Excerpt from survey:

How are boards doing?

Investors are generally satisfied with how boards are doing their jobs, particularly with respect to overseeing regulatory compliance and assessing the company’s strategy. More than 80% of investors say they’re satisfied with how boards are overseeing risk and maintaining their own expertise. And about two-thirds of investors are satisfied with boards’ assessment of management performance. But investors also think there is room for improvement. For example, more than 60% of investors are dissatisfied with how boards assess director performance, and nearly half want to see improvement in how boards engage with shareholders. Over 40% of investors want boards to improve how they incentivize management through performance metrics.

To win investor support for last month’s $53bn takeover of rival drugmaker Shire, AbbVie delivered a blunt message to its target’s shareholders: if you want a deal, speak now or risk us walking away.

NEW YORK, July 22, 2014 /PRNewswire/ — The working group of the Shareholder-Director Exchange (SDX) and its founders – Cadwalader, Wickersham & Taft LLP; Teneo; and Tapestry Networks – today announced important developments related to its initiative to encourage engagement between shareholders and directors, including the transmission of a letter from investor representatives of the SDX working group to Lead Directors and Corporate Secretaries of every Russell 1000 company, as well as the expansion of the SDX working group.

The full letter can be accessed here and is also available at www.sdxprotocol.com.

The letter was written by investor members of the SDX working group, and it asks public company boards to consider adopting and clearly articulating a policy for shareholder-director engagement, whether through adoption of the SDX Protocol or otherwise. The letter states:

“Engagement between public company directors and their company’s shareholders is an idea whose time has come. We believe that U.S. public companies, in consultation with management, should consider formally adopting a policy providing for shareholder-director engagement, whether through adoption or endorsement of the SDX Protocol or otherwise. Several prominent U.S. companies are already following this path of engagement and disclosing their engagement efforts – we believe other public companies should follow their lead.”

In its 2014 Proxy Statement, JPMorgan Chase & Co. stated:

“In 2013, we expanded our outreach program to discuss a wider range of issues with a broader group of shareholders. Outreach discussions in the fall tend to focus on corporate governance matters and discussions in the spring tend to focus on issues specifically related to the proxy statement. In 2014, the Board endorsed the Shareholder-Director Exchange (SDX) Protocol, as a guide for effective, mutually beneficial engagement between shareholders and directors.”

Shareholder lawsuits, cross-border mergers and Marty Lipton, defender-in-chief, will play supporting roles at the annual New Orleans conference for merger lawyers and bankers. Aggressive investors shaking dozy boards are this year’s headliners. Their increasing presence at the gathering reinforces a growing power.

Two years ago, Pershing Square Capital’s William A. Ackman prompted nervous murmurs with swipes at “entrenched management” and a defense of rules that allow investors to quietly build stakes in companies. Corporate advisers also were uncomfortably abuzz over investor forays against Yahoo and McGraw-Hill.

At 78, Carl Icahn shows little sign of retiring, or of becoming more polite. After finally prodding Forest Labs into a $25bn takeover by Actavis, he renewed his attack on eBay this week, accusing John Donahoe, its chief executive, of being “completely asleep or, even worse, either naive or wilfully blind”.

This is becoming a fruitful decade for Mr Icahn and fellow hedge fund agitators, such as Dan Loeb of Third Point. From being reviled in the past as corporate raiders and “greenmailers”, they have rebranded themselves effectively as activist investors, willing to fight and defeat entrenched and complacent boards of directors and executives while pension funds slumber.

Engagement between investors and US listed companies is at a record high, driven by a combination of regulation, investor caution in the wake of the financial crisis and companies’ eagerness to avoid failed votes, according to a study by proxy firm ISS and the Investor Responsibility Research Center Institute.

One of the most interesting recent developments in the corporate governance world — and in the corporate world, for that matter — is the move toward more engagement between issuers and investors. Investors and companies are sitting down at the table more often these days, and whether the rise in engagement is spurred by the increase of “say-on-pay” votes, majority voting for the election of directors, the elimination of broker voting in board election (in the US), or activist investor activities, the development is a welcome one.

Engagement codes seem to be all the rage these days; since August 2013, groups in Australia, the United Kingdom, Japan, Malaysia, and most recently the United States have been falling all over themselves to get investors and boards talking. Kudos to these groups — as is the case with any relationship, frequent and meaningful communication and engagement build trust and make collaboration more fruitful.