SURPRISINGLY little seems to have been written following the U.S. Securities and Exchange Commission’s (SEC) actions last November to establish ground rules for the use of shareholder forums as a corporate governance tool.
Perhaps this is because the SEC has not yet posted the final rule release, or maybe it’s because the SEC’s other decision taken on the same day — the one where they shut the door on shareholder access — has been getting all the attention.
Of course, the lack of discussion might simply be a factor of lawyers and others taking the view that it’s not a worthwhile topic given that precious few companies are actually going to be interested in starting shareholder forums.
Whatever the case, shareholder forums are not something companies can afford to ignore. Whether they like it or not, every corporate board now needs to have policies and procedures in place for communications on shareholder forums.
That’s because the amendments don’t just provide clarity to companies that may wish to provide an electronic forum, they also do the same thing for shareholders who want to do so.
In many cases, I expect shareholders will move first to establish a forum and then invite company directors and management to participate.
Boards need to carefully consider how they will respond to those invitations from shareholders or other third parties. They can no longer hide behind the excuse that vague regulations and potential liability make it impossible for them to participate. The SEC has cleared all of that up and now is “encouraging” the use of shareholder forums.
If a board decides not to participate after being invited, it could well be signaling that it is aloof or even unaccountable.
In the case of the Verizon Shareholder Forum, which is operated by an investor, a Verizon spokesman told the New York Times that the company would consider participating once the rules were clarified by the SEC. Well, that has now been done, so how will Verizon’s board respond?
The prudent response for boards is to talk about this issue soon and determine how they will handle communications on forums, be it their own or one set up by another entity.
By the way, forum software is freely available on the web so the cost of implementation is zero.
For background on this topic see the SEC’s press release, SEC Adopts Proxy Rule Amendments Encouraging Electronic Shareholder Forums.
And here is a video of Chairman Chris Cox’s opening statement about the shareholder forum amendments to the proxy rules.