sec-corp-governance

# SEC Corporate Governance

Review corporate governance practices and board composition from SEC filings for public companies using the Octagon MCP server.

## Prerequisites

Ensure Octagon MCP is configured in your AI agent (Cursor, Claude Desktop, Windsurf, etc.). See [references/mcp-setup.md](references/mcp-setup.md) for installation instructions.

## Workflow

### 1. Identify Analysis Parameters

Determine the following before querying:
- **Ticker**: Stock symbol (e.g., AAPL, MSFT, GOOGL)
- **Focus Area** (optional): Board, committees, policies, proposals
- **Comparison** (optional): Prior year, peers

### 2. Execute Query via Octagon MCP

Use the `octagon-agent` tool with a natural language prompt:

```
Review corporate governance practices and board composition from <TICKER>'s latest proxy statement.
```

**MCP Call Format:**

```json
{
  "server": "octagon-mcp",
  "toolName": "octagon-agent",
  "arguments": {
    "prompt": "Review corporate governance practices and board composition from ORCL's latest proxy statement."
  }
}
```

### 3. Expected Output

The agent returns structured governance analysis including:

**Proxy Statement Information:**
- Filing date and annual meeting details
- CEO and key contacts

**Key Governance Areas:**
- Director election proposals
- Shareholder voting policies
- Governance disclosures

**Data Sources**: octagon-companies-agent, octagon-sec-agent, octagon-web-search-agent

### 4. Interpret Results

See [references/interpreting-results.md](references/interpreting-results.md) for guidance on:
- Evaluating board quality
- Assessing governance practices
- Understanding shareholder rights
- Identifying governance concerns

## Example Queries

**Full Governance Review:**
```
Review corporate governance practices and board composition from ORCL's latest proxy statement.
```

**Board Composition:**
```
Analyze board of directors composition, independence, and diversity for AAPL.
```

**Committee Structure:**
```
Extract audit, compensation, and nominating committee details from MSFT's proxy statement.
```

**Director Qualifications:**
```
What qualifications and experience do GOOGL's board nominees bring?
```

**Governance Policies:**
```
Review corporate governance guidelines and policies from JPM's latest proxy.
```

**Shareholder Proposals:**
```
What shareholder proposals are included in AMZN's latest proxy statement?
```

## Board Composition Analysis

### Independence Assessment

| Category | Best Practice |
|----------|---------------|
| Board Independence | >75% independent |
| Lead Director | If CEO is Chair |
| Committee Independence | 100% for key committees |
| Audit Financial Expert | At least one required |

### Director Demographics

| Dimension | What to Track |
|-----------|---------------|
| Gender Diversity | Representation percentages |
| Ethnic Diversity | Background representation |
| Age Distribution | Balanced tenure |
| Geographic | International perspective |
| Industry | Relevant experience |

### Director Qualifications

| Qualification | Relevance |
|---------------|-----------|
| Industry Experience | Sector knowledge |
| CEO/C-Suite Experience | Leadership perspective |
| Financial Expertise | Audit oversight |
| Technology | Digital transformation |
| Risk Management | Enterprise risk |
| International | Global operations |

## Committee Structure

### Audit Committee

| Requirement | Best Practice |
|-------------|---------------|
| Independence | 100% independent |
| Financial Expert | At least one designated |
| Meetings | Quarterly minimum |
| Responsibilities | Financial oversight, internal controls |

### Compensation Committee

| Requirement | Best Practice |
|-------------|---------------|
| Independence | 100% independent |
| Expertise | Executive compensation experience |
| Advisor | Independent consultant |
| Responsibilities | Executive pay, equity plans |

### Nominating/Governance Committee

| Requirement | Best Practice |
|-------------|---------------|
| Independence | Majority independent |
| Responsibilities | Director selection, governance policies |
| Process | Transparent nomination criteria |

### Other Committees

| Committee | Purpose |
|-----------|---------|
| Risk | Enterprise risk oversight |
| Technology | Digital/cyber oversight |
| Sustainability | ESG oversight |
| Finance | Capital allocation |

## Governance Policies

### Key Policies

| Policy | Description |
|--------|-------------|
| Governance Guidelines | Board operating principles |
| Code of Ethics | Conduct standards |
| Stock Ownership | Director/executive requirements |
| Clawback | Compensation recovery |
| Anti-Hedging/Pledging | Stock restrictions |

### Shareholder Rights

| Right | Shareholder-Friendly |
|-------|---------------------|
| Majority Voting | For director elections |
| Proxy Access | Nomination rights |
| Special Meetings | Low threshold (10-25%) |
| Written Consent | Ability to act |
| No Poison Pill | Or with sunset |

### Antitakeover Provisions

| Provision | Effect |
|-----------|--------|
| Classified Board | Delays takeover |
| Supermajority | High approval threshold |
| Poison Pill | Deters acquirers |
| Dual-Class Stock | Concentrates control |
| Blank Check Preferred | Board authority |

## Leadership Structure

### Chair/CEO Separation

| Structure | Assessment |
|-----------|------------|
| Separate Chair | Best practice |
| Combined with Lead | Acceptable with strong lead |
| Combined, No Lead | Concern |

### Lead Director

| Responsibility | Description |
|----------------|-------------|
| Board Leadership | Independent voice |
| Executive Sessions | Leads non-management meetings |
| CEO Evaluation | Performance oversight |
| Shareholder Communication | Access point |

## Related Party Transactions

### Key Disclosures

| Type | What to Review |
|------|----------------|
| Family Transactions | Deals with relatives |
| Director Transactions | Business with directors |
| Major Shareholder | Controlling shareholder deals |
| Officer Transactions | Executive arrangements |

### Red Flags

1. **Material amounts** - Large related party business
2. **Recurring** - Ongoing dependency
3. **Below market** - Off-market terms
4. **Complexity** - Difficult to understand
5. **New relationships** - Recently established

## Director Elections

### Voting Standards

| Standard | Description |
|----------|-------------|
| Majority | Must receive >50% |
| Plurality | Most votes wins |
| Majority of Quorum | >50% of attending |

### Contested Elections

| Factor | What to Track |
|--------|---------------|
| Activist Proposals | Dissident nominees |
| Vote Results | Support levels |
| Settlement | Negotiated outcome |
| Proxy Fight | Full contest |

## Governance Benchmarking

### ISS/Glass Lewis Assessment

| Factor | What Matters |
|--------|--------------|
| Board Quality | Independence, diversity |
| Compensation | Pay for performance |
| Shareholder Rights | Voting, access |
| Audit | Financial oversight |

### Peer Comparison

Compare across competitors:
- Board size and composition
- Committee structure
- Governance policies
- Shareholder rights

## Governance Quality Indicators

### Strong Governance

| Indicator | Description |
|-----------|-------------|
| Independent Board | >80% independent |
| Diverse Board | Multiple dimensions |
| Separate Chair | Or strong lead director |
| Shareholder Rights | Proxy access, majority voting |
| Responsive | Addresses concerns |

### Weak Governance

| Indicator | Description |
|-----------|-------------|
| Low Independence | <50% independent |
| Homogeneous | Lack of diversity |
| Entrenched | Long tenure, classified |
| Limited Rights | Supermajority, no access |
| Unresponsive | Ignores proposals |

## Analysis Tips

1. **Check independence definitions**: Companies may define differently.

2. **Track tenure**: Long-serving directors may be less independent.

3. **Review overboarding**: Directors on too many boards.

4. **Assess attendance**: Low attendance signals disengagement.

5. **Compare to peers**: Industry context matters.

6. **Monitor changes**: Year-over-year governance evolution.

## Use Cases

- **Investment screening**: Governance quality filter
- **Proxy voting**: Inform voting decisions
- **Activist analysis**: Identify targets
- **Risk assessment**: Governance-related risks
- **ESG analysis**: Governance pillar evaluation