"The Insider by DFIN" is a series of video interviews featuring the latest trends, topics and key perspectives on the global capital markets.
Join DFIN's Director of Corporate Governance Services, Ron Schneider, as he shares key insights on DFIN's 10th Anniversary Guide to Effective Proxies in this special podcast edition of The Insider by DFIN.
Dana Barrett - Welcome to the Insider by DFIN. I'm Dana Barrett and joining me today is Ron Schneider. He is the Director of Corporate Governance Services for DFIN, and we are here kind of to celebrate a big moment, the 10th anniversary edition of DFIN's Guide to Effective Proxies. Did I get that right?
Ron Schneider - Yes, you did.
Dana Barrett - Excellent. It's a big title.
Ron Schneider - Yep.
Dana Barrett - And 10 years.
Ron Schneider - It's a big book.
Dana Barrett - It's a big book. You are sort of the, the, the founding father of the guide. So before we get into the guide, talk to me a little, a little bit about your background and how this guide even came to be in existence.
Ron Schneider - Certainly. So, my parents are both academics, you know, one PhD and three Masters between them. So I was kind of required to focus on academics in school, and I really didn't know much about the business world. You know, by the time I was getting through college, I just wanted to get out and start working, you know, maybe in advertising, you know, who knows what I ended up really taking the first job I was offered, which was a Arcane field called Proxy Solicitation. Like others that, you know, worked there, you learned a lot of things real fast. So working with public companies of all types, working with the Corporate Secretary General Council Investor Relations, you know, C-Suite officers at times, advising boards on how votes were likely to go and, you know, could they win or lose a proxy fight, that kind of thing.
Dana Barrett - Right.
Ron Schneider: - In fact, the first proxy fight I worked on was in 1979 and the client was a guy named Carl Icon
Ron Schneider - Who's quite famous. So there was a lot of heady experiences for a young person. So you learned a lot fast, you learned about corporate governance before it was even called corporate governance, you know, companies, their boards, their management, their investors, and how they interact. So, you know, I, you know, spent about 20 years in that area. Working for several major firms. I worked in investor relations at a major agency. And then in the course of that, someone, that I knew had just had lunch with someone from RR Donnelley at the time.
Dana Barrett - Right.
Ron Schneider - This was nine years ago that I joined and they were looking for someone
who
had a deep background in proxies investors, you know, knew what the issues were. I mean, because
Donnelley was the biggest filer and printer of proxies. They still are. With about 35% market share
even
higher among larger companies. The next highest is like 8%. That's how big they were. And what was
happening is proxies were really kind of dull. They were, you know, black and white SEC form 14 A,
not
very visual name, rank serial number. They were compliance documents. They weren't really telling a
story for the most part. Ron Schneider - And with exceptional companies work, they were like, you know, telling a
good story about the board, about executive compensation and increasingly about sustainability, and
the
likes. And so, a design firm had come in and was, you know, proxies needed a facelift, very sorely.
So
they came into the market and they were easily attracting business. And Donnelley did not want there
to
be a big drain there. So they wanted, and they didn't have a creative capability within the firm
working
on proxies at the time. Ron Schneider: - They wanted someone who could engage with the sales team, with the clients about the
issues, you know, add some thought leadership and the likes. So, you know, we came up with about one
of
eight tactics. The day I started, one was the survey institutional investors about proxies what they
look for, how they read them, what topics are adventurous, what would make them more useful to them?
What's missing? Cause we wanted data to back up our, you know, we were going up against designers
who
could make things look pretty, but they didn't know the underlying audience, the investors, I did
have a
background there. So we wanted to be armed with data. And we figured, “Well, why not?” You know,
make a
little catalog, you know, companies look around at peer companies, how are they doing this?
What have they talked about? Are they using photos and all kinds of little things? And they look at
governance leaders.
So they would go and, you know, download from scc.gov or request a hard copy from the company. I
can't tell you how many
offices I went in, where they had their 20 or 30 proxies all scattered around that maybe the
Donnelly, now DFIN sales
rep had, well here, here's some pretty looking items, you know, we see what we can do.
Dana Barrett - Right. Ron Schneider: - So there was a clear lack of a tool that was kind of consistently organized, not just by
company, but by section topic or feature. So we had the idea, let's look at, you know, our clients are very
creative. Let's take a look at some of those Marquee clients, see what they're doing, maybe slice and dice
it
into some sections. So depending what companies are looking for, they might find it more easily. And, the
first
edition was, 39 pages. This is the ninth edition, 550 pages. And as you said, we're working on compiling
right
now. What will be the 10th anniversary edition, which will come out in September and concurrently the fifth
anniversary edition of the Canadian version. Because I support them and work closely with them as well. So I
remember, after, “Okay, ah, we put that together. That's great. I'm moving on to the next project.” All of a
sudden I get a phone call it's from 011, that's London. Okay. And it was from a London based client and he,
with
Cigna jewelers, had just received it in the mail, opened it up and he called me, he said, “Ron, are you guys
now
in the mind reading business?”
And I'm like, “What do you mean?” You know, he goes, “I was just getting ready to think about what we could
do to make
our proxy look nicer. And I didn't know where to start. And all of a sudden this landed on my desk and it's
exactly what
I need.” And I'm like, “That’s so great to hear.” Dana Barrett - Yeah. Ron Schneider - It was great validation. Yeah. And we got that reaction from any other companies
and
then immediately they were saying, “Can you show us more examples of that are more visual?” Do a deeper dive
into compensation issues. What kind of graphs are companies using? What are investors looking for? Dana Barrett - Yeah. Ron Schneider - So we immediately did the second edition in the same first year. That was 80
pages. Dana Barrett - Okay. Okay. Ron Schneider - So it's really been client driven and investor driven, you know, what are
investors looking for? What are clients disclosing beyond what the SEC requires you to? Dana Barrett - Yeah. Ron Schneider - In their proxy. So it's just taken on a life to life of its own. And it's a real
door opener for our sales reps. It's interesting. Just Monday I was on a call with a prospect along with the
team, you know, the sales rep, the account manager. I mean, that's how we roll. And I realized that I knew
the
person from a prior company and he goes, “Ron, that is me. Yes. I used to work there and you and I have
spoken
before.” And he said, and “By the way, I’ve been using your guide for the last seven years.” Dana Barrett - Yeah. Ron Schneider - Okay. And we get that all the time. When we onboard a new client, they already
know about it. They're already using it because it's the biggest, most substantial resource of its
kind. Dana Barrett - Yeah. So you mentioned walking into people's offices and seeing, competitors and
peers, you know, proxy statements all over the desk, you know, piles of them. And then now you have this all
compiled in the guide. Can you kind of speak to how much time that is saving for clients being able to have
that
single resource versus having to find, and then sort through all of their peers. Ron Schneider - I mean, I would say on the one hand, there's nothing in the guide that you could
not find at scc.gov or our product EDGAR online by going to their public filings. Dana Barrett - Sure. Ron Schneider - I like to say that you just may not find it because those are organized by
company.
Some proxies are 40, 70, some are over a hundred pages long. Dana Barrett - Right. Ron Schneider - They're not in a standard format in terms of the topics and where they discuss
them
necessarily. Dana Barrett - Right. Ron Schneider - Some of them don't even have very useful tables of contents, for example. So
what
we've done is now the current guide for the last couple of years has had 36 different sections topics or
features. Dana Barrett - Wow. Ron Schneider - So it's got a detailed table of contents, roughly a third of it is board related
and
you know, the topics of board composition, board, diversity board skills, board oversight of risk and ESG,
you
know, Dana Barrett - Right. Ron Schneider - Board CEO, succession planning, board director recruitment. Dana Barrett - Right. Ron Schneider - All these board related topics about a third is compensation related. Okay. cDNA
that's the compensation, discussion and analysis executive summaries, performance, graphs, paper,
performance,
alignment, graphs, performance metrics, peer companies, investor engagement on compensation and things like
that. So it's about a dozen compensations. Oh, CEO to median employee pay ratio. That's an interesting one,
always. And then , you know, we started about eight years ago, I had met a client. It was one Oak down in
Tulsa,
Oklahoma, or maybe it was Oklahoma City. And the general, the corporate secretary is very proud of the fact
that
they had six pages of voluntary information on their methane emission story in the proxy. 8% of the proxy
was
about a topic that most of their peers and competitors were not talking about. Ron Schneider - So I thought that was interesting. And so kind of to honor them not knowing
where I
was going to go. I created a section CSR disclosure, corporate social responsibility at the time it had
eight
entries. Okay. There's being the most prominent look where we are now. Fully a third of the guide is on
Environmental Social Governance. Governance, you know, was covered by a lot of the board topics, but the
Governance over the Environmental and Social Human Capital management topics like diversity, equity and
inclusion, employee health and welfare, you know, community activities, climate impact topics that the SEC
in
draft legislation looks like they're going to require companies to talk about. So the guide has been
showcasing
what companies are already doing on a topic that wasn't required for a number of years. So depending on
what,
and not every company does everything equally well. Ron Schneider - Okay. So one may have great branding infused, another may have a great,
interesting
way to show their board diversity story. Another one really focuses on executive compensation, another on
sustainability. Dana Barrett - Right. Ron Schneider - So, but going through a few proxies, you're not necessarily finding what you're
looking for, or there may be nuggets that you weren't looking for. Dana Barrett - Right. Ron Schneider - So we've divided into 36 section topics are features. So it's much easier to
find
what you're looking for. And I would say that, and it's not like we're deciding these are the best possible,
like this is what constitutes good disclosure. Dana Barrett - Right. Ron Schneider - No, it's a range of approaches. Companies have taken from more visual, more
expansive, a little more perfunctory, but all of them are meant to be engaging and informative. Dana Barrett - Right. Ron Schneider - And because companies can legitimately choose, you know, different, you know,
methods of, how deep they want to go into a topic. So, it's just easier for companies to find what they're
looking for or to find things that they hadn't thought about. “Oh, we're talking about board diversity, but
now
we're talking about diversity, equity, and inclusion of our workforce. Why not publish some statistics on
workforce diversity?” Dana Barrett - Right. Ron Schneider - And so, and that I guarantee you is going to explode. I mean, I first started
seeing
that two years ago, so it's really kind of a living. So what, so these are, you know, some of the, from our
client base. Okay. We're really the only company that has such an extensive client base that could do
something
of this nature solely from our clients. Dana Barrett - Right. Ron Schneider - It's a range of approaches to all these, topics. And so it shows where the bar
is
headed in terms of disclosure. Dana Barrett - Right. Ron Schneider - But by the flip side, it also shows where investor expectations are, you know,
heading, you know, they're getting this kind of quality information from some portfolio companies. Dana Barrett - Right. Ron Schneider - They want it from their others. Dana Barrett - But, it sounds like, and you, and you've, you're saying this, I think I just want
to
clarify that, that, but because you're spending all this time, reviewing everything, that's out there to put
the
guide together, you're stumbling on, in a way CSR, before it was ESG, right? So this Corporate Social
Responsibility, which is now morphed into Environmental, Social, and Governance, but you saw somebody doing
it
and you thought, well, this is important. I don't know how important it's going to get, but it's
interesting. I
know I'm going to have other clients that are going to want to know and try to format this or, you know,
include
similar things. So we'll put it in the guide. Now, if I'm just looking at the table of contents and the
guide,
I'm saying, “What is this CSR thing?” Ron Schneider - Yeah.
Dana Barrett - Oh, maybe I should do this. Yeah. And here it is. Now all these years
later,
ESG is huge and about to become, as you said, regulated. Yeah. And you know, people who've working
from
the guide are already working towards it. They have examples, they have advantages because they've
got
this in their hands. Ron Schneider - There's only a handful of sections in there that are SEC required.
Dana Barrett - Right. Ron Schneider - Like the summary compensation table. Dana Barrett - Right. Ron Schneider - Like some kind of a director bio, for example. Okay. Dana Barrett - Right. Ron Schneider - Most of it is voluntary disclosures, but information investors are
looking for. So yes, it absolutely alerts some companies that, “Oh, companies are talking about that
in their proxies. Oh, how are they doing it? Oh, some of my peer companies are.” Dana Barrett - Right. Ron Schneider - Well, we don't want to look like laggards and maybe they have a good
story
to tell, but you know, people aren't going to figure it out if you don't tell that story. And so we
kind
of make it easy, for them to, you know, find what they may be looking for. Now, for many of these
companies, I, or one of my colleagues has discussed the prior year’s proxy with that company. We
were
part of designing it. So I'm looking at it now for the second or third time. Okay. It's reminding me
what they did well for others. I'm looking at least 1100 proxies in the course of compiling this.
And
I'm 95% through compiling it, a few more late filers who are waiting to come in and then we'll start
piecing together in the, summer. So I spend a lot of time going through 1000 proxies. So our clients
don't have to. Dana Barrett - Yeah. Ron Schneider - Well there you, that's where the time saving comes in. Dana Barrett - Yeah. Ron Schneider - That's the cut through all the boring, uninteresting, not visual stuff.
Here's what you need to look at. Dana Barrett - Yeah. So you mentioned a little bit about design and, and some of those
things talk about like the first big project you had success with the Guide. Ron Schneider - Okay. So the guide was one of a number of tactics. Remember we wanted
to,
you know, stem that, you know, onslaught from pure design firms. Okay. Dana Barrett - Yeah. Ron Schneider - So we wanted to show, we don't just create them and file them and print
them
and distribute them we can advise on what goes in them. We're also more investors savvy than others.
I
mean, I'm a member of the National Investor Relations Institute. I'm a member of the Council of
Institutional Investors. Okay. We have investors on all our webinars. So, like I said, we, rolled
out
about, , eight different tactics, you know, from day one, the guide being just, you know, one of
those
thought leadership on executive compensation, a whole array of ESG related, services now. So, you
know
we can, add value if companies aren't savvy about a topic, we can add value, explain why it's
important,
and then we can show them how they could do it. Now we're not limited to what's in the guide.
Dana Barrett - Right. Ron Schneider - You know, we have, complete creative capability. So, what happened the
first
task was to protect the flock, so to speak, you know, protect our franchise and proxy statements.
With
the wonderful relationships of the sales reps and the account managers and the company and their
capabilities within a year and a half, we pulled back at least half of the larger companies that
design
firms had taken. Dana Barrett - Wow. Ron Schneider - We were extremely, in fact, the, the main competitor, their senior
people
all left and tried to do a do over at another company. Okay. We were the cause. Okay. Ron Schneider - Because no, no, you're not keeping that client. All right. Right. What
was
still missing was true creative design. So in the course of engagement with one of our major
financial
institution companies the team from Charlotte, you know, colleagues of mine, had the opportunity to
introduce design. Now we knew there was a creative agency within the greater RR Donnelley at the
time.
See, I'm going back, not eight years now, before the spinoff, but they had never worked on a proxy.
They'd done annual reports, 10-Ks. So, the client basically said, “All right, here's your chance.
Okay.
You've got, I'm going to hand you 10 pages from last year's cDNA, which is a complicated section.”
Dana Barrett - Yeah. Ron Schneider - “You got one week, show me what you can do.” Dana Barrett - Yeah. Ron Schneider - So I looked at it, I said, “Hey, let's have this kind of graph here.
This
kind of section here, this kind of here, you know, look how that committee did that." You know what
I do
with a client normally, but here, my client was a creative group. They executed, beautifully blew
the
socks off the client. Okay. We won the entire design for the proxy.
And, and that remains probably our largest proxy client. And they've been a consistent design client
for eight
years now. So, , we won the battle. Okay. Then we fixed what was missing. We have the true creative
design. We
add enhanced the digital capabilities. So our partnership with median, communications, who also
helps by web
hosting the electronic version of this guide.
Dana Barrett - Right. Ron Schneider - So we've got the full suite and you know, we've retained our industry
leading market
share. So there's a lot of little battles over this client or that client. And, you know, you're
always playing
defense. The competitors are dogged. They're always in there. Okay. So you can't take anything for
granted. And
we don't. So those are a couple of the signature moments, you know, fighting off the competition,
expanding our,
you know, skill set, filling in the gaps and then having some wonderful wins that are very vocal
endorsers of
ours. Dana Barrett - You said the 10th anniversary edition's coming out in September. How many
pages and
how many sections? Ron Schneider - Okay, well, I've been, you know, forced to limit it to, 500 or so pages.
Dana Barrett - Okay. Ron Schneider - . So in some sections we went from having one to page or two to page,
we'll have
four to page. So I've been able to get more examples in that way. Don't tell anyone that was my
secret small
pictures. Dana Barrett - Right, right. Ron Schneider - So you can look at the book and you can get a sense for what's going on,
but if you
really want to see what they wrote and everything, you go to the electronic version, you click on
it, it opens
up right to that page. Dana Barrett - Yeah. Ron Schneider - And you can see the full context, the entire, proxy. So, you know, we're
on schedule
to have this compiled and released in September. And when I return from this offsite where we're at,
I will,
support the Canadian group in doing the screening for their version. We're going to have some kind
of a nice
anniversary10th for the US, fifth for the Canadian guide, we'll do the press release, we'll do the
webinar,
we'll do the distribution. And, and it does get media coverage. I will tell you that the Society for
Corporate
Governance from the American Society, Corporate Secretaries, when they receive this, they write up a
glowing
terms, you know, it's just so you know, we do have competitors that are copying us. Okay. They're
issuing their
version of the guide. It's smaller. They can't do it from their own client base. They don't have
that many
clients. Dana Barrett - Right. Ron Schneider - So it'll be from the Fortune 500, oh, guess what? Over a third of the
companies in
their guide are our clients. Dana Barrett - Right. Ron Schneider - So, you know, this remains the most comprehensive, the most eager or
weighted
resource of its kind of, like I said, it's used by non-clients as well as clients. Dana Barrett - Absolutely. Well, Ron, thank you for your time. And thank you.
Congratulations on 10
years of this guide and, it was a pleasure learning more about it with you. So thank you again.
Ron Schneider - It's a lot of work, but the reaction we get from colleagues and from
clients makes
it worth it. Dana Barrett - Absolutely. Ron Schneider - Thank you. Dana Barrett - This has been the Insider by DFIN. We'll see you next time.
