This post comes to us from Simon Wong of Northwestern University Law School.
Shareholders around the world are seeking greater dialogue with boards of directors of investee companies on an expanding array of topics. For example, demands by investors in the US and other markets for greater shareholder rights – such as an advisory vote on remuneration – are in part efforts to engage the board on important governance issues. In a recent article, available here, I draw upon my experience in the UK and other markets to offer practical suggestions to boards on improving engagement with their shareholders.
To start, boards should strive to build a long-term, trust-based relationship with their most significant shareholders. In practice, this means that the board – particularly the chairman, lead independent director and remuneration committee chair – should interact directly with shareholders rather than delegating this function to the investor relations team.
The focus on building trust means that regular meetings are important, as relationships and goodwill are built through repeated encounters. Meetings with shareholders do not have to be especially formal. In most situations, casual conversation often works better. Quality of discussion, particularly when sensitive topics are on the agenda, is often inversely proportional to the number of people in the room. As a principle, both sides should strive to minimize the number of attendees.