A corporate governance version of the Group of 30 has released a report on enhancing communication between corporations and institutional investors.
The report is by The New Foundations Working Group, a project of the Kennedy School of Government of Harvard University that includes representatives of 30 large pension funds, corporate chief executive officers and legal experts.
The report suggested new approaches to governance problems that aim to "reduce confrontation and promote a more effective corporate governance process."
The shift to long-term passive ownership by many institutions creates valuable communications opportunities for corporations.
Such discussions will "enable corporations to build a better-informed, more stable shareholder base," and build "enhanced support for corporations pursuing sound long-term policies and ensure that new policies are properly understood and valued by the market," the report said.
Among the subjects offered as suitable for discussion were new corporate policies, market performance, consultation on director nominations, CEO succession, compensation and corporate governance.
The report, which included many viewpoints, said "corporations should seek to identify serious concerns held by major investors."
Those views should then be expressed to the board and senior management. The conduit might be a shareholder relations or corporate governance committee of the board or a shareholder ombudsman.
"Corporations agreeing to seek enhanced communications with their major investors have the right to request good-faith pledges from major investors in response," the report noted.
Such pledges of good faith might include understandings about the process governing dialogue and a commitment to continued discourse.
