shareholders, instead of vice versa. It permits directors to make decisions based on business and strategic goals, rather than compliance. It gives boards wide discretion to modify or even reject corporate governance norms and best practices, provided that they can explain their reasons for doing so in terms that satisfy their duty to act in the best interest of the company and shareholders. In a sense, governance in the UK is more democratic than in the U.S. because it recognizes that boards must engage in substantive dialogue with the constituents they represent.

It is important to remember that whenever a company decides to go public, accepting capital from the investing public and subjecting itself to valuation in the capital markets, its board and management take responsibility for dealing with the problems that arise from being publicly traded. Professor Hillary A. Sale has coined the term “publicness” in a recent article ( to describe an entire set of responsibilities and constituencies that U.S. companies need to handle more effectively. In the same Journal I have published an article suggesting that a directors’ duty to inform could open boardroom windows and give directors more freedom to tell shareholders what the board is doing and how it is looking after their interests.

It will not be easy to change behavior in U.S. boardrooms, even more difficult to change the habits and mindset of corporate executives and shareholders. Until we do so, we will be unable to break down the barriers to communication between U.S. companies and their owners or eliminate the inefficiencies and cost that result from mistrust and confrontation.

John Wilcox
9 West 57th Street, 26th Floor
New York, NY 10019
Tel. 212-825-1600




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