NEW YORK, Feb. 3, 2014 /PRNewswire/ -- A working group of leading public company directors, institutional investors and the advisory firms Tapestry Networks, Inc., Cadwalader, Wickersham & Taft LLP and Teneo Holdings, LLC together with Broadridge Financial Solutions, Inc., today announced the launch of SDX – the Shareholder-Director Exchange. SDX is the collective best thinking of a broad group of leading corporate governance practitioners on why, how, and when boards and institutional investors should engage directly with each other. Although the SDX Protocol can be used in the context of a corporate crisis, it is intended to be a broader template for discussing and addressing corporate issues in the normal course of business.
"Market conditions as well as an increasing focus on better and more effective governance practices have demonstrated the necessity of direct communication between directors and shareholders," said Bonnie Hill, Director, AK Steel Holding Corp., California Water Service Group, The Home Depot, and Yum! Brands. "There is a growing call for directors to engage directly with shareholders, but until now, the circumstances and conditions under which that engagement should take place have been unclear. The SDX Protocol was developed in partnership with investors and directors to help navigate these uncharted waters."
"When boards want to know the views of their shareholders, they should go direct to the source," said Michelle Edkins, Managing Director, Global Head of Corporate Governance & Responsible Investment at BlackRock. "Similarly, as a long-term investor, we believe there are issues on which only a director can credibly provide the company viewpoint. The direct board to shareholder engagement proposed in the SDX protocol will help build mutual understanding on key governance matters when necessary and appropriate."
Both investors and directors are realizing significant value from direct engagement. Engagement improves transparency, mutual understanding, and the overall quality of governance in the market. Engagement can also reduce transaction and friction costs.
"Interactions between boards and shareholders of all types need to be rethought with an eye toward developing a common perspective on long-term value creation," said James C. Woolery, Deputy Chairman of Cadwalader, Wickersham & Taft LLP. "SDX will help boards and shareholders demystify the engagement process, and make sure it works effectively for both parties."
"In today's market environment, boards that are not communicating with their investors on a continuing basis risk making themselves vulnerable to activists who will exploit the vacuum that is created," said Declan Kelly, Chairman and CEO of Teneo Holdings. "Engagement as envisioned in SDX – where the decision to engage is made in consultation with or at the request of management – is a powerful tool to deploy."
"Historically in the US, the benefits of engagement have been understated, and the costs and risks inflated," said Anthony Goodman, partner at Tapestry Networks. "There are very few elections where dialogue between the elected and the electorate is positively discouraged. The right sort of director-shareholder engagement can help each group do its job better. SDX is about helping that happen."
"Broadridge commends the working group for its care and insight in creating the Protocol," said Richard J. Daly, CEO Broadridge. "The working group noted that the Protocol is adaptable by companies and directors for their engagement with all shareholders. In this regard, technology can be essential to eliminating the element of surprise that may occur from one year to the next in director elections and votes on pay plans and other matters."
"Engagement with the companies in which the Vanguard funds invest has long been one of the central tenets of our approach to governance and long-term value creation for our clients," said Glenn Booraem, Principal & Fund Controller, Vanguard. "The SDX Protocol represents best practices of leading companies and investors, and it presents these practices in a way that fosters greater dialogue among market participants for the benefit of all investors."
"The rules of engagement between boards and shareholders are changing, and SDX addresses head-on the challenges that are top of mind for directors," said Linda Fayne Levinson, Director, Hertz, Ingram Micro, Jacobs Engineering Group, NCR, and Western Union. "The SDX Protocol's ten points will be a powerful reference for directors who want to understand the 'how' of engagement. I look forward to seeing how boards and investors will make use of SDX for deeper and more productive engagement."
SDX was developed after a comprehensive series of interviews and meetings led by Tapestry Networks. More than 30 directors, institutional investors, and corporate governance thought leaders were interviewed as part of SDX. A group of 17 leading investors and directors served on the working group that developed the protocol:
- Glenn Booraem, Principal and Fund Controller, Vanguard
- Les Brun, Director, Automatic Data Processing, Inc., Broadridge Financial Solutions, Merck
- Stu Dalheim, Vice President, Shareholder Advocacy, Calvert Investments
- Michelle Edkins, Managing Director and Global Head of Corporate Governance and Responsible Investment, BlackRock
- Tim Goodman, Associate Director and Head of North American Engagement, Hermes EOS
- Bonnie Hill, Director, AK Steel Holding Corp., California Water Service Group, The Home Depot, and Yum! Brands
- Michele Hooper, Director, National Association of Corporate Directors, PPG Industries, and United Health Group
- Labe Jackson, Director, JPMorgan Chase and Co.
- Andrew Letts, Managing Director and Head of Corporate Governance, State Street Global Advisors
- Linda Fayne Levinson, Director, Hertz, Ingram Micro, Jacobs Engineering Group, NCR, and Western Union
- Mike McCauley, Senior Officer, Investment Programs & Governance, State Board of Administration of Florida
- Eileen Mercier, Director, Intact Financial Corp., Ontario Teachers' Pension Plan, Teekay Shipping Corp., and the University Health Network
- Thomas Mistele, Director, Chief Operating Officer, Senior Counsel, and Secretary, Dodge & Cox, San Francisco
- Tom O'Neill, Director, Archer Daniels Midland, NASDAQ OMX Group, Inc., and Misonix
- Nathan Partain, President and Chief Investment Officer, Duff & Phelps Investment Management Co.; Director, Otter Tail Corp.
- Debra Perry, Director, Korn/Ferry International and PartnerRe
- Rich Roedel, Director, IHS, Inc., Lorillard, Inc., Luna Innovations Inc., and Six Flags Entertainment Corp.
SOURCE Teneo Holdings