Response: Bringing Directors and Stockowners Together

I can’t help but post a brief response to Carl Olson’s recent post about allowing shareholders to directly communicate with directors. Although I agree that many companies should be doing a better job of ensuring that directors hear the perspective of shareholders–and even hear directly from shareholders under certain circumstances–I think it is unreasonable and impractical for shareholders to have unfettered access to directors.

The reality is that most communications sent to directors are of a trivial nature and would distract directors from the valuable (and limited) attention they can give to overseeing the company. Do we really want directors reviewing emails and letters from shareholders, who might also be customers with petty complaints about a product or service being defective? Shareholders don’t have unfettered access to senior managers at a company; why should they have that kind of access to directors who serve on a part-time basis?

As for the role of corporate secretaries in the “vetting shareholder communications” process, I can tell you from first-hand experience–I know many of the folks that serve in this capacity, and serve on the National Board and as head of the Mid-Atlantic Chapter of the Society of Corporate Secretaries–that secretaries view their primary duty as one of serving directors, not senior management. Thus, if a shareholder sends a communication that truly deserves to be seen by independent directors, corporate secretaries will ensure that directors see it.

Moreover, for those companies listed on the NYSE, under Section 303A.03 of the NYSE’s Listed Company Manual (as clarified in FAQ D.1, issued by the NYSE Staff in January 2004), corporate secretaries are required to follow instructions from non-management directors regarding “what, when, and how they want to review” any communications sent to the directors. In other words, the corporate secretary isn’t permitted to make any independent decisions as to what communications the directors see–and, of course, can’t share any communications with management unless instructed to do so by the non-management directors. This seems to me to be the most reasonable approach to ensuring that shareholders can communicate with directors–and hopefully is a solution that addresses Carl’s concerns about inappropriate screening of valuable shareholder communications.