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Apr 10, 2024

Proxy statements seen as top challenge ahead of proxy season, research finds

Document has evolved from a compliance exercise to a key communication tool

More governance experts see proxy statements as the biggest challenge ahead of the proxy season than any other part of that work, according to a new online poll from Governance Intelligence.

More than four in 10 respondents to the poll (43 percent) say that for members of an in-house legal/governance team, the proxy statement poses the greatest challenges in helping their company prepare for the proxy season.

The proxy statement is followed by shareholder engagement, which 37 percent of respondents say is the biggest challenge. Behind that are a lack of resources (mentioned by 32 percent of respondents), a lack of technology and working with the board (13 percent each) and the AGM (12 percent).

The focus on the proxy statement is particularly pronounced among respondents in North America (49 percent) compared with those in Europe (27 percent). Shareholder engagement is seen as the biggest challenge by 47 percent of respondents in Europe compared with a third of those in North America. A fifth of respondents in Europe report that working with the board is their biggest challenge, compared with just 9 percent of those in North America.   

The poll features responses from 119 governance professionals, primarily based in the US and Europe.

Proxy statement preparation has expanded in recent years from a compliance exercise to helping the company deliver a key means of communicating with investors and other stakeholders such as employees. It now includes new areas of disclosure conveyed in part by more imagery and graphics in an effort to provide transparency into companies and convey their narrative. It’s also an important vehicle for responding to the growing number of ESG-related shareholder proposals and other forms of activism.

Governance Intelligence’s recent Governance Playbook: How to make your company’s proxy statement a success provides actionable advice from governance professionals on their work creating those documents.

The focus on proxy statements is highlighted by the amount of time companies spend working on them and the range of people involved. More than four in 10 (41 percent) of those taking part in the poll say their in-house legal/governance teams begin preparing their upcoming proxy statement between five and seven months ahead of its publication, while a further third start work two to four months before the document is filed.

Not surprisingly, the vast majority (90 percent) of respondents say their in-house legal/governance team is involved in preparing the proxy statement. But a variety of other functions are also involved, including finance (mentioned by 58 percent of respondents), human resources (57 percent), the board (48 percent), the sustainability team (47 percent) and an outside adviser (47 percent).  

Among those seeking outside help, the most commonly sought advice is on legal/regulatory requirements (mentioned by 56 percent of respondents), overall design (33 percent) and executive compensation information (31 percent), the latter being a section of the proxy statement that faces growing scrutiny.

Elsewhere, the poll finds that despite ranking further down the list of top challenges in preparing for the proxy season, governance professionals work for a similarly long time on planning the AGM. More than four in 10 (43 percent) start the exercise five to seven months ahead of the meeting and 39 percent begin two to four months ahead.

Virtual formats for shareholder meetings continue to dominate. Globally, 49 percent of respondents say their company has or will host a virtual AGM in 2024, with 28 percent choosing an in-person event and 19 percent a hybrid event. That compares with similar findings for 2023 with virtual chosen by 51 percent, in person by 25 percent and hybrid by 23 percent.

Ben Maiden

Ben Maiden is the editor-at-large of Governance Intelligence, an IR Media publication, having joined the company in December 2016. He is based in New York. Ben was previously managing editor of Compliance Reporter, covering regulatory and compliance...