In order to give our readers a sense ofthe way the Society of Corporate Secretaries & Governance Professionals ("Society") builds for its future as its successive Chairmen move the Society forward during their one year terms, we first asked Lydia Beebe, Secretary and Chief Governance Officer of Chevron, who is the present Chairman of the Society and who will end her year as Chairman at this year's National Conference in June, about her year as Chairman and what she set out to accomplish for the Society:
I identified four major themes to concentrate on during my term as Chairman, based on individual conversations with the Society directors for 2007 and 2008, as well as some individual thoughts. Those themes are:
• strengthening the Society governance
• growing the Society membership
• increasing support and enabling strategies for Society chapters
• enhancing the position and stature of the Society
Working through "SWAT" teams led by directors, whom I asked to take on this additional role, we have made progress in each of these areas and, hopefully, laid the groundwork for continually advancing these important goals. Highlights are set out below for each of the themes.
Strengthening the Society's governance. Rich Koppes led the SWAT team focused on the Society's governance. After several meetings, the team recommended and the Society board adopted the recommendation to form a permanent Nomination and Governance Committee. That committee, with Craig Mallick serving as chairman, is now working to develop governance guidelines and criteria for selection of officers, directors and committee chairmen.
Growing the Society's membership. Terry Helz, who is in his third year as chairman of the Membership Committee, led the effort to continue initiatives begun during Bill Mostyn's term as chairman to sustain and grow membership, with a significant focus on retention. The Society's membership continues on a modest upward trajectory, while retaining the vast majority of members up for renewal.
Increasing support and enabling strategies for Society chapters. Two SWAT teams focused on strategies supporting the Chapters. Barbara Blackford headed a group focused on smaller public companies and Nicole Silsby Sanford led the effort to strengthen the Society's technology platform. Based on the team's recommendation, a smaller public companies committee is being formed to ensure that issues of smaller public companies are included in the Society's programs and to initiate efforts to assist smaller public companies with appropriate information and resources. Nicole's technology team has focused on working with the National staff on website improvements and piloting webcasts of chapter meetings.
Enhancing the position and stature of the Society. President David Smith is taking the leadership role in bringing the above efforts together with the National Office's "awareness" campaign to enhance the position and stature of the Society. Examples of activities include visits from two delegations of governance executives from China, desk-side interviews with business reporters, ongoing communications and meetings with the SEC staff and dialog with opinion leaders in the field.
Succeeding Lydia Beebe as Chairman of the Society will be Craig Mallick, Secretary & Assistant General Counsel, United States Steel Corporation. We asked Craig about the vision of the role of the corporate secretary that will inform him as he formulates his plans for his term as Chairman. He responded (harking back to an address he had given at the Society's Essentials Seminar, January 30, 2008):
When I speak of corporate governance I'm not just talking about strict compliance, or drafting agendas or writing minutes or making sure that corporate actions are properly authorized - although those are all certainly important parts of corporate governance. I'm talking about more - about keeping your boards informed and involving them in the corporate governance process, about avoiding surprises. And beyond that, I'm talking about conforming with the highest moral principles - the same principles we learned as children, like doing the right thing no matter how hard it is. Corporate governance is one of those areas in which many times there are no clear legal answers, but in which there are often right answers, the kinds of answers that come from somewhere deep within yourselves. The well-governed company is the company that arrives at those right answers and thereby avoids the next scandal.
Ours is a unique role, and it is certainly an important one - made all the more important when Sarbanes-Oxley and the stock exchange rules made our jobs more difficult. Here's my advice to you: We have detail-oriented jobs, but don't get so caught up in the details that you lose sight of the herd for the cattle. Don't get caught up in the latest corporate governance trend without analyzing whether it's right for your company, because when your CEO asks why your company should do it, I guarantee that the wrong answer is "because everybody else is doing it."
Accept the fact that your jobs are like golf. They're impossible to perform perfectly. You'll save yourself a lot of stress if you resign yourselves to that early on. Just put the bad shots behind you and focus on your next one.
Join the Society if you haven't already, and become active in your local chapter. Believe me; the networking you'll enjoy with other members with whom you can share ideas or ask questions is by itself worth the price of membership.
But above all, be your company's conscience, its compass. That's quite a burden, and while I'm happy to say that, because of the integrity of our executive team at U. S. Steel, it's a burden I haven't had to carry in my career, some of you might. It requires the courage to say, "Yes, that would be legally defensible, but it wouldn't be right." Use the famous smell test, because there may come a time when some proposed action just won't smell right to you and you won't be able to readily point to a statute or rule, but I'll tell you this: Given time, some plaintiffs' lawyer will. Trust your instincts. Do the right thing. Have courage. Your CEO, your board, and your shareholders need that from you. Remember that you really are the guardians of corporate legitimacy, and that that's what good corporate governance is - keeping your company legitimate both legally and otherwise.
The members of the Society benefit from the expertise of other members. Cary Klafter, Vice President-Legal & Corporate Affairs, Director, Corporate Affairs and Secretary, Intel Corporation, and Chair of the Society's Public Company Affairs Committee, and Steve Norman, Secretary & Corporate Governance Officer, American Express Company, are on the "Working Group" of the NYSE dealing with proxy voting issues, in particular Rule 452 (the broker discretionary vote) and the NOBO/OBO structure. They represent a concrete example of members with expertise representing the interests of other members in the intricacies and daily workings of the Corporate Secretarial function. I asked them about their efforts. Here is what they told me:
Two years ago the New York Stock Exchange formed a Committee called the Proxy Working Group to consider amending NYSE Rule 452. 452 is "broker non-vote" or "10-day rule" that corporate secretaries are familiar with during proxy season. Proxy agenda items designated as "routine" by NYSE can be voted upon by a brokerage firm as record owner if the shares have been voted-by-instruction by the beneficial owner/broker customer. Various institutional investors and groups have not liked 452 on the basis that brokers may vote with management, and the NYSE was asked to repeal or cut back on 452. The Society and individual issuers have opposed changes to 452 in the belief that changes would serve to reduce the retail vote and threaten the receipt of a meeting quorum at many companies. The sides also differ as to what retail customers really know about their vote and what happens under 452 if they do not vote.
After input from various parties, the Proxy Working Group voted to amend 452 to designate director elections as "non-routine", meaning that un-voted shares could no longer be voted by the brokerage firms. The NYSE submitted a rule-change proposal to the SEC and convened some new committees to study issues related to 452. We are on the PWG, tasked with making recommendations about the proxy process generally, and considering what types of investor education activity could be undertaken by brokers and issuers with the goal of encouraging the retail vote. In addition, the committee has been discussing the merits of various alternatives to the current 452 system, in each case with the goal of encouraging the retail vote. One alternative is "proportional voting" (PV), which has been adopted already by a few brokerage firms. With PV the brokers vote un-voted shares from retail accounts in the same proportion as voted retail shares. Another alternative is "client-directed voting" (CDV). Under CDV, retail holders would be solicited to give advance, revocable, voting instructions to their brokers; these instructions would be general, such as "vote with management."
The Proxy Working Group includes representatives of brokers, service providers, issuers and the SEC. The issuers remain concerned about the proposed changes to 452, and the NYSE proposal to the SEC appears to be currently on-hold as the parties observe the effects of notice-and-access on voting behavior this proxy season.
The Rule 452 issue is one aspect of a broader focus by the Society's Public Company Affairs Committee and the Society overall. In comment letters and face-to-face meetings with the SEC staff, we have pushed for the Commission to undertake a full, holistic review of the stockholder communications and proxy delivery process. We believe that topics such as the NOBO-OBO rules and the Rule 452 proposals prevent issuers from knowing who are their owners and from communicating with them in a cost-effective manner. As more votes become very close, and as "shareholder access" looms again, we fear for a breakdown in the system. As with any industry-wide effort in which the interests of the Society are involved, each of us would welcome any comments or suggestions from Society members.