Society essentials: guidance on governance

The Society of Corporate Secretaries and Governance Professionals (SCSGP) held its 2012 Essentials Conference in February at Disney’s Boardwalk Resort in Orlando, Florida, providing an overview of corporate governance standards and critical guidance on ever-changing areas of governance, compliance and legal issues. The meeting also alerts public, private and not-for-profit organizations to many of the hot-button issues they may have to contend with in the coming year.  

The top governance trends that will dominate the next 12 months include: the growing role of the federal government in setting and enforcing governance standards; the increasing amount of responsibility being placed on independent board members; the increasing influence of institutional shareholder voting on public company governance; evaluation of the impact of proxy advisory firms; the global convergence of governance standards; and not-for-profit organizations adopting public company governance standards. Expert panels discussed the trends and offered valuable solutions for all attendees.

A major focus of the conference was the corporate secretary’s communication with and responsibility to the board of directors. One panel – featuring Robert Barker, former general counsel of Mueller Water Products; Shelley Dropkin, deputy corporate secretary, general counsel and corporate governance officer at Citigroup; Paul Washington, senior vice president, deputy general counsel and corporate secretary at Time Warner; and Holly Gregory, partner at Weil Gotshal & Manges – reemphasized the duties of the board and the importance of establishing a board culture that helps improve efficiency.

After going through the long list of board duties and responsibilities, Gregory made it clear the corporate secretary should weed through the clutter and ‘make sure the board has time to deal with the issues that only the board can take care of: corporate strategy and material risks, management performance, executive compensation, succession planning and material transactions.’

The panel also stressed that the board should ‘foster a culture of open dissent’ that allows any director to feel comfortable with challenging assumptions in an atmosphere of rigorous debate. Such an atmosphere requires ‘candor and trust’ among the directors, and Washington said the CEO’s leadership in promoting openness would help establish good board culture. ‘Executive sessions’ where board members could candidly ‘say whatever is on the top of their mind [without management present]’ can also work to strengthen the interaction between board members, he explained.

Learner lessons

The society was careful to include a panel about the role of the corporate secretary aimed at helping those new to the job cope with the massive amount of responsibilities they have taken on. Darla Stuckey, SCSGP senior vice president of policy and advocacy, James Brashear, vice president, general counsel and corporate secretary of Zix Corporation, Rhonda Carroll, Encore Bancshares’ senior vice president, chief compliance officer and corporate secretary, and Joseph Caruso, executive in residence and senior fellow in corporate governance for the Conference Board shared their experiences in the job, offering a number of tips.

The panelists warned attendees that dealing with the executive team and the board of directors can be frustrating at times because of the extremely high standards they expect. ‘Even if you do things absolutely perfectly, you just barely meet the expectations of the board,’ said Brashear.

Stuckey explained that corporate secretaries have to take on multiple roles. Unfortunately, she said, they can find themselves charged with doing everything from compiling research to help execute corporate strategy, to selecting the wine that will be served during a board dinner meeting. She advised corporate secretaries to learn how to delegate.

Carroll urged corporate secretaries to learn how to use technology, such as board portals, to make their job easier. She also stressed that it is critical to understand how each board member likes to communicate. ‘Give them information in the way they will best respond,’ Carroll said. ‘Some board members want phone calls, not emails.’

With proxy season approaching, a number of panels at the conference addressed shareholder communications, including how to run shareholder meetings. As shareholder activism appears to be growing, companies that have had relatively uneventful shareholder meetings may need to be on the alert for disruptions, picketers and even violence. ‘Make sure the chairman is always in control of the meeting, because if he or she loses control of the meeting, chaos ensues.’ warned Carl Hagberg, chairman of Carl T Hagberg & Associates, who moderated one of two panels on public company shareholder meetings.

Meeting the challenge

The panels on shareholders meetings emphasized that it is important for the corporate secretary to make sure there is ‘an emergency script’ in case something unexpected happens at the meeting that requires you to end it and leave quickly. The meeting chairman should know how to respond to people making motions from the floor and should be able to move through the business of the meeting as quickly as possible. And security should be tightly monitored, not taken for granted.

The conference also included a session on companies going public, which featured Pamela Kunkemoeller, vice president and general counsel of Wilson, a Schlumberger company, and Marita Makinen, a partner at Lowenstein Sandler.

The two panelists reviewed all the filings that must take place to prepare for an IPO, including the all-important S1 filing, where every fact presented must have supporting statistical data and documentation. Makinen suggested preparation for an IPO should start at least a year before you plan to file, emphasizing that companies must give themselves time to understand everything about filing. ‘It’s easy to give up certain things after you go public, but it’s difficult to claw back afterwards things you forgot to include [to start with],’ she said.

Kunkemoeller said corporate secretaries must make sure the staff and board are ‘IPO-ready’, because any mistakes could hurt stock price value. ‘You don’t want to start down this road and have your IPO stalled because you haven’t really thought through who is going to do what,’ she explained.

The conference provided much more information, setting an excellent tone for the SCSGP national conference, which takes place in July in Washington, DC.

Activists targeting larger firms

Has your organization been approached by a shareholder activist within the last 12 months?
                       Yes (%)    No (%)   N/A
Small cap             8          92            –    
Mid-cap              27          73            –
Large cap           60          38            2