We Ask Some Of The Smartest People We Know For Their Thoughts On The Biggest Challenges They Foresee In 2009, And For Their Advice On What To Do About Them…
Lydia Beebe, Corporate Secretary and Governance Officer, Chevron Corp.
Insuring a reasonable regulatory structure in the securities area is, in my view, the top issue that public company corporate secretaries will be dealing with in 2009. Both in Congress and the SEC, there will be great pressure to adopt new oversight and reporting requirements.
Some action is clearly needed in this arena, but I think it will be critically important for public companies to participate in the development of any new regulatory structure, in order to insure that it is workable and avoids unintended consequences."
Stephen P. Norman, Corporate Secretary and Governance Officer, American Express Co.
“In normal times I would be offering lofty thoughts on how issuers and shareholders can seek common ground on creative new governance initiatives. Not this year.
The year 2009 presents greater economic uncertainty. To be sure, a number of banks, securities firms, automobile manufacturers and retailers are fighting for their very survival.
So for my company, the 2009 goals are:
- Stay liquid
- Stay profitable
- Protect the credit rating
- Pursue selected growth initiatives.
Moreover, as many of us find our stock prices at multi-years lows, we must reassess our vulnerability to hostile takeovers. Even shareholders who may want management change do not want their companies acquired on the cheap. The priority of 2009 will be to defend the enterprise. "
Broc Romanek, Editor, TheCorporateCounsel.net:
“The Trust Has Left the Building – Repairs Needed: The biggest issue companies will have to deal with in ’09 is credibility. Investors have lost faith in serving as shareholders – and in many cases, rightfully so. Wall Street has not behaved honestly and investors will grow increasingly angry as the crisis continues to grow.
“Investors – both large and small – will have trouble believing boards that claim they are actively managing the strategy and risks of their companies. The board-centric model of managing corporations will repeatedly be attacked, with the first salvo in the form of a “say-on-pay” bill that will be adopted by Congress.
Executive compensation is the low-hanging fruit on the poor governance practices tree, partially because this is one area that was not impacted by Sarbanes-Oxley and the Exchanges’ governance reforms of 2002.
“What can you do? Helping companies provide more transparency about how their boards govern is the first step. This not only includes better disclosure in SEC filings, but a 360 degree change in perspective of engaging shareholders in meaningful dialogue.
Face-to-face meetings obviously are an important part of this rehabilitation process, but IR departments and senior managers can only do so much. Leveraging IR web pages should be a vital part of this process, including the use of blogs, eforums and video.”
Richard Grubaugh, Senior Vice President D.F. King & Co., Inc.
“The 2009 proxy season is shaping up to be the most contentious ever. Compensation issues will dominate the season.
Investors of all kinds; unions, institutional, hedge and retail holders are out for blood while most executive teams are sitting on a pile of under- water options. Fireworks are guaranteed.
“Although the clout of hedge funds has been deflated and private equity deals are few and far between, issuers still need to be wary of the old fashioned, opportunistic bids from their rivals. Despite the frayed relationship, it is more important than ever to keep up the dialog with your investors.”
Margaret (Peggy) Foran, Executive Vice President, General Counsel and Corporate Secretary, Sara Lee Corporation:
“Get close to your shareholders. Open dialogue and communication were always important, but with majority voting, access to the proxy, say on pay, loss of the discretionary vote, outrage on executive compensation and all of the other changes that we know are on the horizon, we, and our boards, need to continue to improve our communication.
“Remember, shareholders do not have a window into our board room. With the absence of actual knowledge, some shareholders will make their own analysis based on information that will not correctly reflect the long-term view, diligence and hard work that is taking place.”
Paul Washington, Senior Vice President, Deputy General Counsel and Corporate Secretary, TimeWarner
A key challenge facing almost all managers during the coming year will be to inspire employees to achieve ever-higher levels of performance when the short-term financial rewards are limited. People may feel lucky to have a job, but that’s probably not enough to motivate them to achieve the level of performance that’s required.
On the governance front, I see two needed changes. The first is that, as governance matters become increasingly political, it’s critical for those of us who labor in the field to become even more professional. We need to look at every governance issue in a rigorous, objective, non-ideological manner – and provide our insights to policymakers whether at our own companies or in Washington, D.C. Second, we should be entering into a new era of governance. We are probably reaching the limit of what can be achieved by ratcheting up the responsibilities of directors or shifting authority to stockholders. The key to company performance rests with senior corporate management, and so companies may want to look at the way in which executives make decisions to ensure that companies have processes that provide for clear responsibility and accountability.
John Siemann, Partner, Laurel Hill Advisory Group, LLC
“Borrowing from the movie “Jerry Maguire,” shareholders in 2009 will be demanding that managements “SHOW ME THE MONEY”! With most stocks losing anywhere from 25-75% of their value in recent months, the overriding concern for most investors, both institutional and retail, is: how to deal with executive compensation in a down market. Issues such as “say on pay”, pay for performance, re-pricing/ resetting options, caps on severance packages and “claw back” provisions, which had enjoyed selective support from labor funds and other activists in recent years, will likely gain a whole new impetus in 2009. This impetus will be demonstrated not only through higher votes on shareholder proposals dealing with these issues, but through an increased number of “Vote No” campaigns against directors.
“Increasingly, it will be the Board, rather than the CEO, whom shareholders focus on to demand accountability on this issue. For most issuers, 2009 will, quite simply, be a year filled with anxiety. To deal with these troubled times, issuers will need to prepare, prepare, prepare! Know your shareholders, know the impact of third-party advisors, know your holders’ position on key proposals, explain beforehand the possible consequences of particular actions by your Board and their respective committees.”
Tim Smith, Senior Vice President and Director of Socially Responsible Investing, Walden Asset Management:
“Public companies face a plethora of issues in the next year, obviously chief among them the economic crisis facing business and citizens alike. However the crisis doesn’t mean that other issues fall by the wayside or wait until better days.
On the governance front, companies will be urged to adopt policies on executive compensation from clawbacks to proving investors with an Advisory Vote on Executive Pay. The latter issue is receiving huge shareholder votes averaging 44% and may well become the law of the land under a newCongress.
On the environmental front, climate change and reducing greenhouse gas emissions inevitably rises to the top of the list as companies face pressure from investors and a new administration to lessen their carbon footprint and work to be part of the solution.
In addition, companies who have not yet done so, will be urged to be transparent and publish Sustainability or Corporate Responsibility reports describing their CSR policies, practices and record. Finally as exemplified by Wal-Mart’s China summit, companies will be asked to dig down into their supply chains to ensure that the products they bring to market are not made in substandard sweatshop conditions.
In the midst of the crisis, issues like these continue to be front and center.