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04 May. 2011 | Comments (0)

It was only a year ago that Occidental Petroleum made some big news when it was among the first U.S. companies to have a “Say on Pay” proposal voted down by its shareholders. This year, the company reportedly is the first to hold a so-called “fifth analyst call” with about 50 shareholders prior to this year’s annual meeting on May 6. By now, most in the corporate governance space have become familiar with the fifth analyst conference call – a call conducted by directors of a public company with key shareholders to discuss issues in the current proxy statement held just before the annual meeting. The name points to the fact that the call is the fifth of the year following the four quarterly calls a company holds with equity analysts. One of the differences with the fifth analyst call is that directors get to converse with a wider array of investors than they had in the past. So how did the first call go? Well, all that can be confirmed is that the call did indeed take place on April 26, that many corporate governance issues on the proxy statement were discussed and that the company’s Lead Director Aziz Syriani and Compensation Committee Chair Spencer Abraham took part. That was from the hosts of the call, F&C Asset Management and Railpen Investments. The company did not officially comment. “Over 50 investors from seven countries and three continents participated in the call,” according to a joint statement from Deborah Gilshan, corporate governance counsel of Railpen Investments, and Elizabeth McGeveran, senior vice president of F&C Asset Management. “The question-and-answer session was lively, focusing on core corporate governance matters around board structure, compensation, and specific items on the proxy ballot,” Gilshan and McGeveran said. “We are encouraged that investors will be able to use the information and insights from the first-ever fifth analyst call productively as they consider their voting decisions for Occidental Petroleum’s annual meeting.” As for Occidental, it has apparently decided not report publicly what happened on that conference call. But in its 2011 proxy statement, it does address the issue of shareholder dialogue specifically related to executive compensation. Here it is:
Role of Investors and Stockholder Advisory Groups. Occidental maintains an ongoing dialogue with its stockholders and certain stockholder advisory groups.  Occidental’s Lead Independent Director and the Chairman of the Compensation Committee participated in meetings with some of Occidental’s institutional investors in the summer and fall of 2010.  Discussions at the meetings included, among other things, succession planning and selection of performance targets and peer companies and other compensation practices.  Feedback obtained from the meetings was provided to the Compensation Committee and the full Board.  Comments from investor meetings have been taken into consideration in Occidental’s ongoing efforts to improve its compensation program and the quality of its compensation disclosures.”
The company’s actions haven’t been all virtuous. But it seems the board has been listening to some of its biggest shareholders following a settlement last year with California State Teachers’ Retirement System (CalSTRS) and Relational Investors LLC that called from concessions from the company on succession planning, executive compensation and the election of corporate governance expert Margaret “Peggy” Foran to the company’s board. (These institutional shareholders threatened to replace four board members if the company didn’t address corporate governance matters.) But like anything that brings change to a system like American corporate governance, there’s bound to be controversy. And the fifth analyst call has generated its share of that.  Rob Berick, senior managing director of communications at Dix & Eaton, captures the essence of the Occidental call in his Street Talk blog post Monday. He points out that the investor relations/governance concept seemed to work on Monday. He wrote:
“The good news is that the sun did in fact rise the very next day so the feared apocalypse was averted. Granted, while the participants asked pointed questions, there weren't many curveballs thrown during the Q&A session. It would be foolish to assume such would be the case in every instance.”
He also included a link to a white paper his firm wrote regarding the Occidental call, where the firm lists the pros and cons of the fifth analyst call. While the pros are a bit obvious, the cons point out some gray areas, such as whether or not Occidental violated Regulation FD (Fair Disclosure) when it held the call. The sticking point there is that Occidental supposedly did not publicly alert investors about the call and didn’t post a recording of the call on its web site. Dominic Jones, founder of IR Web Report, makes that case in his April 27 post. He also points out how the timing of the call should be questioned since it occurred less than 48 hours before the company released its first quarter 2011 earnings.
  • About the Author:Gary Larkin

    Gary Larkin

    Gary Larkin is a research associate in the corporate leadership department at The Conference Board in New York. His research focuses on corporate governance, including succession planning, board compo…

    Full Bio | More from Gary Larkin

     

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