In light of 2019 proxy reviews, shareholders and governance experts have taken their usual look back at some of the hot topics in recent years. Certain issues like board refreshment, sustainability proposals and the aftermath of the #MeToo movement will likely surface again this year, but they won't be relevant topics for all companies. In 2019, boards will likely have some new topics to brush up on. Director compensation, board self-evaluations, Environmental Sustainability Plan (ESP) issues, human capital, shareholder engagement, and the recent Securities and Exchange Commission (SEC) guidance will be some of the more common topics for proposals.
Shareholders aren't apt to be content with this information. About 48 union and government pension funds, along with other investors, signed a letter to all the S&P 500 companies asking for more information. They wanted more specifics like the median employee's job and location, and additional information that relates to temporary workers, seasonal workers and the entire workforce.
Data analytics will become easier for board directors in 2019 when they choose to accept a little help from technology. CGLytics is an electronic platform that provides the deepest data set in the market. CGLytics offers the most intuitive benchmarking tools and analytics for analyzing the governance practices of public companies.
Boards can have the latest data at their fingertips with executive compensation benchmarking, board effectiveness, business relationship mapping, corporate governance risk monitoring, data fees and NPX voting analytics ' and all in real time. CGLytics puts the right information in front of board directors so they can ask the right questions to inform better decision-making. Trusted by Glass Lewis, CGLytics is the modern governance solution to analyzing data.
2019 Proxy Review: Top Issues For Boards
Here's a look at this year's hot topics:Board Refreshment Disclosures
The past tells us that many companies have faced inquiries from investors about board composition. Boards quickly responded to investor concerns by voluntarily enhancing their disclosures in proxy statements about how they intend to refresh their boards. Disclosures will certainly address diversity and adding women directors to the board. California's SB-826 is keeping this topic alive, as publicly traded companies that have their headquarters in California by the end of the calendar year in 2019 will have to comply with the new state requirements or explain why they aren't doing so. Other states don't require this disclosure yet. Companies that suspect shareholder activism or criticism in this area may want to get ahead of the issue and specify their plans in their disclosures.Board Self-Evaluations
Most companies are following best practices for governance by doing annual board self-evaluations. Investors are happy to see this practice continue. At the same time, they'd like to see things go a bit farther with asking boards to use external consultants at least every few years to preserve the integrity of the process. For the present, boards have much latitude in deciding how they conduct their self-evaluations. As a result, practices for conducting board self-evaluations vary substantially. In a nutshell, investors are looking for assurance that the self-evaluation process yields a true picture of the board's effectiveness. Look for this topic to increase in disclosures and shareholder discussions.Mandatory Age Limits and Term Limits
On the surface, it may seem that mandatory retirement ages and term limits are the solutions to lack of diversity and board directors who serve for too long a period to be effective. Shareholders recognize the value that some long-serving board directors bring in their expertise and experience. There remains a bit of controversy about whether a long-time director can truly be independent. Shareholders may have to consider this issue on a case-by-case basis, as not all companies with seasoned board directors also have seasoned management teams who couldn't benefit from quality mentoring. The new philosophy is to give the issue the scope that it demands and weigh heavier with the results of the board self-evaluation in assessing board composition.Director Compensation
The SEC required disclosures around CEO pay ratios starting in 2018. Boards, shareholders and corporate watchdogs closely monitored the situation to see what the impact of the new rules would be. As it turned out, the disclosures didn't yield as much controversy as was anticipated. The median CEO pay ratio for S&P 500 companies was 163:1, which is only a little more than half what some researchers had predicted. There was good news on median employee compensation as well. According to Deloitte, median employee compensation came in at $68,708, which was substantially higher than predictions.Shareholders aren't apt to be content with this information. About 48 union and government pension funds, along with other investors, signed a letter to all the S&P 500 companies asking for more information. They wanted more specifics like the median employee's job and location, and additional information that relates to temporary workers, seasonal workers and the entire workforce.
Data analytics will become easier for board directors in 2019 when they choose to accept a little help from technology. CGLytics is an electronic platform that provides the deepest data set in the market. CGLytics offers the most intuitive benchmarking tools and analytics for analyzing the governance practices of public companies.
Boards can have the latest data at their fingertips with executive compensation benchmarking, board effectiveness, business relationship mapping, corporate governance risk monitoring, data fees and NPX voting analytics ' and all in real time. CGLytics puts the right information in front of board directors so they can ask the right questions to inform better decision-making. Trusted by Glass Lewis, CGLytics is the modern governance solution to analyzing data.