New SDX Protocol Provides a Framework for Investors And Public Companies To Work Together

Friends, shareholders, directors, lend me your ears … Thanks to the Shareholder-Director Exchange, “a working group of leading independent directors and representatives from some of the largest and most influential long-term institutional investors,” public company boards and corporate shareholders now have a framework for working together to achieve their common – and individual – objectives. Why does that matter? Attorney James Woolery of Cadwalader explains:

“Changes to the corporate governance landscape, including an increasing focus on better and more effective governance practices, the frequency and scale of activist campaigns, the increased use of proxy advisory services, and an increased understanding of the potential benefits of direct engagement, have led institutional investors and public company boards to review their current approaches to shareholder-director engagement. More institutional investors are seeking meetings with the public company directors they elect, and more directors are accepting these requests. Some boards are proactively requesting meetings with significant shareholders.”

Enter the “SDX Protocol,” which provides important guidance to boards and shareholders on when to engage and how to make that interaction valuable and effective. Based on the notions that direct engagement between investors and directors “improves transparency, mutual understanding, and the overall quality of governance in the market,” the SDX Protocol offers important benefits for public companies and investors alike:

“SDX participants noted that engagement benefits companies by enabling them to do the following:

  • Demonstrate quality of board oversight…
  • Create direct and open channels for substantive and productive communication…
  • Better understand investor perspective of business and governance issues…
  • Influence proxy-voting decisions…

Likewise, SDX participants noted that engagement benefits investors by enabling them to do the following:

  • Evaluate board effectiveness…
  • Create direct and open channels for substantive and productive communication…
  • Better understand director perspective of business and governance issues…
  • Influence governance policies and practices…”

Read the full update: Introduction To The SDX Protocol>>

Find additional insight on Shareholder Issues at JD Supra Business Advisor>>