Evolving proxy statements reflect board’s changing role, Nasdaq study says

Jun 19, 2019
Nasdaq releases report into board governance trends to coincide with Center for Corporate Governance launch

The vast majority of US companies (86 percent) now include a ‘Governance Highlights’ section in their proxy statement, which is a testament to how proxy statements – and the role of the board – continue to evolve, according to new research from Nasdaq.

The research – Where Board and Investor Priorities Intersect reveals that more than half (54 percent) of the S&P 100 include a letter, message or Q&A from the board and/or CEO in their proxy statement to showcase recent company and governance achievements. The report authors note that some companies are making efforts to align their governance highlights with the Investor Stewardship Group and other investor standards.

Almost two thirds (64 percent) of the S&P 100 use this opening section of the proxy to highlight their purpose, mission, vision or strategy, while 48 percent include comments about company culture and values.

‘For me, the most compelling takeaway is seeing how the proxy itself is evolving to the broader shifts in the governance landscape to go from a barebones compliance document to seeing more voluntary disclosure around vision, director skills, qualifications and why these directors represent the best mix of individuals,’ says Kellie Huennekens, head of Americas at the Nasdaq Center for Corporate Governance.

‘The governance highlights section provides an upfront digest of where the company is aligned with best practices, and it’s all in one place. Historically you’d have to dig through charters and bylaws to find some of this information, but now it’s all in one place.’

Nasdaq’s research also highlights several additional voluntary disclosures around E, S and G issues. For instance, the report highlights that conversations around company’s human capital management (HCM) practices are being promoted from the compensation committee into the full boardroom. More than half (51 percent) of S&P 100 companies discuss HCM issues as a priority in their proxy filing, while 56 percent emphasize the importance of diversity and inclusiveness.

HCM issues that are discussed include equal pay and opportunity, and protection from sexual harassment and hostile working environments.

Huennekens says she looks forward to seeing subsequent proxy research to get a sense of how voluntary disclosures around HCM and environmental issues evolve. Interestingly, Nasdaq research shows that environmental and social topics were the second most-discussed subjects during direct engagement with investors, underscoring the importance of these subjects.

The research report is released to celebrate the launch of Nasdaq’s Center for Corporate Governance. Speaking to Corporate Secretary about the launch, Martyn Chapman, executive director for the Center for Corporate Governance, says: ‘We’re at a unique moment in time [with regard to] corporate governance practices and the rather sudden role that E and S topics are playing in the boardroom. Because of our distinct position at the intersection of the markets and what we refer to as ‘the corporate experience’, we’re in a unique position to develop best practice material.’

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