Directors and Investors Identify Keys to Long-Term Value

Institutional Investors Provide Insights to Improve Disclosures

News provided by

National Association of Corporate Directors

Mar 01, 2011, 09:35 ET

WASHINGTON, March 1, 2011 /PRNewswire/ -- This year's proxy season provides new challenges—and new communication opportunities—for boards and companies. The National Association of Corporate Directors (NACD)—with support from Broadridge Financial Solutions—is providing its 11,000 members with on-demand insights from institutional investors in a specially recorded roundtable featuring long-term shareowners speaking candidly with corporate directors.

"Both directors and long-term investors have the same goal in mind—sustained success of the company," said Ken Daly, president & CEO of NACD. "In addition, we've seen a rise in investor activism during proxy season especially since the recent financial crisis. That makes it even more important for directors and investors to communicate to ensure alignment. Communication between these two groups is the key."

In the discussion, investors made it very clear what does and does not work for them. "Don't give me the charter," said Anne Sheehan, director of corporate governance, CalSTRS. "I can read that for myself. Tell me about your strategy and the factors that influenced your decision making."

The roundtable convened at the Newseum in Washington, DC on February 22. The discussion focused on four key areas:

Executive compensation
Using technology to improve communication between boards and shareowners
Director qualifications
Enhancing communications through committee reports

Ken Daly led the panel, which included Glenn Booraem, head of corporate governance, Vanguard Group; Donna Anderson, vice president and corporate governance specialist, T. Rowe Price; Rob Galford, compensation chair, Forrester Research; John Gorman, director, SmartPros and Assure Holding Corporation; Rich Daly, director & CEO, Broadridge Financial Solutions; Denny Beresford, director and audit committee chairman, Fannie Mae, Kimberly-Clark, Legg Mason and NACD; and Ms. Sheehan.

One hot topic of the discussion was executive compensation, specifically issues around say-on-pay. The recommendations from the group included ensuring that payment was tied to performance, minimizing guarantees to ensure that pay will be at risk if the company does not perform well, and the idea that the strategy of the business should be the primary driver in developing the compensation structure.

Another key issue of the roundtable was board composition and director qualifications and how these matters are communicated to institutional investors. Both directors and investors admit that while the new Securities and Exchange Commission (SEC) requirement on disclosing qualifications of directors and nominees was a step forward, the system is still evolving.

"Directors are the investors' representatives in the boardroom," said Sheehan. "Investors want to know what skills they bring to the table and how individual director's experience complements the entire board. Knowing that the board represents a balanced team that is well-equipped to move the company forward gives investors confidence."

The roundtable was created and recorded to give NACD members an informed advantage when completing their proxy statements. NACD members can access and view the 60-minute discussion at www.NACDonline.org/investor-insights.

"NACD members are directors who take the time and make the effort to get educated for the boardroom," said Ken Daly. "We are proud to be able to support their leadership with this event, which provides them with actionable information that will make a valuable difference to their boards and companies this proxy season."

A summary of the meeting is available on www.NACDonline.org/BoardVision and http://blog.nacdonline.org/2011/02/nacd-insight-and-analysis-communicating-for-long-term-value.

About NACD

The National Association of Corporate Directors (NACD) is the only membership organization delivering the information and insights that corporate board members need to confidently confront complex business challenges and enhance shareowner value. With 11,000 members, NACD advances exemplary board leadership. NACD is focused on creating more effective and efficient boards through director-led education and peer forums to share ideas and leading practices based on more than 30 years of primary research. Fostering collaboration among directors and governance stakeholders, NACD is shaping the future of board leadership. To learn more about NACD, visit NACDonline.org. To join, please contact Kelly Dodd at [email protected] or 202-380-1891.