The Conference Board Governance Center Blog


Recommendations from The Conference Board Task Force on Corporate/Investor Engagement

By Arthur Kohn, Partner, Cleary Gottlieb Steen & Hamilton LLP & Chuck Nathan, Partner & Senior Advisor, RLM Finsbury

The 2008 financial crisis and the slow recovery that has followed has brought further evidence tending to support the view that the structure of our corporate sector needs adjustment, and that its faults affect the competitiveness of our economy. The crisis has resulted, as would be expected, in a raft of new rules and regulations, which as usual have been implemented before there emerged any consensus about the nature of the problems. There has also been a vigorous competition of ideas over causes and remedies.

However, one principal “organic” focus of change has emerged, which is usually captured by the catchword “engagement,” the corporate governance concept du jour. It seems to us that the focus on engagement has been motivated by two principal factors. These are, first, a desire by interested stakeholders—including various types of institutional shareholders and other investors, directors, management, labor, politicians and others—to increase (or perhaps retain in some cases) their influence and leverage in the functioning of public corporations and, second, the idea that in the realm of corporate productivity, a collaborative, rather than adversarial, relationship between those stakeholders, based on broadly shared principles concerning the roles and objectives of the stakeholders is beneficial. Engagement is viewed as a means towards those ends.

Regrettably, few discussions about engagement dig below these big picture thoughts and the obvious immediate tactical reasons for engagement in various contexts. On March 11, 2014, The Conference Board Governance Center released results of its year-long multifaceted study of corporate/investor engagement, publishing three related papers exploring the topic in great depth. The effort was based on a belief that energized, confident and productive companies are a necessary ingredient in the overall resurgence of our economy and that restoring public confidence in our companies and their governance is critical to an economic renaissance. The concrete recommendations put forth by The Conference Board Task Force on Corporate/Investor Engagement include:

  • Companies and investors, alike, should endorse the key principle that the interests of all of the company’s stakeholders—shareholders, employees, creditors, customers, suppliers, communities and the environment—need to be taken into account to achieve sustainable shareholder value maximization.
  • The board of directors of a company, not its investors, should play the central role in the oversight of public companies. Directors, by virtue of their deeper company knowledge and experience, their fiduciary duties to the company and all of its shareowners and their ability to freely and extensively deliberate about corporate issues, are in the best position to mediate the interests of all of a company’s stakeholders.
  • The single most important corporate governance factor is the quality of board oversight. Directors should have appropriate processes to ensure that they have a good understanding of the company’s business in order to provide meaningful guidance to management.
  • Investors, on their part, have a responsibility not only to have thoughtful voting policies, but also to disclose those voting policies and how companies can contact the investors to discuss those policies.
  • When investors decide to vote (and it is clear that there are situations in which investors may appropriately decide not to vote), they should devote sufficient time and resources to make informed voting decisions. If investors take advice from proxy advisors, they should use the proxy advisors’ recommendations only as one data point to supplement their own analysis.
  • Because proxy advisors play an important role in advising investors on voting, it is critical that proxy advisors adhere to the highest standard of conduct–not only avoidance of conflicts or appearances of conflict of interest, but also transparency in their decision making process.
  • Companies and investors should engage on relevant matters of corporate governance, taken in its broadest terms. Moreover, companies and investors need to share a common set of policies and practices for engagement to prevent confusion and misunderstanding about each party’s engagement activities.
  • To accomplish this goal, companies and investors should utilize the Guidelines for Engagement, developed by the Advisory Board to the Governance Center’s Task Force on Corporate/Investor Engagement. The Guidelines provide a comprehensive roadmap for thinking through and implementing a strategy for corporate governance engagement between public companies and their investors. In so doing, the Guidelines address the responsibilities and roles of a company’s senior management and directors in fashioning an appropriate engagement policy and, as important, the responsibilities and roles of investors in that engagement.

The workproduct created through the efforts of those involved in The Conference Board’s study is extensive, including:

We and our firms were extensively involved with the work of the Task Force.

About the Guest Blogger:

Arthur Kohn, Partner, Cleary Gottlieb Steen & Hamilton LLP

Arthur Kohn, Partner, Cleary Gottlieb Steen & Hamilton LLP

Arthur H. Kohn is a partner based in the New York office of Cleary Gottlieb Steen & Hamilton LLP. Mr. Kohn’s practice focuses on compensation and benefit matters, including executive compensation, pension compliance and investment, employment law and related matters.Mr. Kohn is distinguished by Chambers USA as one of the leading lawyers in the area of employee benefits and executive compensation and is recommended by PLC Which Lawyer? Yearbook. In Above the Law, Mr. Kohn was voted as one of the “Top Partners to Work For – New York.” Mr. Kohn teaches the “Taxation of Executive Compensation” course at the New York University School of Law as an adjunct faculty member, and also guest lectures at Columbia Law School. He is also a co-editor of a book on the global regulation of executive compensation entitled The Executive Remuneration Review, published by Law Business Research.


Charles Nathan, Partner & Senior Advisor, RLM Finsbury

Charles Nathan, Partner & Senior Advisor, RLM Finsbury

Chuck Nathan advises global clients on M&A, financial transactions, governance, Board issues and shareholder matters with RLM Finsbury. Prior to joining RLM Finsbury, Nathan was partner at Latham & Watkins, where he represented companies and financial advisors in many significant, high-profile mergers and acquisitions. Nathan has been named by the National Association of Corporate Directors as one of the 100 most influential corporate governance professionals for two consecutive years. He is the renowned author of many articles on M&A and corporate governance topics, is a frequent panelist at M&A and corporate governance seminars and programs, teaches M&A at Yale Law School, and has chaired a number of bar association committees. Nathan received his B.A. from The Johns Hopkins University and his J.D. from Yale Law School, where he graduated summa cum laude.

This post originally appeared on The Harvard Law School Forum on Corporate Governance and Financial Regulation on March 19, 2014.

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