Report of the NACD Blue Ribbon Commission on Board-Shareholder Communications

Few priorities are more urgent for boards today than communications with their shareholders. The need for engagement, however, is not a recent addition to leading governance issues. NACD has worked for better communications between directors and investors since its foundation. The first issue of the association’s newsletter (in December 1977), foresaw more shareholder involvement in director nominations and emphasized the need for board “self-regulation” to maintain good shareholder relations.

In 2008, NACD issued the Key Agreed Principles to Improve Corporate Governance for U.S. Publicly Held Companies, the outgrowth of dialogue with the Business Roundtable and various institutional investor groups. One of the principles took its theme directly from this report: “Governance structures and practices should be designed to encourage communication with shareholders.” NACD has included investor perspectives in our Fortune 500 Advisory Councils, roundtables, educational programming, and Board Leadership Conferences. A significant milestone was the 2008 Report of the NACD Blue Ribbon Commission on Board-Shareholder Communications. This report exemplified and advanced board-shareholder dialogue by looking at the “why, when, what, who, and how.”

This 2014 edition of this report reissues that guidance in light of a new era for board-shareholder communications — one setting common priorities. This edition includes a thorough revision of all supporting resources appearing in the endnotes and appendices as well as “refreshing” the language of the report. Readers will encounter references additional empirical studies, legal analyses, and corporate templates as well.

The focus on the board’s compensation committee has never been sharper. The components of compensation plans and the link between compensation and company performance are under intense scrutiny from shareholders, employees, policymakers, the media, and other stakeholders. The Report of the NACD Blue Ribbon Commission on the Compensation Committee revisits NACD’s 2003 Report of the NACD Blue Ribbon Commission on Executive Compensation to highlight the new environment in which compensation committees—and, more broadly, boards—are now operating. It recommends that the compensation committee and board work together to establish an executive compensation philosophy that supports the company in creating long-term, sustainable value.

The report includes ten specific recommendations for compensation committees to consider when evaluating their compensation philosophies. It also provides practical tools, such as sample compensation committee charters, a compensation committee assessment, and guidance on executive employment contracts.