Navigating the “Hurricane” in Corporate Governance

February 9, 2017

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Investor activists. Waging corporate war through “proxy access.’’ The vagaries of a new, wildly unpredictable administration in Washington.

 As the season for annual meetings and proxy votes approaches, FleishmanHillard offers a timely guide to the issues and imponderables of corporate governance.

This navigational resource, “Living In The Eye Of The Hurricane,’’ identifies a cluster of volatile trends  certain to influence the interplay of public companies,  investors and boardroom dynamics.

Key factors include:

  • Institutional investors hold an increasingly dominant share of the equity in U.S. corporations – and they are increasingly inclined to use that power to shape the management, boards and behavior of American companies.
  • Shareholder activism has achieved acceptance as a legitimate investment strategy.
  • Activists who care deeply about the Environmental or the Social or the Governance track records of public companies – the so-called ESG factors – are increasingly influential in the way investors vote their shares.
  • “Proxy access’’ (the ability of investors to get the names of their director candidates directly on a company’s proxy statement, rather than having to publish separate candidate nominations) is an increasingly powerful weapon in the corporate governance wars.
  • “Say on Pay” – investor vigilance on the compensation of top executives – is a rallying cause that no big company can any longer safely ignore.

Even while identifying these and other trends, “Eye of the Hurricane” acknowledges the difficulties of predicting how those forces might play out, given the current political and regulatory weather in Washington.

The Dodd-Frank Act, passed by a Democratic Congress in 2010, was meant to provide greater protection to investors – and give them a louder voice in the way companies are run. The current President is inclined to scale back Dodd-Frank. It remains to be seen how far down that path the current Republican Congress might follow. Wherever things are heading, “Living In The Eye Of The Hurricane” is a great starting point for navigating an uncertain future in corporate governance.

See the full version of this resource here.