The Handbook of Board Governance, 2nd Edition

48For Directors: The Long-Term Relationship Between Directors, Companies, and Institutional Investors

Carol Nolan Drake

Founder and CEO, Carlow Consulting, LLC; and Former Chief External Affairs Officer and Corporate Governance Manager, Ohio Public Employees Retirement System

Background

I have had many conversations with board members over the years. Each contact was an opportunity to hear from directors and share an institutional investor's view on best corporate governance practices. During those conversations, I wanted to know your perspective about the company's long-term growth potential and capital allocation strategy. I wanted to hear about these issues because they could put our discussion in context. I knew that we already had a lot in common. Yes, I was going to offer a point of view, but the institutional investor for whom I worked was already invested in your company's success. We held shares, which is the reason you took the call or meeting in the first place. And, as a long-term investor, we might be able to help the company survive a proxy battle, resist an activist's short-term effort to break the company apart, or force a merger/acquisition. We could be one of your strongest allies.

Institutional investors have ownership in thousands of companies. If you are contacted, it means that they chose to talk with you for a reason. They are an early warning system, offering insights and observations. They want to get on your calendar before serious issues arise.