Home > Disclosure > What do investors expect from a proxy statement? How should it be?

What do investors expect from a proxy statement? How should it be?

What would proxy readers like to get rid of?


According to Nicholas Rummell, (1), size is the first obstacle to a useful proxy statement. Complex language and structure could be the following. Poor design and graphing also hinders an easy reading. Inconsistency through time is a noise too.

What changes could help? A good skills and capacities matrix for directors and their photos would help understand board quality, composition and diversity. Proxy design also helps: tables, colours, different fonts, etc. Remarking particular features that have been newly adopted or abandoned is a good idea also, according to Rummell.

According to Larcker, Schneider, Tayan and Boyd, (2) in a 2015 Investor Survey conducted by RR Donnelley, Equilar and the Rock Center for Corporate Governance, investors are generally dissatisfied with:

  • Size, quality and clarity.
  • Communication and explanation, (as rarely companies provide it rather than only disclosure).

In particular, disclosure on compensation is deficient:

  • It is not made clear if compensation levels are correct,
  • The risk and compensation connection is not clear either,
  • Investors don`t get a clear idea of whether performance goals (upon which performance pay is based) are rigorously established.

Investors generally consider a good proxy statement increases shareholder value, so that certain recommendations should be made according to the previously cited survey results. Larcker and Tayan examine how a useful proxy statement should be in their article “The ideal proxy statement”, (3), published by the “Stanford Closer Look Series”

What could be done to improve proxy statements? They suggest the following, that somehow satisfies regulatory obligations and the investors`community demand for clarity:

  • Investors need context; a letter by the Chairman or the Lead Director should help in a page to draw a context picture about strategic goals and particular items, such as board composition, compensation, shareholder rights and other.
  • Proxies should include a matrix (or any other clear tool) trying to justify why every director has a place in the board and the value he/she provides the company with.
  • Compensation: summarized information, and plain explanations about pay`s connection with long-term goals, financial metrics, and risk would be welcome.
  • Shareholder rights: investors would welcome a summary of the ways shareholders can influence the company decisions, clear explanations about how the company answers the different shareholder proposals, and about how it engages with shareholders.
  • In general, executive information would help investors, while keeping details and long explanations (as required by regulation and investors) in the body of the proxy statement

Not only institutional investors, but everyone desiring to be updated on its investments would welcome these and other changes!

  1. http://www.corporatesecretary.com/articles/proxy-voting-shareholder-actions/12626/improving-your-proxy-statement/
  2. http://www.gsb.stanford.edu/sites/gsb/files/publication-pdf/cgri-survyey-2015-deconstructing-proxy-statements_0.pdf
  3. http://www.gsb.stanford.edu/faculty-research/publications/ideal-proxy-statement


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