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Jan 25, 2019

Why GM’s 2018 proxy hit the spot

General Motors won the Corporate Governance Award for best proxy statement (large cap)

General Motors’ proxy statement for 2018 has to be seen in context of what the company was going through in order to fully appreciate the achievement.

In 2017 GM faced a proxy contest with Greenlight Capital, with the investor challenging GM’s capital allocation and three board directors. This prompted several governance changes and emphasized GM’s transition from an automobile company to a technology company. Accordingly, the board nominated Devin Wenig, president and CEO of eBay, to the board to bring technology expertise.

Producing a best-in-class proxy statement today requires a balancing act of style and substance: graphics, charts and pictures can all enhance the readability of the disclosure, but can also dilute the quality of the content if they’re not fully thought out. The judges of this year’s awards agreed that GM struck that balance expertly.

The proxy statement opens with a letter to shareholders. But unlike most, which come from the chair and can often be a little dry, GM’s is presented as a Q&A between Mary Barra, GM’s chair and CEO, Theodore Solso, an independent board director at GM, and Patricia Russo, GM’s governance committee chair.

It covers the company’s approach to shareholder engagement and creating shareholder value, how changes in the automotive sector have called for board directors with new skills and how the board approached identifying Wenig as a new board director.

In short, the Q&A speaks directly to one of the concerns at the heart of Greenlight Capital’s proxy campaign, and presents it in a conversational, engaging and easy-to-read manner.

Next, the proxy summary provides concise paragraphs outlining shareholder proposals and key messages the board would like to convey – covering subjects like board composition and CEO compensation – supplemented by graphics that add to the narrative. For example, the board composition section is supplemented with four pie charts, covering the board’s age, gender, tenure and independence. Coupled with a paragraph titled ‘We have the right board at the right time for GM’, it tells a strong story and highlights the board’s move to bring in Wenig.

The proxy summary also has a section dedicated to GM’s approach to ESG, something investors are increasingly looking for. GM’s outline is once again concise but strong, summarizing the company’s commitment to ‘zero crashes, zero emissions, zero congestion.’ This section provides forward-looking targets for the company and underscores its transition to a technology company by discussing its development of autonomous and electric vehicles.

Additional aspects that stood out for the judges include the formation of a cyber-security committee at board level, the provision of a company performance snapshot, and the CD&A section, which uses pie charts and tables to bring the numbers to life.

By breaking down the CEO and non-executive director compensation into base pay, short-term incentives and long-term equity, it provides a clear picture of the ‘at-risk’ compensation and how that ties to company performance.

This article originally appeared in the latest Corporate Secretary special report. Click here to view the full publication.

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...