Experts Suggest Companies Describe Investor Engagements in Proxy Statements

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By Yin Wilczek

Jan. 29 — As U.S. companies beef up their dialogues with shareholders, experts are suggesting that they include their engagement efforts in their proxy statements.

Chris McGoldrick, research manager for executive compensation data firm Equilar, observed during a Jan. 29 Equilar webcast that many companies in the Standard & Poor's 100 index are continuing to describe in their proxy statements their interactions with their largest investors. Some companies are disclosing the size of the investors they reached out to, the responses they received and the action they took in regard to the responses, he said.

Equilar previously reported that last year, 65 S&P 100 companies disclosed their shareholder engagement efforts, compared to seven in 2008. 

James Kroll, a director with Towers Watson's executive compensation consulting practice, urged more companies to follow in those companies' steps, particularly those that have changed their practices in response to shareholder reaction.

Benefits 

“A lot of companies I talk to have been very pleasantly surprised by the quality of the interaction and the information they get” from shareholder engagements, Kroll said. Although companies don't have to go into “exhaustive detail” in their proxy statements about such dialogues, “I think shareholders as well as companies have found benefits to be had in this process, so why not take advantage and say what you’re doing?”

Moreover, it's a great way for companies that have made changes to tell their shareholders, “Message received,” Kroll said. “It's one of the key benefits of having that disclosure.”

The Dodd-Frank Wall Street Reform and Consumer Protection Act's say-on-pay requirements frequently are credited for creating greater interaction between companies and their shareholders, especially on executive compensation matters. 

Kroll said that that interaction is here to stay. He also suggested that companies proactive in such dialogues will be more successful.

What’s nice about shareholder engagement is it allows companies not to get caught off guard, he said. “An ongoing interaction with key shareholders, whether on say-on-pay or on governance, can yield a great early” warning system as to whether something is going to be heavily scrutinized or viewed as controversial.

To contact the reporter on this story: Yin Wilczek in Washington at ywilczek@bna.com

To contact the editor responsible for this story: Ryan Tuck at rtuck@bna.com