Podcasts  •  September 12, 2022

DFIN's Guide to Effective Proxies with Ron Schneider, Director of Corporate Governance Services, DFIN

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"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.