Are you ready for your Shareholders to nominate your board members?| Are you ready for your Shareholders to nominate your board members? |
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Click on title for full article According to the WSJ
The debate is not whether shareholders should have a say in the way a company is run but whether or not the board is functioning at its best level to run the company. This year the SEC is requiring public companies to disclose the qualifications of their individual board members, as well as their position on risk and diversity. The response in this past season’s proxies was tepid at best. Do boards take this issue seriously? Well, the SEC, through its Proxy Access rule, is making sure they do. A final issue is the increasing liability directors bear. Some are stepping up to the task, but a large number are deciding that the benefits of board service do not outweigh their personal risks, and they are exiting in droves. Thus, an opportunity exists to recruit the best candidates for a board seat, and one that the shareholders will endorse. What is a CEO to do? First a thorough and open examination of the board composition is in order. Every public board must have a standard set of competencies such as financial expertise, human resources, and industry knowledge. However, each board has its own specifications for its director qualifications and a close examination of those needs is a top priority. Another area of focus is the actual processes that the board undergoes in the normal course of operations. For example, are all of the key committees functioning properly? If the Chairman/CEO role is combined, are risks addressed effectively? In brief, a thorough assessment of a company’s board of directors – qualifications, composition, and processes – is in order. The final step is then communicating to the shareholders that the board is able to effectively oversee the company’s operations.If shareholders are comfortable that the board is functioning efficiently and the directors are qualified, they will be less inclined to intervene and will be respectful of the board’s deliberations and decisions. Proxy Access will most directly affect those boards who are not complying with these basic principles. |
, it looks like shareholders will finally get their wish to hold company directors more accountable or replace them. The SEC votes on the Proxy Access rule on August 25 and chances are good it will pass. Proxy Access will allow shareholders holding at least 3% of the company’s equity for more than two years to put their own nominees for board seats alongside the company’s nominees. This is not necessarily a bad thing. After all, if a shareholder holds a significant level of a company’s equity, shouldn’t there be some buy-in and control of how the company operates? Shareholders are the owners of the company and the board does have to account to someone.