For the second year in a row, our benchmark study of the proxy statements filed by Fortune’s 250 largest U.S. firms determined that companies are devoting an increasing amount of attention (and proxy real estate) to board diversity. We also observed more disclosure about shareholder engagement and risk management, often with the addition of infographics.
We looked at over 90 different document features, from the mundane (how many companies do you think include the time, date, and place of the annual meeting on the cover?) to the weighty (cybersecurity is specifically discussed in 63% of the proxies we reviewed). All of which are based on how investors retrieve information, such as:
- How easy is it to access the data?
- Can it easily be compared to peers?
- How accurate is it?
- Is information readily and quickly available?
We would love to share all of our findings with you. Here are some of the highlights.
A more complete picture of the Board
In 2017, 33% of the companies in our survey included either an individualized skills matrix or a graphic showing the total number of directors with a range of relevant skills; and in some proxies, the information appeared both ways. In 2018, companies seemed intent on sharing more information about their directors, and accomplishing that more visually. First, there was a significant increase in skills disclosure: 29% provided individualized skills matrices, and 26% provided aggregate skills data. In addition, we saw notable jumps in the percentage of companies using graphics to show director tenure (from 37% in 2017 to 49% in 2018), the board’s age distribution (from 12% to 20%), and the board’s gender distribution (from 21% to 41%).
The number of proxies that employ graphics to describe their nomination and board evaluation processes is small, but also on the rise. We saw graphics for the nomination process in 13% of the 2018 proxies, compared to 9% last year, and for the evaluation process in 16% of the 2018 proxies (up from 6%).
Pay ratio? Maybe not a big deal after all.
We were unsure what to expect the first year companies were required to disclose the ratio of the CEO’s pay to the compensation earned by the “average” employee. Many companies went strictly by the book, disclosing no more than necessary. Others offered alternative ratios and contextual information. Nobody gave this section any prominence by adding graphics (other than a basic pay chart) or placing the disclosure early in the document.
Some things don’t change
Although new standards of best practice emerge regularly, certain qualities have persevered. We find that the best proxies emphasize distinct document structure, clear content, jargon-free plain language, and enhanced design features.