An analysis of data from more than 2,500 annual general meetings held at Russell 3000 companies between January 1 and June 30, 2014, shows a fundamental shift in the types of resolutions shareholders submitted to a vote. It also shows that activist investors have become more sophisticated in their use of technology and social media to agitate for corporate change outside of the AGM and that senior management is increasingly likely to implement precatory shareholder proposals on corporate governance that have received majority support.
The complete report, Proxy Voting Analytics (2010-2014), will be released in the fall. To receive a complimentary copy when it becomes available, please register for free at www.conference-board.org/directornotes.
Why should I introduce this topic? Shareholders, sort-of insider-outsiders can get a company to change its behaviors and practices and according to this report, have successfully done so. The shareholder structure in for-profit corporations enables such intervention by the community.
Community engagement in nonprofit governance is for most nonprofits, not a real concept. And why does this matter? Given that nonprofits do not have, by their nature, an "ownership" structure outside of a board which in-turn is a proxy owner for the public, the reality becomes that for most nonprofits, there are few if many ways for the public, should it care, to say to a nonprofit: hey, we don't like what you are doing or hey, do more or less of that. There are a couple of exceptions of course. The so-called, walking with your feet approach by donors who, if unmoved or unexcited or just plain unconnected (with the institution, its board, or its executive/development director) can just not give money. Also, the IRS or State, if and when improprieties or illegalities occur, can step-in and demand change. And, employees, disgruntled over bad behaviors, can call on whistleblowing laws for protection and can scream loudly (although they can still lose their jobs). We know, for better or worse, that the public has taken stands on nonrpofit executive compensation, going public and likely withholding their donative support. Again, right or wrong (wrong measurement in my judgement), but often without better references, the public has used the compensation bar as a tool to assess donative worthiness. And, finally, nonprofits sometimes reach-out to their respective communities during strategic planning and ask for input through focus groups or surveys.
But all of these "community engagement" methods are consequential rather that structured vehicles for intentional input. In the absence of an institutionally designed method for the public to lend their voice to the decisionmaking facing nonprofit boards, should not nonprofits be more intentional in regularly reaching out for input? Should nonprofit boards consider adopting a new form of governance (called Engagement Governance) toward being more community-owned and directed? What do nonprofits really lose from the absence of shareholders? Does the insullation matter? Does the community really care particularly as long as they are getting the services they want or need?
What's your thinking?