The Ideal Proxy Statement

Abstract

Institutional investors are highly dissatisfied with the quality of information that they receive about corporate governance policies and practices in the annual proxy. Across the board, they want proxies to be shorter, more concise, more candid, and less legal. The largest complaint involves executive compensation and the inability of investors to determine whether senior management is paid appropriately.

Based on recent survey data from major institutional investors, we describe the information that shareholders would like to see in the “ideal” proxy statement.

We ask: • What changes can companies make to proxies contain the information that investors want in a format that is easy to read and navigate? • Would shareholder understanding of corporate governance practices improve if companies provided clearer and more succinct data? • How might the debate about executive compensation change?

The Closer Look series is a collection of short case studies through which we explore topics, issues, and controversies in corporate governance and executive leadership. In each study, we take a targeted look at a specific issue that is relevant to the current debate on governance and explain why it is so important. Larcker and Tayan are co-authors of the books Corporate Governance Matters and A Real Look at Real World Corporate Governance.

Keywords: annual proxy statement, DEF14a, shareholders, institutional investors, corporate disclosure, say on pay disclosure

JEL Classification: G14, G30, G38, M40