Harvard Law School Forum on Corporate Governance and Financial Regulation
They describe the call the following way:
“We would like to introduce a forum where investors can pose thoughtful questions and challenges, and hear directors’ views that are not filtered by management or by proxy advisory firms. The ‘Fifth Analyst Call’ would also serve as an efficient mechanism for issuers to reach beyond the handful of their largest investors to their broader investor base. A recorded call is easily posted on the company’s website for wider market access.”
Another group of global institutional investors that include T. Rowe Price and Walden Asset Management also called for a similar forum back in February, according to a client memo
from Foley & Lardner. That memo explains how the call got its moniker: the call would be similar to the four quarterly earnings calls, except that it would be held just before the annual meeting. “The call would follow the public filing of the company’s proxy statement for the annual shareholders meeting, but would precede the meeting by 10 to 15 business days,” the Foley & Lardner memo states.
According to Foley & Lardner, the call would be limited to:
- Utilization of rights and responsibilities embedded in the Dodd-Frank Act to encourage good governance by issuers and responsible ownership by investors.
- Enhancement of investor understanding of the company’s governance strategies.
- Facilitation of dialogue on governance matters and, to enable more informed shareholder voting, concerning the contents of the proxy statement.
While the idea sounds like a good one for shareholders, many company boards are not yet sold on the idea of such an intimate setting, especially if it included proxy advisory firms. In fact, only a handful of companies besides Occidental Petroleum have agreed to such a call this proxy season. Many are concerned about violating Regulation FD (Fair Disclosure) in that the discussion could possibly veer off from the agenda, which will include all disclosure included in the proxy statement. Others are concerned about making a recording of such a call available to any shareholder since they believe comments could be taken out of context especially if it were to go viral on the Internet.
The Regulation FD argument has been the focus of many online discussions and has even been addressed by SEC Chair Mary Schapiro in a 2009 speech to the International Corporate Governance Network. “Regulation FD does not restrict communications between companies and shareholders” nor does it “prevent companies from seeking out and listening to the views of investors,” Gilshan and McGeveran cited Schapiro in the March 20 Harvard Law blog post.
In a online discussion moderated by Rob Berick of Dix & Eaton in which I participated, at least one commenter brought up the Regulation FD concern and made a point that any discussion the company has on some of the pertinent issues should be included in the Compensation Discussion & Analysis of the proxy statement. [To read more about Rob’s thoughts on this issue, see his April 4 blog post
However, another commenter pointed out “the SEC has been clear in its guidance that governance matters do not violate Reg FD, and publishing the call on the company web site addresses the issue of selective disclosure.”
Yet another commenter pointed out the significance of any forum where the lead director or head of a corporate governance committee can have contact with investors. “Directors who may have been insulated from investor contact can get to hear investors’ concerns first hand,” he wrote.
The Conference Board Governance Center, which launched an executive compensation task force in 2009, has decided to follow up with a task force on shareholder dialogue later this year. And the idea of focusing on the fifth analyst call has been brought up as a major issue for that task force.
In what is probably one of the most-anticipated conference call in Occidental Petroleum’s long history, some key institutional investors will get a unique opportunity April 26 to discuss key issues brought up in the proxy statement. Known unofficially as a “fifth analyst call,” United Kingdom-based F&C Asset Management plans to host the call with institutional investors and key members of the board and management to discuss corporate governance issues.
F&C Asset Management in conjunction with fellow UK investor Railpen Investments introduced the idea of the fifth analyst call earlier this year in a joint statement from Deborah Gilshan, corporate governance counsel at Railpen, and Elizabeth McGeveran, senior vice president at F&C, that was made available to the