With proxy access now a reality, the pressure will be on corporate secretaries and general counsel to sell their directors to the investment community
Dear readers,
The hysteria is reaching a crescendo. In about 24 hours the SEC will have made its recommendation on proxy access. The final rule will take a little time to emerge, but we will know the basic ground rules come Wednesday evening.
I won’t bother speculating about what the rules might be. It doesn’t really matter. There are going to be legal challenges and all sorts of fighting, but let’s face facts: at some stage investors will be able to propose director candidates and have them included alongside management-proposed candidates on the corporate proxy. It may not happen in 2011, but it will happen soon.
So, what does this mean for all you overworked corporate secretaries and general counsel? It does mean more work, but what it really means is that your fate, in terms of your employment prospects, may well become tied up with that of your directors. How popular will secretaries be if board members don’t get elected? Not very is the answer. Not that it will be your fault, but the board will be looking for someone to blame, and you will be in the firing line.
All of this is preamble for one very obvious reality: you are going to have to promote your directors and present a compelling story not only for why they should be on the board, but also why they are better than the other candidates.
Please don’t think the usual biography pages or even the expanded experience and attributes disclosure that’s now in proxy statements is going to be enough. Relying on those disclosures will not result in a positive outcome for the director or for you.
You need to sell your directors to the investment community. How can you do that? One creative way might be to take a new look at the 21st-century board assessment tool, the skills matrix. You know what I mean: a chart that lists directors’ name on one side and the skills required by the board on the other side. Academics will tell you there are 12 or so skills, but it will be different for every company.
These skill matrices are usually kept private as part of the board self-assessment process and rightly so. But they might be extremely valuable in promoting your directors. Take a look at the new ‘Template for Disclosure of Skills and Attributes’ from the National Association of Corporate Directors. It has a similar feel to the skills matrix, but it is not quite as sensitive.
In the words of NACD president and CEO Ken Daly, ‘The stakes are far too high in today's corporate environment for directors to relinquish their critical role in building boards that represent the interests of all shareholders for the long term. That said it is incumbent upon boards to better articulate the value that their directors bring to the table. Using this disclosure template will empower boards to proactively lead the conversation about their composition.’
The template will help corporate secretaries prepare disclosure documents that not only clearly articulate the qualifications of the individual director, but also explain how those qualifications marry with the strategic goals of the company. Further, it will help to identify common ground among directors, management, institutional investors and other shareholder communities.
This last part is important. Any good team needs to gel if it is to function effectively. It is not just about the individuals and what they bring to the table, it’s also about how they interrelate personally and professionally.
Basically what I am saying is that you need to become a salesman. Your prospects are investors and your product is the director. And as with all salespeople, your performance will be based on how well you sell.
Please send me your thoughts and comments on these or any other topics.
Brendan Sheehan
Executive editor
Corporate Secretary
