4 Tips as We Enter Proxy Season

By Hari Bhatt

Like the rising of the sun, proxy season is upon us once more. You’re likely a professional at handling your element of the document by this point: drafting the CD&A, double checking the equity usage, cross-referencing with the 10-Q and 10-K filings, exchanging daily emails with your securities counsel. In the middle of all that chaos, we’d like to highlight a couple of easily avoidable mistakes.

Don’t Stress the Graphics

As a former advisor, I’ve encountered many instances of teams getting bogged down trying to fiddle with their charts and graphs. Yes, it’s important to make sure these are accurate and clean, but when time is precious, it’s not worth going back-and-forth on the color scheme or drop shadow settings. At the end of the day, shareholders and proxy advisory firms are looking for the data. If the data is easy to read and demonstrates the point clearly, they’re not going to complain. There are no brownie points to be earned with a pretty graph.

Of course, the marketing department will weigh in regarding colors and fonts, potentially complicating the process. Rather than getting stressed about their brand guidelines: just kick the work over! If the department is competent and reliable, and if the processes allow for it, let someone with a design background handle the decorations. Your time is better spent pulling together the document, or spot-checking data.

Watch for Forgotten Statements in Boilerplate Text

This type of slip-up doesn’t happen often, but it’s important to quickly spot check the proxy during its early drafting stage. Words, sentences, sometimes even entire paragraphs pertaining to special circumstances and events from last year that may have snuck into blocks of text that typically don’t change much. At best, it’s an embarrassing mistake. At worst, it can turn into a litigious nightmare.

Places to check for common miscreants:

  • Discussions of roles and duties for directors, officers, board committees, and management.

  • Sustainability and Equity statements

  • Ratification of independent accounting firms

  • Related party transaction discussions

  • Pay philosophy blurbs

  • Any policy explanation

  • Decision-making process discussions

  • Termination and recoupment sections

I won’t go on and on about this point, because  for a detail-oriented professional, this isn’t typically an issue. And when you add in the fact that there’s a dozen or more people working on the document, the chances of something slipping in are quite low. They’re never zero until someone goes to check.

Know your Audience

In no order of importance, the non-exhaustive list of people who have a vested interest in the proxy statement are:

  • The Board of Directors

  • Management

  • Your boss

  • Shareholders

  • Management again

  • Proxy advisory firms like Glass Lewis and ISS

  • Your peer companies

That’s a lot of voices pulling the proxy in multiple directions. The presentation, the content, the focus of the text- all of it has multiple audiences. It’s easy to forget this super basic point, but the focus of the proxy is meant to be communicating with the shareholders. I’ve seen situations where a company has to report on a unique stock grant, an executive transition, a unique shareholder proposal, or just reformat their proxy, and they spend weeks before filing panicking about how to present the information. It’s worse when they know things may reflect badly on the company if they’re not careful.

At the end of the day, every decision was made with thorough consideration, just put that in the proxy! Lay out the facts and the justifications for the decisions in a way that makes sense to shareholders. If it was a particularly eyebrow-raising event, then figure out a way to let them know what’s going to happen in the future - and what’s not! 

In my time as a corporate governance advisor, every year at least one client had this situation arise, and they’d spend hours on Teams calls trying to explain their position to me. My advice to them, and to you, is the same: Just put the facts in the proxy. Shareholders are intelligent and can parse through the sequence of events if you make it easy for them. Let them know what the plan is going forward. Speaking to the shareholders and their priorities leads to them voting favorably more often than not.

Bonus Tip! How Lioness Consulting Can Help

You could spend months painstakingly preparing your proxy statement and planning for the meeting - but it’s all for naught if you forget about outreach. Or worse yet, engaging in ineffective outreach. Lioness Consulting can help you connect with shareholders to achieve your desired business objectives by delivering expert corporate governance advisory and shareholder solicitation services.

Our decades of experience enables us to confidently manage all aspects of shareholder solicitation for you through a smooth and seamless process that improves compliance and efficiency. Our comprehensive proxy solicitation services remove compliance burdens while improving cost and time efficiency for your company.

We invite you to connect with us to experience the difference of tailored, strategic insights that drive successful outcomes in the dynamic landscape of corporate governance.