Optimizing Proxy Communications

The following post comes to us from Ernst & Young LLP, and is based on a publication by the EY Center for Board Matters.

Proxy statements continue to evolve. New disclosure trends are sharpening company messaging to investors, while other disclosure practices leave investors seeking clarification.

To learn what kinds of disclosures are most valuable to investors, EY asked them where they would like to see disclosure enhancements and the kinds of disclosure practices they prefer.

The EY Center for Board Matters recently had conversations with 50 institutional investors, investor associations and advisors on their corporate governance views and priorities.

This post is the third in a series of four posts based on insights gathered from those conversations and previewing the 2015 proxy season. The first post (available here) focused upon board composition; the second (available here) upon shareholder activism. The upcoming final post will focus on the shareholder proposal landscape.

We also gained insights from investors, directors and other stakeholders through our proxy season dialogue dinners. [1] In addition to the Center’s investor outreach, the post draws on our tracking of governance trends and emerging developments through the Center’s proprietary corporate governance database. [2]

Key findings

  • Board composition and refreshment, including director diversity and recruitment processes, and executive compensation are the top areas where investors want to see disclosure enhancements. Some directors and corporate secretaries we spoke with are recognizing opportunities to enhance their discussion of board composition in the proxy statement.
  • Extensive boilerplate, legalese and repetition throughout proxy statements, as well as dense, complex Compensation Discussion and Analysis sections, continue to obfuscate company messaging to investors.
  • Graphics, tables, charts and hyperlinks allow companies to share comprehensive information in a more concise and comprehensible way.
  • Letters from independent chairmen, lead directors or the full board allow for direct communication around particular governance challenges and developments and can demonstrate leading governance practices and the strength of independent board leadership.

Making engagement disclosures valuable for investors

Many investors said they don’t pay close attention to disclosures around company-shareholder engagement unless there is an issue (e.g., a failed say-on-pay vote from the year prior). Some of these investors indicated they are generally skeptical of the disclosures and believe they are directed at the proxy advisory firms, which take engagement into account in their recommendations.

Some enhancements that could make engagement disclosures more relevant to the broader investor community include:

  • Discussing the concerns raised by shareholders, the company’s response to the feedback and any changes made as a result, including the rationale behind why the board has determined those changes are in the company’s best interest
  • Making clear how information from engagement conversations is relayed to the board
  • Stating who from the company participated, especially whether any directors were involved
  • Discussing the methodology behind the outreach, including how many shareholders participated and the types of shareholders involved (e.g., long-term investors, investors beyond the top 25 holders)

Three ways companies can optimize overall proxy communications:

  1. Explain the rationale behind board and management decisions and discuss unusual governance circumstances or challenges, including addressing controversies in relevant committee reports
  2. Avoid boilerplate, legalese and repetition as much as possible
  3. Use graphics, charts, tables and hyperlinks—both within the proxy and linking to other reports (e.g., sustainability reports)—to streamline disclosure and make information easier to digest

A letter to shareholders from the independent chairman, lead director, a particular committee chair or the board as a whole can be a vehicle for explaining the board’s reasoning on governance decisions and developments.

Engagement disclosures that do not align with investors’ views of how engagement went could negatively impact the company when it comes to voting. Providing a summary at the end of engagement discussions may help ensure that views are aligned when engagement concludes.


The proxy statement is generally the main communication document from a company that institutional investors rely on when evaluating corporate governance and making proxy voting decisions.

By enhancing proxy statement disclosures, companies can make proxy statements an extension of their shareholder engagement efforts and better position investors to support the board and management. They also provide a foundation for more substantive and efficient engagement conversations if needed.


[1] In February and March 2015, EY hosted dialogue dinners in Chicago and New York, bringing together institutional investors, board members, corporate secretaries and advisors to discuss key governance topics heading into the 2015 proxy season, including board composition and strategies for renewal.
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[2] Unless otherwise noted, all data is from EY’s corporate governance database, which covers more than 3,000 companies listed in the US. Data for 2015 is through 2 March. EY’s investor outreach conversations included asking specific and consistent questions to a broad spectrum of institutional investors, investor associations and advisors. Participants included asset managers, faith-based investors, labor funds, public funds, socially responsible investors, and investor associations and advisors. Investor views vary. All respondents are anonymous, and results are presented in aggregate.
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