Face the music
By Robert H. Rock

B raced for another harangue from an itinerant corporate gad- fly, my fellow directors were sur- prised when he lauded the board at our annual shareholders’ meeting this winter. Although he began by questioning why we had chosen the coldest day of the year to hold the meeting , intimating it was to keep attendance dow n, he ended by complimenting the directors for sitting up on the podium facing our shareholders. In his 40 years of attending (agitating may be more precise) share- holder meetings around the countr y, he noted that he rarely saw directors sitting “e y e b a l l - t o - e y e b a l l w i t h their owners and facing the music.” T h i n k i n g b a c k o n t h e s c o r e s o f a n n u a l s h a r e- holder meetings I had at- tended over the years, I was surprised that I could not recall any other board where I sat face-to-face with stock- holders. More typically I sit with my fellow directors facing the podium. At the begin- ning of the meeting the chairman intro- duces each director who, in turn, stands and nods to the assembled audience. We then settle back in our chairs and watch the show. Annual shareholder meetings are usu- ally pretty cut and dried; carefully script- ed and well-rehearsed performances that march through certain prescribed busi- ness such as election, or more often than not, reelection of the outside auditor. The whole process is usually over in under an hour. As one of my fellow directors ob- served, annual meetings are “Soviet” in their precision and routine. Often the ma- jority of attendees are company employ- ees, and those outside shareholders who show up often seem more interested in the food and free samples. Few questions are asked and little information is given. Over the past few years, annual meet- ings have become a bit more exciting as more controversial issues have come to the fore. In particular, investors are putting forward resolutions that seek to enhance boardroom accountability. For example, proposals advocating stockholder voting rights over executive com- pensation, so-called say on pay, are enlivening some an- nual meetings. The 2008 proxy season could be one of the most contentious following last year’s SEC decision enabling companies to exclude proxy access proposals that relate to director elections. Frus- trated with the SEC, pen- sion funds such as CalPERS and AFSCME are submit- ting access proposals in an attempt to test the agency’s decision in court or, alterna- tively, force the issue onto corporate prox- ies. In addition to shareholder access pro- posals, public and private pension funds are championing majority threshold vot- ing, reimbursement of proxy solicitation expenses, and limitations on uninstructed broker voting. With all these proposals, the 2008 proxy season is shaping up to be an exciting one. Consequently, directors may not be able to just sit back and glide through another routine annual meeting. Instead, they may need to adopt some reforms. No better way to do so than to face their sharehold- ers while looking out from the podium. directors & boards Letter from the chairman ® Face the music www.directorsandboards.com Editorial Advisory Board Robert H. Rock President, MLR Holdings Chairman Norman R. Augustine Former Chairman and CEO Lockheed Martin Corp. Robert L. Crandall Former Chairman and CEO AMR Corp. Robert L. Dilenschneider Chairman The Dilenschneider Group Inc. Theodore L. Dysart Managing Partner of the Americas Board of Directors Practice Heidrick & Struggles Charles M. Elson Director John L. Weinberg Center for Corporate Governance University of Delaware Thomas P. Gerrity Director Wharton Forum on Electronic Commerce University of Pennsylvania Ann McLaughlin Korologos Former U.S. Secretary of Labor Susan R. Nowakowski President and CEO AMN Healthcare Services Inc. Russell E. Palmer Chairman and CEO The Palmer Group Victor Pelson Senior Advisor UBS Securities Ltd. Jeffrey A. Sonnenfeld Associate Dean, Executive Programs Founder and CEO Chief Executive Leadership Institute Yale School of Management Drector  & Board  is an international journal of corporate governance and leadership, directed to the interests of board members, chairmen, CEOs, senior officers, and advisers to the board. It was founded by Stanley Foster Reed in 1976.

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