Posts Tagged ‘The Conference Board’

The 2014 Board Practices Survey

Posted by Matteo Tonello, The Conference Board, on Friday March 21, 2014 at 9:02 am
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Editor’s Note: Matteo Tonello is Managing Director at The Conference Board. This post relates to The 2014 Board Practices Survey being led by Dr. Tonello; Bruce Aust, Executive Vice President, Global Corporate Client Group at NASDAQ OMX; and Scott Cutler, Executive Vice President and Head of Global Listings at NYSE Euronext. Board members, general counsel, corporate secretaries and corporate governance officers, and investor relations officers of U.S. public companies are invited to participate in the survey; the survey can be completed online by clicking here.

The Conference Board, NASDAQ OMX and NYSE Euronext announced last week the renewal of their research collaboration to document the state of corporate governance practices among publicly listed corporations in the United States.

The centerpiece of the collaboration is The 2014 Board Practice Survey, which the three organizations are disseminating to their respective memberships. Findings will constitute the basis for a benchmarking tool searchable by market index, company size (measured by revenue and asset value) and industry sectors. In addition, they will be described in Director Compensation and Board Practices: 2014 Edition, scheduled to be released jointly in the fall.

…continue reading: The 2014 Board Practices Survey

Recommendations from Conference Board Task Force on Corporate/Investor Engagement

Posted by Charles Nathan, RLM Finsbury, and Arthur H. Kohn, Cleary Gottlieb Steen & Hamilton LLP, on Wednesday March 19, 2014 at 9:37 am
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Editor’s Note: Charles Nathan is partner and head of the Corporate Governance Practice at RLM Finsbury. Arthur H. Kohn is a partner at Cleary Gottlieb Steen & Hamilton LLP. This post relates to a report from The Conference Board Task Force on Corporate/Investor Engagement, one of three related publications released by The Conference Board Governance Center as a result of its year-long multifaceted study of corporate/investor engagement.

The 2008 financial crisis and the slow recovery that has followed has brought further evidence tending to support the view that the structure of our corporate sector needs adjustment, and that its faults affect the competitiveness of our economy. The crisis has resulted, as would be expected, in a raft of new rules and regulations, which as usual have been implemented before there emerged any consensus about the nature of the problems. There has also been a vigorous competition of ideas over causes and remedies.

…continue reading: Recommendations from Conference Board Task Force on Corporate/Investor Engagement

The Separation of Ownership from Ownership

Editor’s Note: Matteo Tonello is managing director of corporate leadership at The Conference Board. This post relates to an issue of The Conference Board’s Director Notes series authored by Arthur H. Kohn and Julie L. Yip-Williams; the complete publication, including footnotes, is available here.

The increase in institutional ownership of corporate stock has led to questions about the role of financial intermediaries in the corporate governance process. This post focuses on the issues associated with the so-called “separation of ownership from ownership,” arising from the growth of three types of institutional investors, pensions, mutual funds, and hedge funds.

To a great extent, individuals no longer buy and hold shares directly in a corporation. Instead, they invest, or become invested, in any variety of institutions, and those institutions, whether directly or through the services of one or more investment advisers, then invest in the shares of America’s corporations. This lengthening of the investment chain, or “intermediation” between individual investor and the corporation, translates into additional agency costs for the individual investor and the system, as control over investment decisions becomes increasingly distanced from those who bear the economic benefits and risks of owners as principals. The rapid growth in intermediated investments has led to concerns about the consequences of intermediation and the role of institutional investors and other financial intermediaries in the corporate governance process. These concerns are particularly relevant against a background of increasing demands for shareholder engagement and involvement in the governance of America’s corporations.

…continue reading: The Separation of Ownership from Ownership

Global Trends in Board-Shareholder Engagement

Editor’s Note: Matteo Tonello is managing director of corporate leadership at The Conference Board. This post relates to an issue of The Conference Board’s Director Notes series authored by James Kim and Jason D. Schloetzer; the complete publication, including footnotes, is available here.

There has been a rapid increase in shareholder requests for special meetings with the board. This report discusses the potential benefits and complexities of the board-shareholder engagement process, reviews global trends in engagement practices, provides insights into engagement activities at U.S. companies, and highlights developments in the use of technology to facilitate engagement. It also provides perspectives from institutional investors on the design of an effective engagement process.

The annual general meeting is the main channel of communication between a company’s board and its shareholders. Among other important meeting activities, shareholders have the opportunity to hear executives and directors discuss recent performance and outline the company’s long-term strategy.

Since 2007, there has been an increase in shareholder requests for special meetings with the board. A recent study of board-shareholder engagement activities shows that 87 percent of security issuers, 70 percent of asset managers, and 62 percent of asset owners reported at least one engagement in the previous year. Moreover, the level of engagement is increasing rapidly, with 50 percent of issuers, 64 percent of asset managers, and 53 percent of asset owners reporting that they were engaging more. Only 6 percent of issuers and almost no investors reported a decrease in engagement. Shareholders, particularly institutional investors, believe that annual meetings are too infrequent and do not provide sufficient content to address their concerns.

…continue reading: Global Trends in Board-Shareholder Engagement

Proxy Voting Analytics (2009-2013)

Editor’s Note: Matteo Tonello is managing director of corporate leadership at The Conference Board. This post relates to a report released jointly by The Conference Board and FactSet, authored by Dr. Tonello, Melissa Aguilar, and Thomas Singer of The Conference Board. The Executive Summary is available here. For details regarding how to obtain a copy of the full report, contact matteo.tonello@conference-board.org.

While the number of shareholder proposals filed at U.S. public companies continued to increase this year, management has been less successful at obtaining permission from the Securities and Exchange Commission (SEC) to exclude from the voting ballot new types of investor demands.

The finding is discussed in the latest Proxy Voting Analytics (2009-2013), recently released by The Conference Board in collaboration with FactSet Research. The study examines data from more than 2,400 annual general meetings (AGMs) held at Russell 3000 and S&P 500 companies between January 1 and June 30, 2013. Historical comparisons with findings from the last four proxy seasons are also made.

Data analyzed in the report includes:
…continue reading: Proxy Voting Analytics (2009-2013)

Disclosure Lessons from the 2013 Proxy Season

Editor’s Note: Matteo Tonello is managing director of corporate leadership at The Conference Board. This post relates to an issue of The Conference Board’s Director Notes series authored by James D. C. Barrall, David T. Della Rocca, Carol B. Samaan, Julie D. Crisp, and Michelle M. Khoury.

In light of increased transparency and governance expectations imposed by shareholder advisory groups and increasingly aggressive attempts by plaintiffs’ firms to enjoin shareholder votes on key compensation issues, U.S. public companies face a substantial burden to provide adequate disclosure in their annual proxy statements. This Director Notes examines the key disclosure issues and challenges facing companies during the 2013 proxy season and provides examples of company responses to these issues taken from proxy statements filed during the first half of 2013.

U.S. public companies face a substantial burden to provide adequate disclosure in their annual proxy statements. In addition to complying with a growing number of increasingly burdensome disclosure rules from Congress and the Securities and Exchange Commission (“SEC”), companies must take into account corporate governance guidelines from institutional shareholder advisory groups such as Institutional Shareholder Services (“ISS”) and Glass Lewis & Co. Moreover, a recent wave of proxy injunction lawsuits has added to this burden and created additional issues and challenges for companies. The plaintiffs’ bar has also been actively pursuing damage claims against public companies based on disclosure and corporate governance issues, including issues relating to Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”). All of these developments present many traps for the unwary. As a result, companies should review their executive compensation disclosure and their say-on-pay and equity plan proposals to determine whether additional disclosures, beyond those required by statutes and rules, are appropriate to attempt to reduce the risk of a potential lawsuit or investigation by a plaintiff’s law firm.

…continue reading: Disclosure Lessons from the 2013 Proxy Season

When Do Shareholders Care About CEO Pay?

Editor’s Note: Matteo Tonello is managing director of corporate leadership at The Conference Board. This post relates to an issue of The Conference Board’s Director Notes series authored by Ryan Krause, Kimberly A. Whitler, and Matthew Semadeni.

With recent legislation mandating that publicly traded corporations submit CEO compensation for a nonbinding shareholder vote, a systematic understanding of how shareholders vote under such circumstances has never been so important. Using simulated say-on-pay votes, this post investigates how different levels of CEO pay and company performance can interact to influence how shareholders vote.

In July of 2010, President Barack Obama signed the Dodd-Frank Wall Street Reform and Consumer Protection Act, which, among other things, mandated that all publicly traded U.S. corporations solicit a non-binding advisory vote from their shareholders to approve or reject the compensation of the most highly compensated executives, commonly referred to as “say-on-pay” (SOP) votes. In the short time since the passage of Dodd-Frank, these votes have already made waves. In 2011, the shareholders of Stanley Black and Decker issued a “no” vote, and the board subsequently lowered the CEO’s pay by 63 percent, raised the minimum officer stock requirements, altered its severance agreements to be less CEO friendly, and ended the practice of staggered board terms. [1]

…continue reading: When Do Shareholders Care About CEO Pay?

Communication Practices in CEO Succession

Posted by Matteo Tonello, The Conference Board, on Thursday July 25, 2013 at 10:22 am
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Editor’s Note: Matteo Tonello is managing director at The Conference Board. This post relates to an issue of The Conference Board’s Chart of the Week series authored by Dr. Tonello.

A review of the CEO succession announcements made by S&P 500 companies in 2012 showed that they typically included details on when the succession would take effect, why the departing CEO is leaving, and whether the incoming CEO will be named board chairman; a statement by the departing CEO on his/her belief that the board has selected a qualified replacement; a statement by the lead independent director that the incoming CEO is the right choice for the company, given its current position, and thanking the departing CEO for his/her service; a statement from the incoming CEO that the existing management team is strong, the company is well positioned for the future, and expressing appreciation that the board has selected him/her as chief executive; and a description of the incoming CEO’s professional qualifications, and, if necessary, details on other director or senior management changes that will take place.

…continue reading: Communication Practices in CEO Succession

The Sustainability Business Case

Editor’s Note: Matteo Tonello is managing director at The Conference Board. This post relates to an issue of The Conference Board’s Director Notes series authored by Marc Bertoneche and Cornis van der Lugt; the full publication, including footnotes, is available here.

While much has been published on the business case for sustainability during the last decade, businesses have been slow to adopt the green innovation and sustainability agenda. Reasons include a lack of consistency in the indicators employed by analysts, and a failure to effectively incorporate financial value drivers into the equation. This article defines a green business case model that includes seven core financial value drivers of special interest to financial analysts.

Researchers, management experts, and activists have published extensively over the last decade on the business case for sustainability. The accumulated evidence and experience makes it clear that sustainability actions do not have a negative or neutral impact on the financial performance of a business. Rather, it is a question of the degree to which sustainability actions have a positive impact on financial performance. One research overview has identified more than 60 benefits, clustered into seven overall business benefit areas.

As greater attention is paid today to integrated thinking and more sustainable business models, the link between sustainability actions and corporate financial performance remains central. However, the business case evidence collected to date has failed to have the expected scale of impact. One reason for this is the lack of consistency in indicators employed by analysts in their examination of possible cause and effect relations. Another is the gap in discipline between sustainability experts and financial officers, with each community conversing in its own language (jargon). Sustainability activists have failed to get a better grasp on corporate finance, while financial officers have failed to get a better grasp on the sustainability agenda.

…continue reading: The Sustainability Business Case

CEO-Board Chair Separation: If It Ain’t Broke, Don’t Fix It

Posted by Noam Noked, co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Tuesday June 25, 2013 at 9:20 am
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Editor’s Note: The following post comes to us from Matthew Semadeni, Associate Professor of Strategy at Indiana University. This post relates to an issue of The Conference Board’s Director Notes series authored by Mr. Semadeni and Ryan Krause; the full publication, including footnotes, is available here.

One of the most contentious corporate governance issues for boards of directors is board leadership, and specifically whether sitting CEOs should also serve as board chairs. This report examines three types of CEO-board chair separation and their consequences on company performance.

To date, research on CEO-chair separation has yielded only one overarching conclusion: a CEO who also serves as board chair is no better or worse for company performance than an independent director serving as board chair. Nevertheless, many in the corporate governance field advocate for separation of the CEO and board chair roles. Here, we examine three possible types of CEO-board chair separation and their performance consequences. Our results suggest that if a company chooses to separate the CEO and board chair positions, particularly by demoting the CEO, the reason for the separation should extend beyond the conventional wisdom that doing so is “best practice.”

…continue reading: CEO-Board Chair Separation: If It Ain’t Broke, Don’t Fix It

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