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I have been working on some case studies related to board practices, corporate governance, and disclosure using this year’s proxies at financial services firms as examples.  (Case studies are a useful vehicle with the recognition that for the vast majority of the population - and in my experience that includes board members - fact based information and examples are what lead to insight; theories and concepts, alone, do not resonant. Nor in fact do examples without the names, dates, etc.)

The idea for the studies first began when I was meeting with a retired CEO who was a shareholder in one of the financial services firms that received TARP funds and I agreed to take a look at the proxy for the company he was invested in to see what I might find. It turns out that I found quite a lot. (Not just on that proxy, but as my process continued, on others too.) 

What kinds of things should you, as a board member or interested party, be looking for in your review of the proxy and what might you find?  To see a draft study of what I found in the PNC proxy, click here http://www.thevaluealliance.com/PDF/pnc_proxy_analysis_excerpt.pdf

Disclosure Review Practices Tell You a Lot About the Board. The level of careful review and questioning of disclosures is one way to distinguish a “rubber stamp” board from an engaged, participatory one. As a matter of practice, does each member of your board consistently review all important disclosures with care?

Evaluating Your Board’s Practices thru the Lens of Disclosure Review. The level of disclosure review not only tells you a lot about the board; so too, do other practices that are related to the process itself.

With respect to evaluating your board’s level of engagement, you may wish to address the following questions for proxies: 

(1) Practice of disclosure review: Did each member of the board review the proxy word by word and cover to cover? Were questions raised and issues handled in-depth?

(2) Oversight of management and outside advisors: Out of that review, did the board make some assessment of the competence of internal and external legal counsel and any management staff or other outside advisors responsible for reviewing or putting the proxy materials together? 

(3) Board independence, competence and organizational culture assessment: Did board members find, in their review, that they are independent-minded and analytical enough to get a “succinct read” on the board from the proxy? Were they able to get a picture of the culture of the organization and see the organization through others’ eyes?

These are some of the general areas that the board should assess in the annual evaluation process anyway: (1) disclosure practices, (2) robust dialogue, (3) evaluation of management, (4) evaluation of advisors, (5) board independence, (6)board competence, and (7) oversight of culture/cultural assessment. The board’s disclosure practices simply provide a handy lens — and in the case of the proxies, a fact based example — for such a review.

The Value Alliance and Corporate Governance Alliance www.thevaluealliance.com

 Eleanor Bloxham www.eleanorbloxham.com

 Copyright 2010 The Value Alliance Company. All rights reserved.

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