Advantages stemming from board-shareowner communications on governance and executive pay outweigh the potential risks and costs of such dialogue. Regulation FD in the US should be seen as a caution rather than a barrier to such communication. Prompted by universal adoption of advisory ‘say on pay’ resolutions, UK companies have moved to integrate regular engagement with domestic investors into the annual process of framing corporate remuneration policies. Most US companies have not fully endeavored to engage their shareowners in the same manner, but some—motivated sometimes by crises—are experimenting with various models of dialogue. Companies can best manage effective engagement when they provide shareowners with access to appropriate board directors and other governance personnel. Likewise, institutional investors need to develop internal coherence between their fund managers and governance professionals to enhance their capacity to engage with corporate boards and executives on governance and executive compensation. Companies that are successful credit communication programs with improvements in investor loyalty as demonstrated by fewer instances of confrontation.
Stephen Davis & Stephen Alogna,
Talking Governance: Board-Shareowner Communications on Executive Compensation,
Available at: https://scholarship.law.columbia.edu/global_markets_corporate_ownership/32
Policy Briefing 2