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Pivotal Moments For Boards To Engage With Shareholders

Monday, 29 April 2019

No business wants the intense pressure of a shareholder revolt or to be tracked on the Public Register, so what steps can boards take to make sure they are closing the gap between what they want to do and what shareholders want to see? 

Engaging with shareholders and decision makers is key. To be confident there will be no public disagreements, board members need to see engagement as a year-round endeavour, allowing boards and shareholders alike to identify issues ahead of time and find a resolution – without damaging reputation. 

In particular, attention needs to be given at three key moments during the year. 

1. When preparing the annual report 

Financial performance is no longer the only benchmark for businesses, but one important chapter in the wider story. There is a push towards taking a long-term, purpose-driven view and this year, we expect to see reports being poured over for details about everything from diversity to climate change. 

Engaging with shareholders and advisors ahead of starting to draft your report will ensure you include all the information people expect to see and provide the level of transparency and careful consideration required in business today. 

2. In the lead up to the AGM  

To maximise shareholder support, companies should spend time meaningfully campaigning for votes, making it clear why resolutions are being put forward and how they relate to the bigger corporate picture. 

All voting results will be scrutinised widely so knowing what your shareholders think and how they are likely to react will prevent any nasty surprises.

3. During risk assessments

Shareholder behaviour and the business landscape are changing so quickly that both proxy and corporate governance risk assessments are now needed every year. It’s as important as a financial audit, helping you collaborate effectively with shareholders and spot and solve all potential contentious issues in good time. 

When it comes to shareholder engagement, preparation is everything. It is markedly less disruptive and damaging to be proactive than be forced to react to the fallout of significant votes against a resolution. 

Most businesses do engage effectively with their shareholders but not all, as the 12 FTSE 100 companies named on the Public Register in 2018 will testify. For the minority who don’t have the right engagement strategies in place, the 2019 AGM season will be an uncertain time unless action is taken now to get shareholders on side.