A week or two ago I was asked to speak at a meeting of the Small- and Mid-Cap Companies Committee of the Society of Corporate Secretaries and Governance Professionals. That’s not unusual or even noteworthy, as I’m a long-time, active member of the Society and often speak at Society functions.
What was unusual and perhaps noteworthy is the topic on which I was asked to speak and the reason I was asked to speak on it. Specifically, one of the Committee members had asked the Chair if someone could give a general primer on shareholder proposals, because his/her company had received its first shareholder proposal ever.
I’ve been saying for quite a while that empowered investors are likely to turn to small- and mid-cap companies for the next wave of governance reform. I’ve believed that because, frankly, there’s not much low-hanging fruit to be plucked at large-cap companies. The overwhelming majority of those companies have – among many other things – eliminated staggered boards, implemented majority voting and done away with supermajority voting requirements for mergers and other transactions. Sure, empowered investors still have “issues” with a number of large caps, such as the perennial favorite of having an independent board chair and enabling shareholders to call special meetings and to act by written consent. However, these are as peripheral as the scraps of turkey that we’ll be picking at over the coming weekend after the bulk of the bird has been devoured. And there’s also proxy access, which is the issue du jour, but given the number of large caps that seem to be adopting it, proxy access is also becoming so last week.
Which brings us back to the small- and mid-caps. There is abundant low-hanging fruit, and to be candid many smaller companies may have no clue how to deal with empowered investors or the issues they advocate. That’s not a dig – it’s just that smaller companies generally don’t have the experience or the resources. It’s hard to develop and implement a shareholder engagement program when the CFO heads the IR function, acts as head of HR and is responsible for turning out the lights at night.
So be scared…be very scared. But also be prepared. Line up your teams of insiders and outside advisors and there’s reason to think you’ll do fine.
Happy Thanksgiving to all.