Investor advice on your proxy

Clear descriptions of your business, executive summaries and judicious use of graphics are among the features in company proxies appreciated by investors. That and other useful tips emerged from a panel of three of the largest institutional investors at a recent conference* covering executive pay and proxy disclosures: T Rowe Price, Vanguard and BlackRock.

As proxy season approaches, it’s useful to consider what your key audiences are looking for. One common sense piece of advice from the panelists, for example: “Don’t just assume that we know a lot about your business. We invest in thousands of companies so providing information about yours can provide useful context for how your board and compensation are organized.”

 In addition to their conciseness, good executive summaries are liked because they provide a roadmap to the overall proxy. Take-away: make sure you have one and that it reflects the content of the rest of your document. The panelists also offered some advice on formatting, encouraging companies to use graphics deliberately to illustrate their message and not to overdo it.

Say on pay…clearly

On discussing pay issues, a few nuggets:

  • “Make it clear how ROIC relates to your peers and rTSR;”
  • “Payout should be linked to your long-term strategy and should relate this year’s performance to the long-term trajectory;”
  • “One-time awards can be red flags and investors need to understand quickly if it is performance-based.”

A few proxy reports were cited as examples of what to do:

  • Regions: well-organized, clearly talks about culture and mission at the beginning;
  • Hologic: high marks for candor and how pay is truly linked to the business and how it evolved;
  • Xcel Energy: lays out core business drivers and why the board is the way it is.

Only the lonely

Regarding challenges to pay policies or outcomes, Blackrock said they have an ‘engagement first’ approach, engaging with the company about any concerns and voting against “only” in situations of perceived non-responsiveness. T Rowe Price said they voted against “only about 10% of the time.” In general, panelists said they tended to engage with “only” about 50% of companies.

The bottom line: considering the feedback from this key audience in preparing your proxy can be useful for avoiding being among the “only” companies that investors consider need additional scrutiny.

*“Pay Ratio & Proxy Disclosure Conference & Say on Pay Workshop,” organized by CompensationStandards.com & TheCorporateCounsel.net

By |2019-03-05T09:40:34-05:00November 16th, 2017|Categories: Articles|Tags: , |Comments Off on Investor advice on your proxy
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