Views on improving the integrity of global capital markets
23 February 2012

Best in Class in Proxy Disclosure: Prudential Financial

Matt Orsagh, CFA, CIPM

For all of you in North America about to begin that annual rite of spring of slogging through hundreds of pages of corporate proxy filings that inconveniently appear just as the weather begins to warm and flowers start to bloom, you have our condolences.

Proxy season is one of those necessary evils. After all, we need to know that a board is qualified to best serve shareowners and oversee management; we want to understand that an auditor is truly independent; we want to know the details of executive compensation and whether it aligns the interests of management with those of shareowners; and we want to be informed about new resolutions set for a vote at the annual meeting. 

The corporate proxy is a vital communications document. Unfortunately, too many companies treat it as a compliance document — one that often gets handed off to a legal team to avoid any language that might get anyone into trouble, and to ensure that a company meets the minimum level of compliance, but nothing more. This, unfortunately, leads to bloated corporate proxies that do a better job of racking up legal fees than communicating vital information to shareowners.

So when a proxy comes along that serves as a shining beacon of good corporate disclosure, we feel we should highlight it. To that end, Prudential Financial was recently recognized by Corporate Secretary as having the best proxy statement of 2011.

If you are curious about what makes the Prudential Financial proxy statement so special, read it for yourself, and then compare it with almost any other corporate proxy you can find. The differences are striking. You can also take Corporate Secretary’s word for it, as the magazine nails down what makes Prudential Financial’s disclosure so special: “using plain language throughout the document to ensure clarity, Prudential used a number of design features to organize the information into a surprisingly inviting read. Excellent use of charts, graphics and soft colors made the document less intimidating, and bold labeling of key information made it easier to navigate than most proxy statements. An up-front snapshot summary, detailed profiles of director qualifications and an extensive listing of governance policies — including sustainability factors — were also among the innovations that led to Prudential winning Corporate Secretary’s award for best proxy statement this year.”

The Prudential Financial proxy incorporates many of the best practices discussed in the Compensation Discussion and Analysis (CD&A) Template, published last year by CFA Institute. Although we only focused on the CD&A portion of the proxy, the principles of transparency and clear communication espoused in our CD&A Template come shining through in the Prudential Financial proxy. By telling its story in a clear and concise manner, Prudential Financial has done a great service to its shareowners — reclaiming the corporate proxy as a communications document, and not simply an exercise in compliance.

Here’s hoping that this best practice becomes the standard in the very near future.

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About the Author(s)
Matt Orsagh, CFA, CIPM

Matt Orsagh, CFA, CIPM, is a director of capital markets policy at CFA Institute, where he focuses on corporate governance issues. He was named one of the 2008 “Rising Stars of Corporate Governance” by the Millstein Center for Corporate Governance and Performance at the Yale School of Management.

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