Corporate Counsel Weekly™ helps corporate lawyers get the big picture on the legal challenges facing corporations today. Practitioners can discover trends on the horizon and stay alert to the full...
By Che Odom
April 17 -- The level of engagement between public U.S. corporations and their shareholders is up, creating high satisfaction levels from both sides, according to a study released April 10.
“The overall trend is toward more engagement,” Marc Goldstein, head of engagement for Institutional Shareholder Services Inc. and study author, said during an April 17 web conference with reporters. “The biggest impediment to engagement is the time it takes. This is true of shareholders and issuers.”
The study updates a 2011 report and is based on a survey of 82 institutional investors and 133 U.S.-listed companies with an aggregate market capitalization of more than $2.3 trillion. The survey was supplemented with 45 in-depth interviews.
The study finds that the new requirement that U.S. companies seek shareholder approval on management compensation is the largest reason for the increased engagement . Say-on-pay votes were credited by almost half of those interviewed as a cause for the increase.
“This is the rare instance where a regulator reform is working as intended,” Jon Lukomnik, executive director of the Investor Responsibility Research Center Institute (IRRCi), said during the web conference. “Moreover, the conversations have expanded beyond one narrow issue.”
According to the survey, which IRRCi commissioned, public companies and shareholders are now “engaging more frequently on merger and acquisition activity, environmental and social issues, board structure, director qualifications, corporate strategy and financial results,” Lukomnik said.
Among the study's key findings:
• Engagement is more firmly rooted in the corporate governance landscape.
• The subject matter of engagement is varied.
• Corporate directors are more likely to take part in engagements today than three years ago, though such participation is still the exception.
About 22 percent of companies and 19 percent of shareholders had not initiated any engagement in the past year. That number is down from about 27 percent of companies and 44 percent of shareholders three years ago, according to the study.
Among companies, 47 percent reported initiating more than 10 engagements with shareholders, up from 30 percent three years ago. Among investors, 55 percent reported more than 10 engagements, up from 31 percent in the 2011 study.
Shareholders and issuers reported discussing a variety of subjects when engagement occurs, including executive compensation, merger and acquisitions, environmental impact, social issues and corporate strategy, Goldstein said.
Both groups, but particularly companies, seem more comfortable with engagement and are devoting more resources to those efforts, he added.
“Although engagement levels at an individual company will continue to fluctuate from year to year based on varied factors, evidence suggests that the upward trend will continue,” Goldstein said. “Dialogue will continue to play prominently as investors seek to mitigate risks at companies they intend to hold for the long-term, while, concurrently, issuers seek to win support for company proposals, ward off activists, and keep shareholders happily invested in the stock.”
To contact the reporter on this story: Che Odom in Washington at firstname.lastname@example.org
To contact the editor responsible for this story: Kristyn Hyland at email@example.com
The study is available at http://irrcinstitute.org/pdf/engagement-
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to firstname.lastname@example.org.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to email@example.com.
Put me on standing order
Notify me when new releases are available (no standing order will be created)