The two companies that shared the inaugural governance award for shareholder engagement – PepsiCo and Prudential Financial – were recognized for two very different approaches to an increasingly critical part of good governance programs.
Prudential was honored for its relentless efforts to reach out to and elicit feedback from retail investors, while PepsiCo drew the judges’ praise for some of its most senior executives’ communications with major institutional investors amid a very aggressive activist campaign by Nelson Peltz of Trian Fund Management.
Prudential is respected for its pioneering efforts in shareholder engagement over many years and for including a board member on its engagement team. It has distinguished itself by reaching out beyond large investors to retail shareholders and by providing a mechanism through which they can communicate feedback on executive pay issues directly to board compensation committee members online.
For its part, PepsiCo was seen as deserving of the award for weathering a tough year during which Peltz first pressured the company to acquire Mondelez, the snack foods manufacturer that had recently separated from Kraft, and later demanded PepsiCo spin off its beverage business from its snacks business. As one of the judges noted, PepsiCo’s general counsel and its CEO/chairman approached all the company’s major investors in order to mount a defense against Peltz.
Last year, PepsiCo released its first Global Reporting Initiative report, which provided enhanced disclosure of its sustainability goals and accomplishments, and also updated its sustainability report, incorporating shareholders’ ideas. The company regularly hosts meetings with stakeholders in partnership with Ceres, a prominent network of institutional investors and public interest groups that helps companies address sustainability challenges.
Although Prudential’s engagement with shareholders starts with its proxy statement and feedback from investors, the company sees engagement season as stretching across all 12 months of the year. ‘Your communication with investors has to be persistent and ongoing and has to reflect acknowledgement that when your investors make a suggestion or ask a question, you’ve got to incorporate their feedback into your action,’ says Peggy Foran, chief governance officer, vice president and secretary at Prudential.
Theresa Molloy, director of corporate governance at Prudential, says she’s impressed by how many of the firm’s retail shareholders read the entire proxy and ask specific questions about it. ‘They also give us suggestions [about] certain content they’d like to see,’ she notes. ‘The dialogue is more of an exchange of ideas and information as it relates to disclosure of information that’s important to shareholders.’