Six Principles For Effective Interaction Between Board and Shareholders
If managed properly, companies can gain insights into their shareholders' priorities and worries by engaging with them, which will allow them to modify their plans and operations accordingly.
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As shareholder activism continues to climb, boards of directors are increasingly being called upon to take a more proactive role in engaging with their shareholders. This heightened need for boards to be more communicative with their shareholders is becoming increasingly important.
As the corporate landscape continues to evolve, so too does the importance of shareholder engagement. This process involves the verbal communication between shareholders and company executives, and covers a wide range of topics from CEO succession and executive compensation, to corporate culture, human capital management, and environmental, social and governance issues. To help facilitate these conversations, institutional investors and proxy advisory firms have taken to publishing their priorities ahead of the annual proxy season. This allows for boards to better understand which topics are suitable for discussion. As such, shareholder engagement is becoming increasingly important for companies looking to remain competitive and to stay ahead of the curve.
The Securities and Exchange Commission (SEC) recently adopted Regulation Fair Disclosure (Reg FD) to ensure a level playing field for all investors. This regulation seeks to prevent companies and their representatives from selectively disclosing material and nonpublic information to a select group of shareholders. This information can then be used to buy or sell company stock, resulting in potential unfair advantages. While Reg FD may be seen as a restriction on shareholder communications, it is actually a boundary that helps to define the scope of these communications. By ensuring that all investors have access to the same key information, the SEC is helping to create a fair and transparent market.
An effective board-shareholder communications policy is essential for corporate governance, according to experts. To ensure that the rights and interests of shareholders are respected, boards should adopt a policy that outlines what can and cannot be discussed with shareholders. Additionally, boards are encouraged to have general counsel review the talking points for the shareholders' meeting and attend the meeting itself. Following these guidelines will help ensure that shareholders’ questions are answered in a respectful and compliant manner.
In an effort to build trust and transparency, many corporate boards are now regularly meeting with top shareholders, such as quarterly. This defined communication mechanism enables investors to share any concerns they have before a crisis occurs, while also giving boards the chance to listen to shareholders' views on emerging topics. Additionally, boards are working to ensure that all shareholder requests for meetings with the board are answered quickly and efficiently. By making these changes, many corporate boards are striving to ensure that they are more transparent and accessible to their shareholders.
Shareholders of many corporations are being advised to take active engagement in the business of the company, rather than waiting until annual meetings to do so. According to experts, by the time of the annual meeting, shareholders may have already cast their votes for a range of significant changes to the company, such as director elections, bylaw amendments, mergers, or even a dissolution of the corporation. They should also consider proxy resolutions proposed by both management and shareholders. Taking an early and active role in the company's affairs can ensure that the shareholder's voice is heard.
The annual meeting for shareholders of many companies can be a source of surprise and confusion if the board has not taken the time to engage with them. This is because misunderstandings can quickly arise when the board is unaware of the demands and expectations of their shareholders. To ensure a productive annual meeting, it is important for the board to take initiative in communication with shareholders before the event.
"Research Your Way to Success!"
In an effort to be prepared for any activist challenge, boards of directors are being urged to adopt a written activist response plan and engage in scenario planning. Taking the extra step of proactively thinking and evaluating like an activist can help to prevent an activist attack from occurring in the first place. Additionally, boards are advised to thoroughly review any commentary or proposals submitted by activist investors. Having a written plan in place will help ensure that any activist challenge is met with an effective response.
Businesses around the world are taking measures to ensure they can respond to any challenge that might arise. To do this, they are creating plans to anticipate potential issues before they become a problem. The first step is to recognize that a challenge may arise. Once identified, boards can start the process of preparing a proactive response plan.
"Prioritize Responsiveness for Optimal Results"
The importance of responsiveness in building trust and maintaining engagement with shareholders cannot be overstated. To ensure this, management should be the primary point of contact for shareholders, with the general counsel or investor relations acting as the main facilitator. When it comes to matters that require board input such as CEO compensation, these should be forwarded to the board for consideration. Ensuring that the necessary steps are taken to build and maintain strong relationships with shareholders will be a key factor in the success of any organization.
A new shareholder communications oversight committee has been created at the management level to ensure that the company meets its commitments to shareholders. This committee will be monitored by the nominating and governance committee and the audit committee. The committee aims to prevent any potential misunderstandings, and will ensure that any SEC disclosures are accurate.
The Board of Directors of XYZ Company has made a commitment to increase accountability and build trust with its stakeholders. To that end, the Board has pledged to provide regular updates to its investors. The Board has created a schedule to ensure that updates are provided in a timely and consistent manner.
"Be Ready: Activist Challenges Ahead!"
Activist investors may not be welcomed by all, but the board of a given organization should be prepared to develop a response plan in the event that they become a target. To ensure the plan is effective, simulations should be conducted and outside advisors consulted. It is important to determine which outside advisors need to be part of the response team, who from the board will communicate directly with the activist and when a special board meeting is necessary. These steps should be taken to ensure the board is prepared for any activist situation.
Protecting your company from activist investors is more important than ever, and companies should be regularly evaluating their board and their overall strategy to protect themselves. By keeping an eye out for any potential vulnerabilities and proactively taking steps to mitigate them, companies will be better equipped to handle any activism they may face. With the right strategies in place, companies can protect themselves from activist investors and ensure their continued success.
