Tag: board refreshment policies

Can director commitments policies help prevent overextended boards?

There is a lot going on at companies, and—you may be surprised to hear—not all of it is new regulation.  There are new technologies, such as AI, global political instability and social change, not to mention ESG and cybersecurity.  Many of these topics, as they affect a company, fall within the remit of the board for oversight. The energy and time necessary can be overwhelming. In this article, Director Commitments Policies, Overboarding, and Board Refreshment, proxy advisory firm Glass Lewis discusses one way to help ensure that directors have “sufficient time and energy to fulfill their duties and obligations to shareholders”: a director commitments policy. As a corollary, GL maintains, these policies can also serve to boost board refreshment, and can represent a vital measure of corporate governance. 

Framework developed by the Investor Stewardship Group establishes common set of investor expectations for corporate governance

The Investor Stewardship Group—a group of the largest, most prominent institutional investors and global asset managers investing, in the aggregate, over $20 trillion in the U.S. equity markets—has developed the Framework for U.S. Stewardship and Governance, a “framework of basic standards of investment stewardship and corporate governance for U.S. institutional investor and boardroom conduct.” The stewardship framework identifies fundamental responsibilities for institutional investors, and the corporate governance framework identifies six fundamental principles that “are designed to establish a foundational set of investor expectations about corporate governance practices in U.S. public companies. Generally, the principles “reflect the common corporate governance beliefs embedded in each member’s proxy voting and engagement guidelines,” although each ISG member may differ somewhat on specifics. The ISG encourages company directors to apply these basic principles—while acknowledging that they are not designed to be “prescriptive or comprehensive” and can be applied in various ways—and indicates that it will “evaluate companies’ alignment with these principles, as well as any discussion of alternative approaches that directors maintain are in a company’s best interests.” The framework does not go “into effect” until January 1, 2018, so that companies will have “time to adjust to these standards in advance of the 2018 proxy season,”  the implication being that failure to “comply or explain” by that point could ultimately lead to shareholder opposition during proxy season.  Check out the countdown clock at the link above!

Does director tenure affect company value?

by Cydney Posner With a number of institutional investors and proxy advisory firms advocating that public companies adopt “board refreshment” policies, much energy has been devoted to studying the impact of director tenure in the context of corporate governance.  In “Do Directors Have a Use-By Date? Examining the Impact of […]