Last week brought yet another long, exhaustive, and exhausting catalogue of “governance priorities”, this time from prominent boardroom attorney Holly Gregory. She scolds, gently, investors for our activist proclivities, and urges us to “apply a long-term value approach”, “vote on a company-specific basis where possible,” and “focus on core issues.” All worthy goals.

Her priorities, and those of most corporate partisans, revolve around empty platitudes like “monitoring company performance” and “preparing for a crisis.” Between the seven “key areas” and 25 (count ‘em) “challenges”, we can’t figure out the “priorities”.

There are two-and-a-half governance priorities, and only two-and-a-half, that matter to investors, this year and probably for many years after.

1. Eliminate Poison Pills

The biggest one. The one that limits most severely what an activist investor can do at a portfolio company. The one that corporate BoDs and executives have abused the most. And, the one that serious investors care about most.

As we’ve shown before, shareholder rights plans have metastasized, from a way to respond to a coercive tender offer, to a way to limit any investor from owning as little as 5% of a company’s shares.

The Delaware courts have demonstrated no interest altering their long-time company-friendly stand on poison pills. Investors will need to figure something out - Federal legislation, regulation, or litigation seems like the most viable solution.

At the very least, investors should advocate, hard, for shareholder approval of shareholder rights plans.

2. Eliminate Staggered BoDs

A classified (or staggered) BoD entrenches company directors and executives as much or more than anything else in a company’s bylaws. Nothing frustrates activist investors more than the thought of needing two or three years to change a portfolio company’s leadership, which of course is the point.

It makes perfect sense that the Shareholder Rights Project at Harvard Law School goes after staggered boards. Extensive research shows that companies with staggered boards underperform their peers.

Now that the SRP has had an impact on the largest companies in the U.S., investors need to continue to pressure mid-cap and smaller companies for the same change.

2-1/2. Implement Proxy Access

Why only one-half? Well, achieving proxy access is hard, and these days pretty much requires a bylaw amendment.

Furthermore, proxy access merely makes it easier for shareholders to promote competing BoD candidates. It doesn’t put nominees on the agenda, nor does it overcome the considerable advantages that companies enjoy in controlling BoD elections.

Yet, corporate interests fought hard against proxy access, perhaps revealing that it could have a significant impact on the balance of power between investors and companies. So, among the many possible reforms in a deeply unfair and biased (toward corporations) BoD election process, it would matter the most.

What’s missing?

Lots of things:

1. ❖Majority voting for the BoD
   

2. ❖Separating the roles of BoD chair and CEO
   

3. ❖Improved Say-on-Pay and pay disclosure
   

4. ❖Disclosure of political contributions
   

5. ❖Shareholder empowerment
   

among many others. Corporations receive corp gov reform proposals on a wide range of subjects. Most serious investors don’t concern themselves about these, and they probably shouldn’t. PMs vote on these other measures because they have to, not because they want to.

Investors that want to make a difference, and their advisors and consultants, would be wise to make these two-and-a-half changes the priority for 2014.