TheCorporateCounsel.net

Last week, Dave blogged about whether companies are likely to ask stockholders to approve officer exculpation charter amendments & how stockholders will react if they do.  If you’re thinking about proposing such an amendment at your next annual meeting, this Freshfields blog offers up some sample language for such an amendment and, in this excerpt, raises some important points to consider when gauging the likely reaction of institutional investors & proxy advisors:

One open question is how institutional shareholders and proxy advisory firms will react to proposals to amend the charter in this manner. The answer, in the case of listed companies, may depend on:

– the other elements of the corporation’s governance profile and the extent to which there may already be tension with shareholders over governance;

– the extent to which the corporation otherwise engages in best practices relating to its executive officers, including their compensation, diversity, and skillsets;

– the relationship between management and the shareholders, including the extent of shareholders’ confidence in management’s stand-alone plan and their assessment of recent performance;

– management’s approach to shareholder engagement and its ability to articulate effectively in off-cycle meetings with shareholders in the coming months the rationale for putting forward this proposed charter amendment at the next annual meeting; and

– the effectiveness of the articulation of the rationale for this charter amendment in the proxy statement for the meeting at which the amendment will be voted on and in related solicitation conversations.

The blog says that there’s a strong policy rationale for these charter amendments and that it makes sense for institutional investors & proxy advisors to support them, but it also acknowledges that getting these constituencies to sign-off on such an amendment will require “thoughtful and deliberate” efforts on the part of companies when engaging with stockholders.

– John Jenkins