With management and board oversight of traditional and emerging risks increasingly being top-of-mind for institutional investors in their portfolio company engagements and proxy voting decision-making, Donnelley's new "Keeping Pace on Risk Oversight" included in Equilar's Fall C-Suite publication (also page 26 of pdf here) is share-worthy.
While acknowledging the wide range of proxy disclosure about board risk oversight from general or boilerplate to robust, inclusive of appealing, effective visuals - and everything in between - Donnelley observes a trend toward the latter and, in that context, highlights this disclosure from HCP's 2017 proxy statement (pg. 19):
" RISK OVERSIGHT
Our Board believes that effective risk management involves our entire corporate governance framework. Management is responsible for identifying material risks, implementing appropriate risk management strategies, integrating risk management into our decision making process, and ensuring that information with respect to material risks is transmitted to senior executives and our Board.
Our Board, primarily through the Audit and Compensation Committees, provides overall oversight of the risk management process, as summarized in the table below. The Board believes that its current leadership structure, described under “—Board Independence and Leadership Structure” above, is conducive to its risk oversight process.
Donnelley suggests companies that haven't already moved toward a more robust disclosure consider doing so. Here's the sound guidance:
"What Should You Do?
- Review your current risk oversight processes
- Review your most recent proxy and other disclosures about these critical processes
- Review your peer companies’ proxies and other disclosures, looking for examples of how best to explain these processes
- Ask yourself:
- If our processes are strong, are our disclosures of these processes equally strong?
- Are our processes likely to engender confidence on the part of investors and others who don’t have a direct window into the boardroom and convince them that our company has an appropriate focus and handle on these critical issues? "
Other non-exhaustive, recent examples of effective risk oversight proxy disclosures are Mastercard (pg. 23), Chevron (pf. 22), GE (pg. 25), and Intel (pg. 21), which we identified courtesy of Argyle's Disclosure Database searchability features. See additional risk oversight disclosure examples from Donnelley beginning on page 133 here.
This post first appeared in this week's Society Alert!