Institutional Investors Expect Dialogue, Not Just Solicitation

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By Che Odom  

April 2 --The new normal, as far as investors are concerned, involves greater transparency and a forward-looking stance from public company boards, Robyn Bew of the National Association of Corporate Directors said April 2 during a call with reporters.

“The expectation for open dialogue is here to stay,” she said.

Bew, director of research at NACD, discussed the results of a report published April 1, Investor Perspectives: Critical Issues for Board Focus in 2014, which was written after researchers spoke with U.S. institutional shareholders representing nearly $13 trillion in assets under management. The investors included BlackRock Inc., California State Teachers' Retirement System, Calvert Investments Inc., the Council of Institutional Investors and The Vanguard Group.

Ken Daly, CEO and president of NACD, said his organization has been working with the investor community for years to gain an understanding of what shareholders believe directors should be focused on.

Late last year, NACD met with a panel of institutional investors collectively representing more than $10 trillion in assets under management to identify key issues for boards and compensation committees to consider as they prepare their companies' compensation and disclosure analyses (CD&A). One common criticism among shareholders was that filings are often redundant, which makes them more difficult to read.

“We don't see a champion for disclosure reduction,” Daly said during the call with reporters, adding that investors will take as much disclosure as they can get and pass it to their analysts for “cannon fodder.”

Investors, in fact, would like more disclosure, but in other formats, such as through company websites and videos, Peter Gleason, NACD's managing director, said during the call.

“The influence of investors on the market is greater than ever,” and what they want matters, Gleason said.

Investors are interested in ways of getting information to them without it being “filed,” which rightfully means getting lawyers involved, Daly said

“We don't see a champion for disclosure reduction.”
Ken Daly
NACD's CEO and President

Shareholder Activity Up

The importance of robust, board-shareholder dialogue is underscored by the dramatic increase in shareholder activity over the past several years, according to the report. The number of shareholder actions carried out across the globe swelled by 88 percent between January 2010 and September 2013, and the number of shareholders with specific strategic requests has doubled over the past decade, Bew said.

The conclusions identified in the report will inform NACD's ongoing research and director education programming. While discussion participants emphasized that there is no one-size-fits-all approach to governance, the report is intended to help NACD's more than 14,000 members not only engage in an ongoing dialogue with their top investors, but to be prepared to take appropriate action.

The institutional shareholders said that while they appreciate any engagement with boards, they especially want meetings with directors during the offseason, Bew said. When boards reach out to investors ahead of the annual meeting, shareholders see that more as solicitation than engagement, she said.

Bew urged directors to know their largest investors, and understand how and when they want to be engaged.

Boards also should develop an engagement plan to make the most of their outreach efforts, Gleason said.

“The importance of board-shareholder communications has always been a part of NACD's philosophy,” Daly said. “In the current environment, we believe it is critical to give directors practical advice, not just on how to engage with their top investors, but on which issues.”


To contact the reporter on this story: Che Odom in Washington at

To contact the editor responsible for this story: Kristyn Hyland at

The report is available at

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