“Companies should use EVERY opportunity to talk with their shareholders.” —PR Newswire
Ernst & Young’s April’s edition of BoardMatters Quarterly reports that shareholders are providing more input into corporate governance decisions, and gaining more access to management teams and directors. Shareholders want to be involved. Shareholders are increasingly using proxy disclosures to evaluate company governance practices and board effectiveness.
As a result, companies are using proxy statements as a strategic tool for strengthening board communications with shareholders, and placing greater emphasis on shareholder engagement.
How do companies create effective shareholder engagement? In order to connect with shareholders, board and management need to understand investor interests, voting records, and engagement approaches.
An effective engagement plan might incorportate the following:
- An increased effort towards proxy statement readability.
- Enhanced disclosure and transparency around corporate governance practices and policies, perhaps highlighting compensation changes and/or shareholder engagement related to SOP voting outcomes.
- A use of proxy statements as a way of telling the company story, and highlighting broader efforts to be more responsive to shareholders.
- Board or committee member check-ins with investors, emphasizing a building of investor trust and confidence.
- Management and board preparation for shareholder meetings, in which investor policies, voting records, and interest in governance can be reviewed.
- Demonstrating a willingness to learn and consider an investor’s point of view.
As BoardMatters Quarterly aptly states, “Engagement can be an opportunity. Companies can benefit by building trust, establishing a mutual understanding and maintaining constructive relationships with investors. By taking these steps, companies may be able to secure support for proposals that they put to a shareholder vote. Companies also may be able to identify earlier in the process potential issues that require attention.”
For more information about shareholder engagement, check out some of our sources:
Ernst & Young– Proxy Season 2012: trends in proxy statement disclosure.