Accountability Central Alert for April 11, 2011 - It's That Time of the Year Again - Spring Flowers and Proxy Contest Mark the Season
By all measures, Andria's career has been a success. She excelled in law school and worked in a prestigious law firm for eight years. Then she established her own legal practice with a companion she knew from her law school days. Adrian is well respected by her peers and she’s happy to say, well compensated by her client. So much so that a few years back she signed up with a financial advisor to manage her personal savings and investments. Her financial advisor has Andria's portfolio sprinkled with public companies, and so Andria receives e-mails whenever there is activity in her accounts.
During the past month she has been receiving multiple emails almost every day from the companies in her portfolio. At first she thought the emails were about sales and purchases initiated by her advisor, but upon closer inspection, she (like many other people) now realizes that the mail is almost all about upcoming annual meetings. And the solicitation for her vote in related corporate matters – resolutions and annual board of director elections.
Indeed, for Andrea and millions of shareholders, it's that time of the year again, when most public companies conduct their annual meetings. Once considered routine -- even mundane affairs -- the proxy voting contests have taken on a new life in recent years. The annual corporate electoral process – the “proxy season” for shareholders – has become a period of intense communication with shareowners at some public companies. All part of the “New Normal” of the US capital markets.
The recent intensity of shareowner proxy campaigns is better understood if viewed as a breakdown or failure of shareowner-corporate or shareowner-board communications and attempts, or failure of engagement. When this happens, and shareowners are frustrated at the lack of progress, the weapons-of-last-resort are those in the arsenal of the activist shareowners, especially those with critical issues in focus --- the filing of shareowner-sponsored resolutions; public communication; coalition-building with allied investors; and involvement of third-parties (“influencers”) involved in the issues..
The issues that activist shareowners and their asset managers care most about have put a sharp focus on corporate policies, practices, decisions and actions – including global supply chain policies, human rights, labor rights, diversity, treatment of indigenous peoples, forestry and land management, environmental management, preservation of natural resources, water consumption and waste water, product ingredients, and more. Hardly routine and mundane matters! These are the dimensions of corporate activities very much in focus for shareowners and the professional asset managers they hire.
There has been a steady linkage of unacceptable corporate policies, behaviors, actions -- in the opinion of some shareowners and advocates -- which bring traditional corporate governance issues such as compensation into conflict with these social or societal issues of concern. The financial performance of the issuer is always of primary importance. However, for a growing number of asset owners and managers, the policies, practices, behaviors and Key Performance Indicators (KPIs) on ESG issues (environmental, social and governance issues) have also become very important – and come into sharp focus at Annual Meetings and during proxy contests.
For a growing body of shareowners, these issues are now a major factor in their year-round decision-making process. These issues get debated at proxy time as a primary arena in which contests of will between owner and board, owner and corporate management on ESG issues get public attention – and media coverage. AC editors present the news, commentary and research (publicly-issued) surrounding proxy contests in our Hot Topic Section entitled "2011 Proxy Season: Shareholders Speak Out." Like the rising temperatures in the Northern Hemisphere, his section is getting very hot as we enter the prime meeting and voting season. Here are some recent excerpts: