Investor Perspective on Boards

At the recent Board Leadership Forum, co-hosted by Equilar and Nasdaq in New York City, a group of directors, investors, GCs and other advisors gathered to discuss the state of corporate governance at the board level. Topics ranged from board diversity to setting compensation to conducting regular board evaluations.

Perhaps the most anticipated panels bookended of the event, featuring the perspectives of institutional shareholders and proxy advisors. A summary of their thoughts and opinions on various aspects of boardroom business are below.

Transparency on Board Performance

“For board attendance, 75% is not a high enough threshold. If I’d attended 75% of my school days I don’t think I would have done very well.”

“We’re not in the boardroom, and we have no idea at first who is contributing what and how the board works together. Oftentimes disclosures, rules and policies are reactive to a situation. Use the proxy as a tool to start engagement and dialogue.”

For board attendance, 75% is not a high enough threshold. If I’d attended 75% of my school days I don’t think I would have done very well.

Shareholder Engagement

“There’s an obligation for corporations and shareholders to be invested for the long term, because we’re going to be invested in these companies for a long time. It’s a relationship management business. I’m not going to be at this company forever, and the person on the investor relations side is not either—so it’s our job to be stewards for the time that we are here.”

Board Diversity

“There’s diversity and there’s inclusion. If diverse candidates are marginalized, then what’s the point of doing it? It’s very important to tell that inclusion story. We also expect boards to be able to see how management dealing with that throughout employee base. For example, you can fix the issue of women on boards top-down in the short-term, but we need to see the diverse pipeline of talent rising to the top.”

“It’s important to understand the global perspective in terms of social, government, quotas and other regulation. At this point, we don’t have serious prospects for regulation other than disclosure-based pressure. I think we should expect name and shame. Investors are so frustrated with the lack of progress. For example, 100 companies in our small-cap fund have never had women on the board.”

I think we should expect name and shame [on board diversity]. Investors are so frustrated with the lack of progress.

“In other countries, you have rules, standards, laws, etc. It doesn’t mean companies have met those, even though they are the law, but they sure are on their way. So targets from various organizations and advisors and investors are a reaction to boards not doing anything about it because they don’t have to. There’s a huge runway to have these conversations, and there is tremendous resistance from boards. There’s no question progress is slow, and institutional investors are going to get the point where they say enough is enough, and they are going to be much more specific with targets.”

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For more information on Equilar events and board education symposiums, please visit http://www.equilar.com/equilar-events.html

For more information on Equilar data and analysis, please contact, Dan Marcec Director of Content & Communications at Equilar. He can be reached at dmarcec@equilar.com.

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