The Directors & Boards Survey: 2015 proxy season and shareholder relations survey.

• Author: Shaw, David
• Position: 2015 PROXY SEASON AND ANNUAL MEETING SURVEY

Whither the proxy proposal--a weapon wielded by populists and the 'good governance police' or a useful prod to a plodding board? Our respondents wrestle with its effectiveness.

A key focus of this year's survey on shareholder relations and annual meetings was on the importance of proxy proposals to the overall governance process. And our director respondents tended to reflect three board categories of response.

Many told us that such proxy proposals were not important at all to the overall governance process because the proxy proposals they have received were off the mark.

"For the most part, outside proxy proposals come from shareholders who have almost no economic interest in the company," one director said. "They tend to be gadflies who proffer proposals as a hobby. This is no way to run corporate governance of public companies."

"They're mostly a distraction and presented for populist reasons," commented another director. "They are not related to increasing shareholder value."

The second class of responses we received would like proxy proposals to be important, but find that they're not. "The ability to submit [proxy proposals] is important, but the quality and relevance of the outside proposals is sometimes questionable," wrote a director respondent.

"It depends entirely on the proposal," commented another. "Access is important, but most proposals are not."

The final category of responses we received finds proxy proposals to be very important to the governance process. Reflecting the opinions of several respondents, a director told us that proxy proposals "help keep us on our toes, give a diversity of opinion and broaden our knowledge base as a board."

And several other respondents pointed out that such proxy proposals are "virtually the only time that the board and senior management hears from non-institutional shareholders."

One respondent was able to capture a middle ground among all these categories, which we think best reflects the pros and cons of proxy proposals: "It is entirely dependent on the intent and objectives of those proposing and the quality of the company and its board. Proposals can be useful when a board is unresponsive, and nothing but a distraction when they come from special interest agendas--including the inaptly named good governance' police--to a company with a board that has done a good job of looking out for shareholder interests."

Methodology

This Directors & Boards survey was conducted in February 2015...