Kris Pederson and Jamie Smith: Takeaways from the 2022 Proxy Season.

Boardroom Governance with Evan Epstein

0:00 -- Intro.

1:40 -- Start of interview.

2:20 -- Kris' "origin story".

5:20 -- Jamie's "origin story".

7:30 -- About the EY Americas Center for Board Matters. It has three mandates:

1. To conduct primary research in corporate governance (Jamie is the research lead). They have a proprietary proxy database and benchmarking database. Insights for directors.
2. To support boards of directors. For example with board committee work, new board formation (IPO, divestitures, spin-offs, etc.)
3. To organize and participate in director convenings (events, committees, industry, etc.)

10:19 -- Deep dive into their article "Four key takeaways from the 2022 proxy season."

10:58 -- On E&S Shareholder Proposals. "While there were more proposals in these categories, support for them became more targeted."

14:34 -- Focus on climate risk/energy transition, DEI and corporate political responsibility.

17:07 -- On boardroom diversity trends (including legal challenges to SB-826 and AB-979 in California and the Nasdaq Diversity Rules). "Today, 1/4 of the Fortune 100 directors is racially diverse and 1/3 is gender diverse; 61% of SP 1500 companies have 3 or more women on boards (up from 28% in 2018, that's a 30 point increase in three years)." "We have seen tremendous progress on all aspects of board diversity."

19:37 -- Support for directors remained stable despite signals that opposition would increase, with average votes against S&P 500 directors inching up to 4.2% compared with 3.9% over the same time period in 2021. "This year average voting opposition for nominating and governance chairs at S&P 500 companies was 8.2%, up from 4.6% in 2017. Similarly, average voting opposition for compensation committee chairs at S&P 500 companies was 7.3%, up from 3.8% over the same period. In addition, opposition to independent board leaders (i.e., independent chair, lead or presiding director) rose to 7.0% from 4.3%."

"The stakes for directors are really going up, and that's including around ESG matters." "Overall trends we think are pointing to director votes as a lever of change that investors may be more inclined to use going forward to express their views and accelerate their stewardship goals."

23:28 -- On investor pressure and pending SEC regulations (on climate change). "All of this is a wake-up call for directors."

27:00 -- On adding ESG expertise in the board. "I think it's critical for companies with board oversight to think about materiality." "Materiality assessments and matrices have been a good outcome of the ESG dialogue."

29:34 -- On institutional investors, stakeholders and the "disconnect" with the Anti-ESG political push-back.

36:03 -- On the new Universal Proxy Rules for Director Elections.

38:51 -- On shareholder engagement. "We really see investor engagement as a vital tool for companies to understand their key shareholders' perspectives on the company's governance and its strategy and also an opportunity to enhance the company's communication and deepen those relationships."

42:57 -- On shareholder activism. "We counsel boards to run different programs to think like an activist." "Companies need to be smart about what drives their own TSR." "Activists will often look at the board, to bring different dissidents and/or target individual directors." "There is a deep scrutiny around the E&S agenda areas."

45:51 -- On recommendations for directors in these volatile times, and how to increase the board’s impact in volatile times. "It's important to have a framework in place grounded in the company's purpose and its values so that it's ready in terms of how they are going to make decisions, what issues they are going to weigh-on, what stakeholders they need to think about, and what constituencies they are hearing from."

49:28 -- On boards adding value (strategy and innovation).

51:53 - What are the 1-3 books that have greatly influenced your life:

Kris:

1. Start with Why, by Simon Sinek (2009)
2. Gone with the Wind, by Margaret Mitchell (1936)
3. Talent, Strategy, Risk: How Investors and Boards Are Redefining TSR, by Bill McNabb, Ram Charan and Dennis Carey (2021)

Jamie:

1. Doughnut Economics, by Kate Raworth (2017)
2. This is Water, by David Foster Wallace (2009)

53:30 - Who were your mentors, and what did you learn from them?

1. Kris: Peggy Vaughan (former partner and board member PwC)
2. Jamie: Allie Rutherford (partner PJT Camberview)

55:16 - Are there any quotes you think of often or live your life by?

1. Kris: "Just say yes"
2. Jamie: "We are the ones we've been waiting for"

56:28 - An unusual habit or an absurd thing that they love:

1. Kris: She's a flutist, and has passed that skill over to her daughter so they play flute duets together.
2. Jamie: Having her hair and make-up done by her 5-year old daughter.

57:41 - The living person they most admire:

1. Kris: Greta Thunberg
2. Jamie: "Working mothers (and especially those of the pandemic) that are working to make the future more sustainable and equitable for future generations."

Kris Pederson is the EY Americas Center for Board Matters Leader. Jamie Smith is the EY Americas Center for Board Matters Investor Outreach and Corporate Governance Specialist.

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You can follow Evan on social media at:

Twitter: @evanepstein

LinkedIn: https://www.linkedin.com/in/epsteinevan/

Substack: https://evanepstein.substack.com/

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Music/Soundtrack (found via Free Music Archive): Seeing The Future by Dexter Britain is licensed under a Attribution-Noncommercial-Share Alike 3.0 United States License

You can follow Evan on social media at:

Twitter: @evanepstein

LinkedIn: https://www.linkedin.com/in/epsteinevan/

Substack: https://evanepstein.substack.com/

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You can join as a Patron of the Boardroom Governance Podcast at:

Patreon: patreon.com/BoardroomGovernancePod

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Music/Soundtrack (found via Free Music Archive): Seeing The Future by Dexter Britain is licensed under a Attribution-Noncommercial-Share Alike 3.0 United States License