A group of institutional investors have proposed a “Fifth Analyst Call” wherein  U.S. public companies host a “dedicated conference call” in addition to the quarterly conference call for institutional investors focusing exclusively on corporate governance matters with the primary dialogue between investors and directors.

Mindful of Regulation Full Disclosure, the call would be scheduled 10 to 15 days before the annual meeting and cover material that is in the proxy.  While every company will need to examine its particular needs, this proposal is a framework that encourages dialogue.

Directors should embrace this opportunity to efficiently communicate with institutional investors and beneficial owners with the ability to interact directly with shareholders not filtered through proxy advisory firms or solicitors.

Yes, it will require preparation.  But shouldn’t those who are paid to represent the interest of shareholders be able to discuss the company’s governance framework and philosophy, the board’s structure, effectiveness and succession planning? Directors should be able to discuss the internal controls and risk management practices and even answer questions about executive compensation.

Such dialogue could be enormously helpful to boards at this critical time in helping to restore trust in their work in providing governance oversight.

“Business leaders today face a choice:  We can reform capitalism, or we can let capitalism be reformed for us, through political measures and the pressures of an angry public,” says Dominic Barton in his Harvard Business Review article.

The McKinsey global managing director has spent the past 18 months talking to more than 400 business and government leaders across the globe.  He concludes that capitalism has been and can continue to be the greatest engine of prosperity ever devised.  However, if the fundamental issues revealed in the recent crisis remain unaddressed and the system fails again, “the social contract between capitalism and the citizenry could rupture, with unpredictable but severely damaging results.”

Barton confirms that boards must become more effective, representing a firm’s owners and serve as the agent of long-term value creation. Being a director is also a much bigger job, requiring more time and deeper understanding of the company and its strategy.  He makes many of the same points that Fred Steingraber and I make in our article in Corporate Finance Review, “What Boards Need to Do to Preserve Their Relevance and Provide Value in the World of the New Normal.”

There is an urgency for management and boards to work together to fight the tyranny of short-termism, and “infuse their organizations with the perspective” that serving the interest of all stakeholders is an essential to maximizing corporate value.  Finally, boards need to bolstered to govern like owners.

Inaction will produce the most negative consequences.

When Deutsche Bank Chief Executive Josef Ackermann said he hoped “someday” his board would be “more colorful and prettier, too,” it sparked new discussion about new regulations and even quotas. Angela Merkel opposes quotas for the number of women on boards, even though Germany has the poorest track record in Europe for female representation. France passed a law this year requiring companies with more than 500 employees and more than $68 million in sales to have women in 40 percent of the supervisory board positions within six years.  Spain has the same requirement. Women remain a minority in the boardroom in the U.S. (15 percent) and the UK, where it has stagnated at 12.5 percent for the third year running.

It might be well for U.S. directors to consider that governance concepts that originate outside of the U.S. have a history of moving into the American mainstream rather quickly. Consider “Shareholder Say on Pay,” which began when U.K. cabinet minister Stephen Byers’ 1999 white paper suggesting that shareholders have a more active role in overseeing companies by requiring a “non-binding shareholder advisory vote on remuneration.” In 2002, the U.K. government adopted the Directors’ Remuneration Report Regulations, which made annual pay votes mandatory.  By 2004, say on pay spread to continental Europe as the Netherlands made it a requirement, moving to Norway, Sweden, Spain, Portugal, Denmark, France, Germany and Australia before institutional investors in the U.S. filed shareholder proposals at 44 companies by 2007. Just last week, the SEC finalized the rules on say-on-pay and say-on-golden parachute rules.

Diversity is on the minds of American directors, according to the recent PwC’s Annual Corporate Directors Survey with 45 percent of them citing the difficulty in finding qualified candidates of diverse gender, race and with expertise in technology.  A whopping 86 percent of directors say they use their own network of contacts to recruit new board members. Given the possibility of quotas for women on U.S. company boards and the new rules for greater transparency in describing the competencies of every board member, directors are well advised to look more broadly for board candidates or shareholders may propose their own candidates in proxy access.

When Deutsche Bank Chief Executive Josef Ackermann said he hoped “someday” his board would be “more colorful and prettier, too,” it sparked new discussion about new regulations and even quotas. Angela Merkel opposes quotas for the number of women on boards, even though Germany has the poorest track record in Europe for female representation. France passed a law this year requiring companies with more than 500 employees and more than $68 million in sales to have women in 40 percent of the supervisory board positions within six years.  Spain has the same requirement. Women remain a minority in the boardroom in the U.S. (15 percent) and the UK, where it has stagnated at 12.5 percent for the third year running.

It might be well for U.S. directors to consider that governance concepts that originate outside of the U.S. have a history of moving into the American mainstream rather quickly. Consider “Shareholder Say on Pay,” which began when U.K. cabinet minister Stephen Byers’ 1999 white paper suggesting that shareholders have a more active role in overseeing companies by requiring a “non-binding shareholder advisory vote on remuneration.” In 2002, the U.K. government adopted the Directors’ Remuneration Report Regulations, which made annual pay votes mandatory.  By 2004, say on pay spread to continental Europe as the Netherlands made it a requirement, moving to Norway, Sweden, Spain, Portugal, Denmark, France, Germany and Australia before institutional investors in the U.S. filed shareholder proposals at 44 companies by 2007. Just last week, the SEC finalized the rules on say-on-pay and say-on-golden parachute rules.

Diversity is on the minds of American directors, according to the recent PwC’s Annual Corporate Directors Survey with 45 percent of them citing the difficulty in finding qualified candidates of diverse gender, race and with expertise in technology.  A whopping 86 percent of directors say they use their own network of contacts to recruit new board members. Given the possibility of quotas for women on U.S. company boards and the new rules for greater transparency in describing the competencies of every board member, directors are well advised to look more broadly for board candidates or shareholders may propose their own candidates in proxy access.

If Charles Peter McQuaid had his way, proxies would be shorter and easier to read, rather than the wordy complicated documents that today are mostly written by lawyers. Proxies would describe how companies pay for superior performance.  The Columbia Acorn fund votes against dozens of stock plans a year—those that reward sub-par performance with high pay. Fewer and Simpler Words, Please

Columbia Acorn may be a different because they do their own homework, reading the proxies for every stock they own.  The fund has a lower turnover than most– 20 percent.  “Compare that with a hedge funds that is 11 seconds,” said McQuaid, President and Chief Investment Officer of Columbia Wanger Asset Management  at an NACD  panel on performance metrics and compensation this week.

In addition, McQuaid would like it to be easier to find basic information in the proxy that the small and mid-cap investor cares about:  How many options are outstanding? How many options were awarded?  How many shares do directors own personally?

With a 26 year career in the investment business, McQuaid recognizes that companies are competing for talent and not adverse to high pay for superior performance.  “Good management can add value to a company and increase shareholder return.”