For organizations and businesses, shareholder engagement is important for deepening investor relationships and communicating long-term strategy. Companies have been focusing more on shareholder engagement by expanding the number of engagements every year in recent years.
For many years, shareholder engagement meant meetings with investor relations teams or company management. Shareholder engagement was typically limited to annual general meetings (AGMs), where shareholders voted on resolutions and proposals for the coming financial year or plan. Today, the levels of engagement are broader, and board members are more involved in the shareholder engagement process.
Communication with investors is now a year-long effort and no longer restricted to the AGM or when seeking additional funding support. Increasingly, companies are engaging with shareholders in one-on-one sessions even during the off-season, quieter months. This allows companies to establish a lasting foundation for regular communications. In return, this increases the likelihood of getting robust shareholder support when the need arises, especially during a contested situation such as a proxy contest or aggressive shareholder proposal discussions.
Today’s large and institutional investors are no longer passive, waiting to be supplied with annual reports by the management. They want to be more engaged in strategic and financial matters. Such investors also expect the board to not only engage them more robustly but to be involved in overseeing and monitoring the implementation of the company’s strategy. Overall, the trend is increasingly shifting to increased scrutiny from investors on the composition and experience of the board members. Investors want the assurance that the board understands the company’s long-term strategy.
The COVID-19 pandemic presented unique challenges to boards regarding shareholder engagement. Besides the economic uncertainty, the pandemic halted the in-person boardroom engagement forum and eliminated strategy retreats, investor site visits, and live meetings at conferences.
Today, as the impact of the pandemic continues to ease, large institutional investors are once again focusing on strategic matters, with attention now shifting to economic, social, and governance (ESG) issues. ESG and rising corporate scrutiny is now a growing and important trend that companies can longer afford to ignore.
Shareholder activism, something that was previously associated with only a small group of socially responsible investors, is now the new normal. Coupled with momentum to implement eco-friendly production methods and strategies, companies now have no option but to work more closely with shareholders to achieve ESG goals.
In the days ahead, the main drivers for shareholder engagement are likely to be good risk management and change geared toward better corporate behavior.
It is now recognized that ESG-related incidents negatively impact corporate reputation and, consequently, the share price. For example, in California, Pacific Gas and Electric (PG&E), a utility company paid US$13.5bn to wildfire victims in the state between 2015 and 2018.
A survey by the Edelman Trust Barometer projects that shareholder activism will assume bigger roles over the coming years and that boards must align their operations for increased and direct shareholder engagement on economic, social, and governance (ESG) issues.
Undoubtedly, implementing effective shareholder engagement mechanisms yields valuable information for companies and boards. Those organizations willing to implement and continually revise their investor engagement strategies will have a head start in an increasingly competitive business environment. More investor support backed by meaningful shareholder engagement and feedback from shareholders will be crucial to achieving that.
For many years, shareholder engagement meant meetings with investor relations teams or company management. Shareholder engagement was typically limited to annual general meetings (AGMs), where shareholders voted on resolutions and proposals for the coming financial year or plan. Today, the levels of engagement are broader, and board members are more involved in the shareholder engagement process.
Communication with investors is now a year-long effort and no longer restricted to the AGM or when seeking additional funding support. Increasingly, companies are engaging with shareholders in one-on-one sessions even during the off-season, quieter months. This allows companies to establish a lasting foundation for regular communications. In return, this increases the likelihood of getting robust shareholder support when the need arises, especially during a contested situation such as a proxy contest or aggressive shareholder proposal discussions.
Today’s large and institutional investors are no longer passive, waiting to be supplied with annual reports by the management. They want to be more engaged in strategic and financial matters. Such investors also expect the board to not only engage them more robustly but to be involved in overseeing and monitoring the implementation of the company’s strategy. Overall, the trend is increasingly shifting to increased scrutiny from investors on the composition and experience of the board members. Investors want the assurance that the board understands the company’s long-term strategy.
The COVID-19 pandemic presented unique challenges to boards regarding shareholder engagement. Besides the economic uncertainty, the pandemic halted the in-person boardroom engagement forum and eliminated strategy retreats, investor site visits, and live meetings at conferences.
Today, as the impact of the pandemic continues to ease, large institutional investors are once again focusing on strategic matters, with attention now shifting to economic, social, and governance (ESG) issues. ESG and rising corporate scrutiny is now a growing and important trend that companies can longer afford to ignore.
Shareholder activism, something that was previously associated with only a small group of socially responsible investors, is now the new normal. Coupled with momentum to implement eco-friendly production methods and strategies, companies now have no option but to work more closely with shareholders to achieve ESG goals.
In the days ahead, the main drivers for shareholder engagement are likely to be good risk management and change geared toward better corporate behavior.
It is now recognized that ESG-related incidents negatively impact corporate reputation and, consequently, the share price. For example, in California, Pacific Gas and Electric (PG&E), a utility company paid US$13.5bn to wildfire victims in the state between 2015 and 2018.
A survey by the Edelman Trust Barometer projects that shareholder activism will assume bigger roles over the coming years and that boards must align their operations for increased and direct shareholder engagement on economic, social, and governance (ESG) issues.
Undoubtedly, implementing effective shareholder engagement mechanisms yields valuable information for companies and boards. Those organizations willing to implement and continually revise their investor engagement strategies will have a head start in an increasingly competitive business environment. More investor support backed by meaningful shareholder engagement and feedback from shareholders will be crucial to achieving that.
