Mark Hynes - thoughts on corporate disclosure

Opinions on changing rules, changing best practices, and their effect on investor relations officers.

Wednesday, February 23, 2011

The engagement process continues to evolve.

As UK Plc and UK investors get to grips with the engagement process, it is useful to look at what’s going on in the US. 2 interesting pieces of work are helpful.

First new research on “The State of Engagement between U.S. Corporations and Shareholders”, from ISS and the IRRC. The research asked investors (both owners and managers) and public companies their views on engagement.

The resources used, how much engagement, time spent, what the engagement comprised, the subject matter of engagement requests, the outcomes, and how success was measured were all reviewed.

However, a few themes emerged. One was the crucial role played by IR. Around half of all investors said they initially reached out to the IR department when they wished to engage. However it is noticeable that the asset owners – pension funds, insurance companies, mutual funds – tended to contact the Chairman.

Another point was the tendency of companies to speak to the investors' dedicated ESG people. Some companies said they tended to contact the "front office" – the portfolio managers – who are seen as more familiar with the companies in their portfolios; and more willing to make exceptions to their firms' proxy voting policies.

2 other points. Proactive IR engagements by companies were for the most part focussed on the largest investors, and where they did not engage, many highlighted their inability to identify the investor as the underlying reason.

The second report from Rob Berick at Dix and Eaton, and from Georgeson, looks at how different 2011 proxy voting season is likely to look. Say on pay of course, with its obligation to submit proposals to shareholders, the proxy access changes – and as a consequence of both the increasing influence of proxy advisors.

But boards will have to deal with other changes as well: the end of broker voting on uncontested elections; the rules on faster vote results disclosure. And new items will be on the agenda, such as board diversity, succession planning, the newly mandated disclosures around climate change impact...

All of which needs pre-planning (which the report suggests).


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