5 governance metrics boards should be watching ahead of proxy season

It’s a corporate secretary’s worst nightmare: In the annual general meeting (AGM), an investor asks the board about the one thing they’re not fully prepared to discuss. This could be a new ESG metric, a re-election challenge or a compensation concern — the list goes on.

In today’s sea of mandates, frameworks, proposals and investor priorities, it’s easy to get overwhelmed. Meanwhile, the list of data points and mandatory disclosures to stay abreast of is only growing.

The good news? With access to the right data and insights, your board can zero in on what matters most to your investors, so you’re ready for whatever the next AGM throws your way.

5 essential metrics to track for proxy season

Here are five crucial metrics for boards to monitor, so they go into the AGM fully equipped with the data they need.

1. Activism: What are investors thinking and planning?

Activist strategies are always shifting. For example, yesterday’s demand for mergers and acquisitions has morphed into today’s drive for divestitures. And who knows what the future might hold? Specific issues can also vary across industries and regions, such as a boom of climate-related campaigns in Asia or an increase in diversity campaigns in Europe.

To stay ahead of activist demands, you’ll need intelligence on:

• Past issues, strategies and campaigns, preferably through insights from leading sources like Glass Lewis and ISS
• Success rates and returns
• Current and historic ownership holdings, for tracking the relevant players
• Activism that’s brewing on the horizon, along with the trends driving it
• Areas where your organization might be vulnerable

2. Executive compensation: How do you measure up against peers and expectations?

Investors want to see well-managed companies, with executive compensation that both attracts top talent and supports the bottom line. And they’re willing to lend their voices and votes to the subject. Diligent’s 2023 Proxy Review revealed a rising number of remuneration proposals at U.S.-listed companies subject to a vote.

Is your organization vulnerable to scrutiny in this critical area? Looking ahead, what does your board need to revisit in terms of executive compensation and how it’s governed?

Answers to such questions require comparing your company against peers in areas like:

• Granted compensation
• Realized compensation
• Pay ratios
• Pay against performance
• Overall corporate governance practices

3. Voting: What should your board expect on the AGM ballot?

Elections related to executive compensation, directors and shareholder proposals should never take your board by surprise. With advance intel, you can help board members know what to expect and the rationale behind it all, so they can engage the right people on the right issues before the vote.

To provide such an in-depth view, you’ll need:

• A comprehensive archive of voting policies and records from investors worldwide
• Voting recommendations and proxy insights from global authorities like Glass Lewis and ISS 
• Supporting information that deepens context and understanding, like industry benchmarks, investor stewardship profiles and data on no-action requests
• Advanced modeling tools to help you understand what it all means for your organization
• Customized alerts for critical votes and deadlines
• A dashboard for distilling the highlights 

4. ESG: What’s top of mind for activists and shareholders?

Environmental, social and governance priorities shift with the business and geopolitical landscape. Diligent’s 2023 Proxy Review noted human rights and employee welfare proposals as areas to watch, as well as an increased pass rate for climate-related proposals for companies in the United States. Meanwhile, as you read this sentence, new trends are emerging for 2024.

To keep your finger on the pulse, you’ll need:

• The latest details and statistics on investors’ ESG proposals, including pass rates 
• External ratings, assessments and science-based ESG scores, so you can monitor your firm’s ESG reputation and compare its posture against peers
• Red-flag and vulnerability alerts for issues demanding urgent attention

5. Board composition and effectiveness: How does your company measure up?

Activists and investors are watching your top leaders, from how they promote effective governance to how they assemble and maintain a high-functioning executive team. Any sign of weakness will attract unwanted attention.

Bolster your defenses with: 

• Comprehensive evaluations and analysis for your own internal operations
• Benchmarking data for comparing your governance practices against peers
• Market intelligence, including the latest updates on director appointments, activist nominations, bylaws and charter amendments
• Reporting tools for sharing this information in a timely, effective manner 

Diligent brings clarity to proxy season preparations

Staying on top of all these metrics is a tall order. But with tools like Diligent Market Intelligence and Diligent Board & Leadership Collaboration, your board will be ready for anything come proxy season.

Gain a comprehensive view of corporate governance and shareholder engagement across publicly available sources, plus the ability to track all of these metrics, with Diligent Market Intelligence. In addition, Diligent Market Intelligence is the only solution that provides intelligence on voting recommendations and unique proxy insights from Glass Lewis and ISS, so you can proactively optimize your position with investors well before the AGM.

Meanwhile, Diligent Board & Leadership Collaboration makes it easy to put everything into context. Customizable reporting templates and dashboards distill the details you need to focus on, while a secure and intuitive online portal brings decision-makers together to share and edit documents and securely, efficiently communicate across Microsoft Teams or Zoom.

Both solutions are rooted in over 15 years of corporate governance expertise and research across sectors and geographies. Working from the Diligent platform, your board and leadership teams can maintain consistency and demonstrate confidence in your corporate narrative, even as the issues — and our world — continue to evolve.

It’s time for proxy season peace of mind. Schedule a demo with Diligent today.