Bloomberg BNA’s Corporate Law & Accountability Report is available on the Corporate Law Resource Center. This news service keeps corporate practitioners informed of legal developments of...
By Susan Bokermann
March 13 — “Companies who try to insulate their boards from their shareholders are doing their company a great disservice,” Stuart Grant, co-founder and managing director of Grant & Eisenhofer, P.A., said March 12 at the Georgetown Law Corporate Counsel Institute.
Speaking on a panel about shareholder activism, Grant said “if [a board doesn’t] think about what to do when an activist comes knocking until they come knocking, [they’ve] already lost.”
Activist shareholders underscore the importance of communications between the board and investors, according to Margaret M. Foran, chief governance officer, vice president and corporate secretary of Prudential Financial Inc.
Investors are interested in a number of board issues, Foran said, including board methods of self-evaluation, tenure, diversity and proxy access. “When you get the call from an activist, [the issue they have] should not be a surprise,” she said.
Foran discussed the engagement strategy that the Prudential board uses to communicate with institutional shareholders and gauge where their interests lie. If an activist investor approaches the board, “you want to be seen as a straight shooter.”
She said simply talking to investors about what’s on their mind is extremely informative. Specifically, meetings between shareholders and the board are useful communication channels.
Foran said she was present during the first-ever meeting between the Pfizer Inc. board and some of the company’s institutional investors. She said it was a good opportunity to create a dialogue and for the investors to see that the board members were not just “smoking cigars and eating bonbons” during the meeting.
She added that not every board member needs to engage with shareholders. “It’s a skill,” said Foran, “you have to be camera ready.”
Grant added that it is OK for board members to ask questions. “I think we’re starting to see boards be more inquisitive now,” he said.
The panelists also touched on new developments related to shareholder activism. Elizabeth A. Ising, partner at Gibson Dunn & Crutcher, noted that companies “are doing different things” in response to the Securities and Exchange Commission's recent announcement that it will be reviewing the rule that allows companies to omit from their proxy materials resolutions that directly conflict with a management proposal. Ising said the spectrum of responses was wide, highlighting on one end of the spectrum General Electric Co., which amended its bylaws to allow proxy access without a shareholder proposal.
Grant also mentioned the proposed legislation by the Delaware State Bar's Corporation Law Council that would prohibit stock corporations from enacting fee-shifting bylaws or charter provisions. He said that the law has a “decent liklihood of passing,” but joked that “nobody's safe when Parliament's in session.”
To contact the reporter on this story: Susan Bokermann in Washington at firstname.lastname@example.org
To contact the editor responsible for this story: Ryan Tuck at email@example.com
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to firstname.lastname@example.org.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to email@example.com.
Put me on standing order
Notify me when new releases are available (no standing order will be created)