Naturally cautious about expenses, Cardinal Health decided to bring in outside resources to redesign its proxy statement in view of its increasing importance as a communications tool. Vice President and Associate General Counsel Jim Barnett talks about his team’s experience in working with Labrador.
What benefits did the redesign bring to your team and to Cardinal Health?
Simply put, it made it easier for our directors, management and investors to navigate and digest the information. The team that conducted our engagement sessions with shareholders this fall reported positive comments about the new Lead Director’s letter and the expanded and enhanced proxy summary, both of which were suggested by Labrador. Internally, our directors and management spoke highly of the proxy and really thought it was a stellar effort.
How did you go about deciding to improve your proxy?
As a distributor with thin margins, we’re judicious about our use of outside resources and try to do as much as we can in-house. But we wanted to see if we could step up how we communicate with investors and made a proposal to our management to ask for help. Once we got their buy, we were happy to jump in with Labrador to work together on it.
Redesigning your disclosure: is this a one-shot project or is it a step-by-step process for you?
It was definitely the latter. How we communicate through our proxy is something we review every year, including looking at how others are doing it, and this past year we undertook at more comprehensive reorganization and refresh of the board and governance sections. It’s important to us to provide concrete examples of what we’re doing in these areas to demonstrate their significance to us and that we’re not just updating the SEC-required disclosures.
What has been the reaction from your stakeholders to the evolution of your proxy?
Shareholders that we spoke to this year had less questions. One of the things that they continue to appreciate is the brevity of our proxy and that we get straight to the point. Labrador was able to help us make further progress, including turning more text into graphics. They also helped us improve the existing graphics so that our proxy remains simple and brief while getting the main points across.
Many companies hesitate or think it’s not worth changing the way they disclose their information; how would you respond to this?
I think it’s important for a company’s credibility in the marketplace that they put forth their best effort to have a high-quality, sharp-looking document. These documents have evolved over time from being merely about disclosure to becoming more of a persuasive piece in which you share your perspective with the world on governance and compensation issues. You also want to make sure that the proxy advisors like ISS and Glass Lewis are clear on what you’re presenting.
Can you briefly describe the process and how the investment in terms of hours and money spent compared with your expectations?
It took two or three meetings with Labrador to determine exactly what we wanted to do, what we wanted to ask of Labrador and to get everyone internally on board. The money was consistent with what we expected and well worth it. Once we got going, the process was pretty seamless and even better than expected in terms of the benefit received.
What benefits did you see from using the EOL collaborative platform to create your proxy?
We were able to control the drafting process and make changes ourselves without having to worry about formatting. Previously, we had to design it ourselves and this may have been even more time consuming than drafting the content. EOL saved us considerable time. Also, when we ran into something we couldn’t figure out ourselves or needed a new design, the Labrador team was very responsive in helping us out.
What’s your next step for improving your disclosure?
We’ll look again at what others are doing to see if there’s something we want to integrate. We want to continue to improve our graphics and document design. We started the design this past year a little later while we were vetting vendors, so we would expect to start earlier this year and apply what we learned this past year to make our proxy even better.