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Jan 28, 2020

Behind NorthWestern Energy's DIY proxy statement

NorthWestern Energy won best proxy statement (mid-cap) at the Corporate Governance Awards 2019

As proxy statements continue to evolve into glossier, more visually engaging publications, the number of people involved can increase – as can budgets. But for NorthWestern Energy that isn’t an option. The two-person corporate secretary team is responsible for drafting the language, gathering the data and drawing the charts, says Tim Olson, senior corporate counsel and corporate secretary at the company.

Olson says he and his colleague Emily Larkin, assistant corporate secretary, ‘try to make incremental progress each year’ by looking at the nominees for each Corporate Governance Award and exploring what they could replicate. ‘We’re fans of good design,’ Olson says. ‘If we see something that grabs our attention and makes us want to read it, we will use it.’

But he adds that not everything they see works for them, even if they like it in other contexts. ‘We look for new charts and we really like some of them, but a proxy statement isn’t a one-size-fits-all [publication]. If something doesn’t fit our story, it doesn’t find a place in our report,’ he says.

It’s a strategy that has consistently worked for the firm. NorthWestern Energy won the best proxy statement (small to mid-cap) category in 2014 and has been short-listed four more times. The DIY approach means drafting the proxy statement takes Olson and Larkin about nine months. During the summer, Larkin begins to gather peer data that will be used in the following year’s pay-for-performance section of the CD&A. By November, Olson and Larkin are drafting the full document to present to the board in December. Then there are various rounds of feedback with the board in January and February, before the statement is filed in March.

Olson says board input is crucial to the development of the proxy statement, especially given the small team. He praises the company’s prior chair of the compensation committee, who he says was very progressive in asking for detailed pay-for-performance data.

‘A lot of the visual elements in our proxy statement are as a result of his request many years ago to help the compensation committee make decisions about pay for executives,’ Olson explains. ‘When we moved from the boring, technically compliant proxy statement and converted to something more visually appealing, we could turn to those charts we were already producing on an annual basis for our compensation committee.’

One example of a progressive data point NorthWestern Energy has reported on is the CEO pay ratio, which it has included since 2010; last year it became mandatory for public firms to include this in their proxy statement.

While all nominated proxy statements are elevated by design components that would have been unfamiliar to proxy readers even five years ago, it’s also important that the publications are easy to read. The judges praised NorthWestern Energy’s readability and plain English disclosure. Olson says this has definitely been a focus for him and Larkin in recent years.

‘Two years ago we focused on how to make the proxy statement easier to read by using smaller words and shorter sentences,’ he says. In practical terms, this has meant looking at every word closely and thinking about the simplest way to say it. For example, the proxy statement now refers to pay rather than compensation and the compensation committee rather than the human resources committee. The latter change was adopted based on reading other successful proxy statements.

As Olson and Larkin turn their attention to next year, their goal is to find ways to add more ESG-focused material into the proxy statement, and to further enhance the storytelling with the use of photographs as well as charts and tables.

This article originally appeared in the latest Corporate Secretary special report.

Ben Ashwell

Ben Ashwell

Ben Ashwell is the editor at IR Magazine and Corporate Secretary, covering investor relations, governance, risk and compliance. Prior to this, he was the founder and editor of Executive Talent, the global quarterly magazine from the Association of...