Based on PwC's analysis of 100 S&P 500 company 2016 proxies, of the 64% of companies that disclosed engagement with shareholders: (i) 38% indicated that directors were involved; (ii) 95% described the topics discussed (with compensation being most common (47%), followed by proxy access (18%) and strategy (11%)); and (iii) 64% reported that they took some action as a result of the engagement - most commonly - changes in compensation programs and adoption of proxy access. And of the 42 that identified who on the board is or would be involved in engagement, all but one identified the lead or presiding director.
The memo includes these two share-worthy mini-checklists re: good engagement-related practices:
Directors should ensure management has a thoughtful, ongoing program for shareholder engagement. The best ones:
- Regularly track who owns the company stock
- Focus engagement on long-term shareholders
- Set targets for annual engagement—e.g., the 20 largest shareholders, or shareholders representing 60% of the base
- Engage at the right time—i.e., not during proxy season, unless there’s a compelling issue
- Integrate messages with what the company discloses on analyst calls, during investor days, at its annual meeting, and in its SEC filings
- Clarify when to involve key members of the C-suite
- Ensure concerns heard during discussions are fully discussed with both senior management and the board
The best disclosures describe:
• Outreach program, including what proportion of shareholders they want to reach and the frequency or timing of outreach
• How the engagement happened (e.g., in-person meetings, conference calls)
• Topics covered during the discussions
• Number (e.g., ten of our largest shareholders) or percentage of shareholdings (e.g., over 60% of our outstanding shares) represented by meeting participants
• Reasons driving any special or new outreach efforts, such as a fall in say on pay approval rates
• Who from the company was involved, including who from the C-suite
• Whether directors were involved in the engagement—and, if so, which directors (e.g., lead director, compensation committee chair)
• What feedback the company received
• Specific actions taken in response to the discussions
Access additional resources on our Shareholder Engagement topical page.