Selling the Governance Story

Last year, we wrote about the “Fifth Analyst Call” which covers governance information and has gained some steam in Europe. I recently had a conversation with Dave Dragics, SVP Investor Relations at NYSE listed CACI, who told me he doesn’t think a Fifth Call is necessary if a company incorporates some simple corporate governance outreach practices into its investor relations program. I’m not sure that he actually called them “unnecessary” but in my head, that’s what I heard. His reasons for dismissing the practice are actually pretty interesting. Turns out, he takes CACI’s Associate Counsel, who's responsible for their SEC filings, and SVP of Risk Management, who works with the board's Comp Committee, on the road every year to meet with the governance teams of their top 30 shareholders. And, no, this is not a company that has a history of controversy with shareholders, rather this is a company that knows how to be prepared.

The idea here is to have a firm relationship with the people at your largest shareholders who make the voting decisions before you actually need them for something. Sometimes these are the equity guys and you probably already have that relationship, but often it’s compliance or counsel and how many of you have been courting them? Dave’s strategy is to take his governance team out 2 days a year (not a huge commitment) to the cities where he’s got the largest concentration of holders and specifically meet with people who are voting CACI shares. Because CACI's annual meeting is in November--they have fiscal year end of June 30th, they always go out after the Spring proxy season is over to make sure they get access to the compliance folks, and they will often tackle ones they missed by phone. By developing a relationship, Dave can head off any surprises during CACI's proxy season by getting a better understanding of which issues the compliance people most care about. Is it compensation? Or director qualifications? Or something else? Since not many companies are doing this, he finds that the meetings have an impact with the compliance people and others who vote the shares and that they appreciate it.

Two more reasons to do this that Dave didn’t comment on, but I think make sense: 1) Having your own governance relationships within the investment firms could diminish the impact of ISS on your proxy season; and 2) These meetings could get you into some of the big index funds you’ve always wondered about….

One more thing – Dave will be presenting on this very topic at the NIRI Annual Conference in Seattle in June. If you’re interested in learning more, this will be a great opportunity.