What directors are thinking.

• Author: Dunbar, W. Roy

Leading company boards will report in proxy filings for 2020 how they are responding to what they heard from shareholders in conversations the companies requested after the previous year's filings.

These companies will have solicited investors representing as much as 80% of their shares with an offer to make independent directors available. Management may be on the calls and may provide a brief summary to open the conversation, but when an independent director is asked to be on the call, the investor wants to hear directly from a director, not management.

Investors, when taking up such an offer, have been most interested, in my experience, to speak to any or all of the following: the independent chair/lead director, the compensation chair and the governance chair. Subject matter could be anything on the mind of either the investor governance team or the fund manager and environmental, social and governance matters (ESG) are common as are deep questions on compensation practices, such as the structure of long-term incentives and alignment of pay-for-performance and questioning may be intense and intricate. One I recall dealt with the rationale for the composition of a peer group used in compensation planning.

Investors want to hear the voice of the board, its level of engagement and independence, and glean through the conversation a sense of...