Earlier this decade under the Dodd-Frank Act, the SEC Investor Advisory Committee was created. Comprised of 22 members, the committee is represented by academics, think tanks, advocacy groups, issuers, and investors. Together they provide recommendations on solving investor protection and market trading issues, market strategies, and enhancing investor trust in the marketplace. How does the committee’s work impact board members—and which specific recommendations should governance professionals put on their radar?

During the Diligent Directors’ Experience event in Napa Valley, Inside America’s Boardrooms host TK Kerstetter sat down with Investor Advisory Committee Chair Anne Sheehan, who joined the committee after leading corporate governance for CalSTRS, the California Teachers pension fund. Sheehan shared insights from her years of service—and what she aims to bring to the boardroom as a recently elected board member of retailer L Brands.

Disclosures, shareholder education, and more

Obviously coming out of the financial crisis, a lot of investors pulled their money out and were worried about the markets—and so the investor advisory committee was created as a way to provide recommendations, advice, and findings to the commission on behalf of investors.

— Anne Sheehan, Chair, SEC’s Investor Advisory Committee

Sheehan said since its founding, the committee has issued 21 recommendations spanning a variety of solutions: municipal bond markets, support for the universal proxy card, the fiduciary obligation of broker dealers and investment advisors, and beyond. Which of these should board members put on their radar?

Sheehan cited a recent recommendation around human capital management as part of board oversight. According to Sheehan, some companies do well disclosing how they manage their personnel because it’s very important to the running of a company for obvious reasons. But given the important roles of board members in this area, the committee recommends more disclosure.

“We like to say that human capital is one of the best assets of a corporation, yet for investors the only information they’re required to receive in terms of the SEC is the number of employees,” Sheehan said.

Another recent committee recommendation covers dual class shares. “I know there are a lot of companies that have dual class share structures, and some shareholders don’t like them,” she said. “We’ve recommended that the commission do a little more disclosure around those.”

For instance, do dual shares increase risks? “Do investors understand when they buy a dual class share company what it means? They might not have the same rights they would otherwise,” she said.

Bringing investor perspectives to the board (and vice versa)

As a long-time investor advocate, I spend a lot of time with board members talking to them about the role they play; about how they represent shareholders inside the boardroom and what an important role they play in that boardroom.

— Anne Sheehan, Chair, SEC’s Investor Advisory Committee

Sheehan was recently elected to the board of L Brands, the retail company behind Victoria’s Secret and Bath & Body Works. With her seven years on the Investor Advisory Committee and over a decade of governance experience with CalSTRS, she aims to help educate her fellow board members on some of the issues shareholders care about from a governance perspective.

“As you know, the landscape has changed dramatically in the past 10 years on corporate governance issues,” she said. “I think L Brands brought me on as someone who can help them see what those changes are and help them navigate through some of those changes.

“The whole retail industry is undergoing great transformation, so I’m looking forward to bringing my perspective to it,” she said. As part of the process, Sheehan is looking forward to gaining new perspectives as well. This includes “really learning from my fellow board members how I can be most impactful.”

A recap from the Diligent Directors’ Experience event

In this blog, Board Refreshment & Resiliency: Navigating the Digital Era, we recap the first panel discussion at Diligent 2019 Directors’ Experience event in Napa Valley. In what ways are today’s boards struggling with refreshment—and at what cost? How are high performers leveraging board composition as a competitive advantage?