We’ve polled some of our in-house friends – and here’s what they say works best when engaging with shareholders:
- “To be an active listener. On some of these calls, you often go in with an agenda – particularly if you have specific things you’re trying to address on the call or if you’ve got your chair on the phone and they have things that they want to talk about. I think it’s critical to pause and hear what the investors are saying. Are you responding to what is being said as opposed to just sticking to the script that you went in with?”
- “Recognizing the differences among shareholders. An active manager may have very different interests and priorities than a passive manager. Speaking to an active manager as if they are a passive one is not going to go over well.”
- “Be very precise with your language. You may be having a terrific engagement and suddenly one thing is said that gives the impression that you’re not in tune with good governance practices. Recognize if that happens and rectify it. Every word matters. Having said that, tone is key and if you’re new to engagement, make it clear you are just dipping your toe into the engagement waters. You will find many investors to be polite and forgiving.
- “Leverage the year-round approach to engagement and solicit that input during investor calls. Maintain an engagement map that melds well with your company’s own calendar.
Ask investors about their engagement preferences and factor these in where possible. Some want to engage every two years on the off season. Some say we will call you during proxy season if there is a problem, etc.” - “When engaging and in your disclosures, make the distinction between what you’re communicating and how to communicate. For example, for your letter from the CEO that goes in the annual report and your letter from the board in the proxy, take full advantage of that opportunity. There are powerful ways to articulate both the management perspective on matters that are important to the company and topics you know your most important investors want to hear about, as well as confirm that there is a set of board priorities and oversight that support management’s vision.
- “No surprises. Shareholder engagement is your big opportunity to learn early on what the potential hot buttons for your upcoming annual meeting might be and a chance to get a head start on staving off unwanted results if possible. Sometimes your company might not be willing to make the changes needed and the company will take the hit (combined board chair/CEO or classified board are good examples). Make sure management and the board is in the loop based on what you learn during your engagements.”
- “Engagement offers a great opportunity to talk to your investors and get advice. Take that advice if it makes sense. Investors read a lot of proxies and might offer wisdom that you can’t get anywhere else.”
- “During an engagement, really focus on what are the most important types of things that you would ultimately like to disclose. Or should be disclosing. Consider engagement part of the drafting process.”
Authored by
Broc Romanek