Experts highlight need for engagement flexibility
Companies need to be able to customize and adapt their shareholder engagement efforts, both to meet investor needs and to catch the attention of investors they wish to meet, according to governance experts.
Many issuers can be ‘tone deaf’ going into calls or meetings with shareholders, Elizabeth Saunders, partner with Clermont Partners, told delegates during a panel discussion at the recent Corporate Secretary Think Tank – US in New York. For example, some companies have an ESG story they want to tell, and they tell it regardless of the institutional investor they are engaging with, she said, adding that this can be particularly the case with smaller companies.
Saunders’ advice to avoid this scenario is to hold a pre-call during which it can be established who will be on the call or at the meeting, what topics will be discussed and what the investor is interested in learning about.
Also on the panel, IBM senior counsel Evan Barth said his team will prepare a set of talking points – for example, on how the company’s strategy links to executive compensation and ESG – but will not tie itself to a script.
Another aspect of the engagement program that needs to vary depending on the investor is the involvement of directors. Although this is often held up as a good practice, governance professionals say shareholders do not often ask to speak with board members.
Fellow panelist Tiffany Wooley, chief counsel for executive compensation and governance and assistant corporate secretary at Marsh & McLennan Companies, said she has not had many requests for directors to be involved in engagement, but that it had been rewarding when they were. In such cases, the investor covered new ground and it was helpful for their feedback to go direct to a member of the board, she added.
Barth said he was surprised how few institutional investors were interested in having directors take part in discussions. He also noted that having a director involved had been valuable.
The need for companies to stand out amid the growing number of meeting requests institutional investors face also highlights the importance of being creative with engagement efforts.
With this is mind, Hannah Orowitz, a managing director on Georgeson’s corporate governance advisory team, said professionals should be very clear what feedback the company is looking for so the investor can decide whether it’s a topic it is interested in talking about. As part of that, it is important for engagement teams to show they have done their homework by reading the investor’s public policy positions, she added.
Another way to stand out is to suggest including someone from the company at the engagement meeting that the investor might not expect, or who does not typically appear on earnings calls but can give a different perspective, Orowitz advised.
Examples might include the head of enterprise risk management or sustainability, a director or even the head designer at a fashion company, she added. But she reminded delegates not to ‘lose sight of the basics,’ such as making sure such speakers are trained on Regulation FD.