Ernst & Young Report: Early Filings Show Enhanced Transparency Around Corporate Governance Practices
According to a report by Ernst & Young, early filings reveal emerging trends in proxy statement disclosure: S&P 500 companies are showcasing shareholder outreach efforts in the area of executive compensation, demonstrating strategic board composition and tightening company messaging around key topics of investor interest. The report entitled, Proxy Season 2012: Trends in Proxy Statement Disclosure, finds that regulatory reforms and enhanced disclosure rules around say-on-pay (SOP) votes have made board communication strategies with investors a higher priority for many companies.
The early look at filings for the 2012 proxy season shows three emerging trends:
- Executive summaries and board letters to shareholders are a communication strategy. Large U.S. companies are increasingly using executive summaries and board letters to shareholders to tell their story and highlight governance practices as part of broader efforts to be responsive to shareholders around particular areas of investor interest, such as executive pay, shareholder engagement and sustainability.
- Shareholder engagement is becoming a priority for some boards. An increasing number of companies – 25% of those reviewed – are disclosing shareholder engagement efforts in connection with SOP votes. Companies made targeted pay reforms based on shareholder feedback, and followed up by communicating those pay changes and engagement efforts in the proxy statement.
- Strengthened disclosures around board composition show the board as a strategic asset. Leading companies are now disclosing a skills matrix approach for board composition, showcasing how different director qualifications are strategically aligned to the company’s business needs and why these areas of expertise are needed at the board level.
“Proxy statements are evolving. Boards are sharpening their message and highlighting efforts to be responsive to shareholders, an area on which they increasingly are being evaluated,” said Allie Rutherford, Associate Director of the Corporate Governance Group at Ernst & Young LLP. “The ongoing challenge is establishing a balance between being responsive to investors and ensuring governance practices are appropriate for the company’s specific circumstances.”
Published: May 8, 2012 By: