2014

The Conference Board Report Calls for Investor Engagement to Rebuild Corporate Trust and Drive Economic Growth Governance Task Force Issues Recommendations for Balancing the Roles of Boards and Investors in Corporate Governance

During Proxy Season, Ongoing Investor Activism Increases Importance of Effective Engagement between Corporations and Investors

NEW YORK, March 11, 2014 /PRNewswire/ -- With the political and economic aftermath of the financial crisis still unfolding, trust and confidence in business remains lower today than it was in 2008. Yet according to a Task Force of The Conference Board Governance Center, opportunities also abound to successfully recover public trust — if companies are able to act decisively and with a unity of vision and responsibility shared by management, the board of directors and investors.    

Many argue that the corporate governance system is fundamentally broken. Such mistrust animates not only legislators and street protesters but also powerful institutional investors; in fact, some now believe activist shareholders should take on oversight roles traditionally vested in boards. As the 2014 proxy season reaches its peak, ongoing investor activism increases the importance of effective engagement between corporations and investors.

The Governance Center Task Force on Corporate/Investor Engagement is the first comprehensive collaboration of representatives of both companies and investors, bringing together directors of public companies and leading investors to examine these issues through a series of public forums, expert reports and commissioned research. The Task Force concluded that fixing corporate governance — and, ultimately, restoring trust in business — calls for an open, yet purpose-driven process of reestablishing alignment between corporate strategy and investor interests.

"Corporations and their investors have an important role to play in helping to restore trust in business," said Pat Russo, co-chair of the Task Force and Director at Alcoa, General Motors, Hewlett Packard, and Merck. "That's why the Task Force was assembled and why, after extensive investigation and debate, we developed this set of recommendations as a first step in aligning the interests of investors and the companies they invest in to stimulate economic growth and prosperity."

The Task Force, with the assistance of an Advisory Board of leaders in corporate governance from the corporate, investor and academic worlds has developed a comprehensive discussion of the need for a strategic approach to engagement and the nuts and bolts of creating such a strategy. Based on Advisory Board work and the accompanying white paper findings, the Task Force developed strategic recommendations to address:  

  • Why directors and investors must together reaffirm the principle that the interests of all stakeholders — including customers, employees, suppliers, communities, and the environment — are key to business success, and thus shareholder value in the long term.
  • Why board-centric, rather than shareholder-centric, governance remains the optimal model for corporate decision-making, and how directors can adapt this model to incorporate more investor input and build stronger collaboration while retaining primary oversight responsibility.   
  • How investors can most effectively, responsibly, and openly utilize the power of their votes to work with the board and management.
  • Which regulatory changes may have a big impact in shaping a more accountable, effective, and transparent relationship between corporate boards, investors, and the public.

"Previous crises in capitalism have shown that we can restore trust through governance," said Simon Lorne, co-chair of the Task Force. "But business leaders — from corporations and institutional investors — need to take the initiative by clearly advocating and articulating a strategy to transcend the status quo. Considering the diverse array of perspectives represented on the Task Force, we believe we're in a good position to formulate governance recommendations and encourage their widespread adoption. That task starts today."

About the Task Force on Corporate/Investor Engagement

The Task Force was formed to examine the facts, issues, and policy implications of U.S. corporate governance and issue research and recommendations aimed at influencing corporate directors, investors, and policy makers to help create a stronger corporate governance system through effective engagement. The Task Force is comprised of board members of leading corporations, institutional investors and hedge funds. 

In addition to the recommendations on corporate/investor engagement, The Conference Board Governance Center published a white paper that reviews the historical development of the current U.S. corporate governance system, including key challenges, and a practical set of guidelines for engagement between senior management and directors of a public company and their investors. All of the materials can be found at The Conference Board Governance Center website at http://www.conferenceboard.org/governance.

About The Conference Board

The Conference Board is a global, independent business membership and research association working in the public interest. Our mission is unique: To provide the world's leading organizations with the practical knowledge they need to improve their performance and better serve society. The Conference Board is a non-advocacy, not-for-profit entity holding 501 (c) (3) tax-exempt status in the United States. www.conference-board.org

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