In the once cut-and-dry world of proxy statements, colorful communication matters more than ever before.
With shareholder activism still on the rise, and institutional investors like BlackRock and State Street, and collectives like the Investor Stewardship Group, sharpening their focus on corporate governance issues, the tick-the-box approach to proxy statements is quickly becoming a thing of the past. Many companies are moving beyond the traditional black & white “legalese,” paragraph-heavy proxy statement and taking a more innovative, communications-focused approach to improve transparency, defend against activism, and better engage with shareholders.Here are four ways that you can use innovative design and communications to set your company up for proxy success:
1) Sum it Up. Including an executive summary at the start of the proxy is an excellent way to highlight the most important topics, feature governance changes and shareholder engagement practices, and establish the strategic rationale for the proxy proposals that follow. This communications-rich addition is extremely effective, and so it is no surprise that it is on the rise. According to Equilar, the percentage of Equilar 100 companies (defined as the top 100 U.S.-listed companies by revenue) that include proxy summaries increased from 52.6% in 2013 to 74.0% in 2017.
2) Make it Pop. The use of charts, graphs, color and active headlines can transform the technical, data-dense proxy into content that is more easily understood and digested by readers. By incorporating elements such as non-executive officer (NEO) pay mix charts, graphs that illustrate executive pay relative to performance, an executive compensation checklist, or headlines that put governance practices into a strategic context, your company can highlight its strong governance practices.
3) When it Comes to the Board, Make it Personal … and Strategic. Include a letter from the board of directors that speaks to its collective dedication to good corporate governance and commitment to generating long-term shareholder value. Reference the company’s mission, vision and values as key components in achieving these goals. In addition, make your director biographies a more strategic element of the proxy. Dense board biographies often fail to effectively feature board members’ qualifications and miss the mark in demonstrating how your board composition supports your strategy. A more innovative approach to proxy design can solve this. For example, the simple addition of board member photographs can “humanize” directors. Dashboard pie charts are an effective way to highlight the board composition statistics that are important to your shareholders, like diversity, tenure, independence and age. And, by supplementing board biographies with a set of icons or a table that highlight board selection criteria, you can demonstrate how each director’s skillsets and qualifications align with your company’s overall strategy.
4) Go Digital. Investors, like most other audiences, are accustomed to consuming information digitally. So why not present your corporate governance messages in a user-friendly online format. The digital proxy statement provides you with an excellent opportunity to highlight key information using charts, graphs and photos far beyond what you could do on the printed page. And the web offers the user a visually appealing way to access the specific governance information they want much more quickly and easily.
Too often we hear of companies that have increased shareholder engagement and made changes to their governance practices in response to, or anticipation of, shareholder concerns, only to be surprised by a proxy Advisor ‘Against’ recommendation or failed proxy vote. More often than not, their enhanced efforts and changes were buried in the dense paragraphs of the proxy and, as a result, were overlooked. Does that scenario sound familiar to you? When you flip through your proxy statement, do you see black & white text with the occasional blue table? If you answered yes to either of these questions, it just might be time to put your preconceived notions about what a proxy should look like aside and give some serious consideration to implementing best-in-class design and communications practices in your next proxy.
To help companies implement effective year-round shareholder engagement programs, beginning with a best-in-class proxy, we offer the Proxy GamePlan™ strategic advisory service. Proxy GamePlan provides management teams and boards of directors with a strategic roadmap for effective shareholder engagement that is grounded in a deep, data-backed understanding of a company’s proxy practices, shareholder voting behavior and peer landscape, and is activated through a series of thoughtful and effective communications channels.
Ryan Flaim is a Vice President at Sharon Merrill Associates. She has served as a trusted advisor to C-suite executives and in-house communications teams across a variety of industries. She counsels clients on a range of strategic communications areas, including corporate governance and shareholder engagement, messaging, internal communications and M&A communications.