TheCorporateCounsel.net

March 18, 2019

Regions Financial’s Proxy: Bringing It All Together

After Broc blogged last week about GE’s “Letter to Shareholders,” a few loyal readers reached out to gush about the proxy statement that was recently filed by Regions Financial. One person said it was “unreal – totally changes expectations around proxy disclosures.” And this comment explains why:

It’s like a proxy statement, proxy advisory data report on governance practices, consolidated sustainability report and review of every shareholder hot topic rolled into one. It’s worth checking out if you’re looking for sample proxy disclosure on virtually any topic – it was even cited by CII in its recent report on best practices for board evaluation disclosure.

This is not to comment on the merits of any of their programs or practices, which I haven’t reviewed, just the scope of disclosure. I do note they have enjoyed strong voting support, but clearly they aren’t resting on their laurels in that respect. And that’s a good lesson for every company, even if you don’t have the resources to prepare a proxy like Regions’.

Sustainability: How to Talk So Investors Will Listen

This PwC memo says the “safe zone” of ESG reports & communications is quickly disappearing as investors get more aligned in the type of info they’re looking for – and continue to integrate ESG criteria into decision-making by investment officers & PMs, rather than just the stewardship team.

You’re likely familiar with the “safe zone” – it’s sustainability reporting that calls out a ton of company accomplishments…but it doesn’t quantify their impact on the bottom line, and there’s no convincing link to business strategy. From an investor’s view, it’s a start – but it’s not going to ensure the company avoids the biggest global risks that are coming down the pike, or that it’s positioned to capture a competitive advantage. A recent 40-page report from Ceres offers some strategies to improve your positioning – and engagement – on this topic. Here’s one takeaway, as summarized in this Cooley blog:

Use language that investors understand and value. One goal of the IR team should be to “communicate the company’s values and strategies using language that investors understand” — including, where appropriate, financial terms such as margin and EPS, as well as business concepts such as risk mitigation, cost avoidance, revenue growth and competitive differentiation — thus positioning sustainability in the context of business performance.

To permit investors to incorporate sustainability into their valuations, companies should discuss sustainability investments, risks and benefits “through the prism of [practical business concerns such as] supply chain resilience, stranded asset avoidance, cost savings and efficiency, improved product performance, consumer acquisition and increased employee retention.” Notably, some asset managers do not position their questions as “sustainability” questions per se, but may instead frame them strictly as financial issues, such as supply chain stability.

According to Ceres, one “constant refrain” heard from investors is that “if a company is not talking about its sustainability strategy and performance, they may conclude the company does not have a story to tell or, even worse, it’s hiding something.”

Preparing for “CEO Activism”

There’s a perception that CEOs have become more willing in recent years to speak out on controversial social & political issues. It’s still pretty rare, but that doesn’t mean you shouldn’t prepare for the day when your company’s leader wants to take a stand. We’ve blogged about the public and investor reactions to this double-edged sword – and we’ve been posting even more resources in our “Crisis Management” Practice Area. In this WSJ article, two B-School profs offer tips on when CEOs should take a stand – and how to speak out effectively. Here’s the takeaways:

CEOs should take a stand when:
1. The nudge comes from their employees
2. Their corporate or personal values – and corporate practices – align with the issue at hand
3. The issue is “live”

CEOs who speak out should:
1. Set up a rapid response team
2. Anticipate backlash
3. Work with the communications team

Liz Dunshee