The advent of "Drive By Engagement Parties" does NOT apply to Shareholder Engagement!

One of the *minor* dangers we face at times – given that the world is not the same as it was a year ago - is having too much time on our hands to dream up weird topics. This leads into important business discussions that take place at the same time every year – starting after Labor Day (for 12-31 fiscal year public companies anyway): the topic of “Shareholder Engagement.” A bunch of my son and daughter’s friends as well as the kids of our friends are having to cancel engagement parties, baby showers, weddings, and related celebrations due to the virus.

Certainly, “drive-by” engagement and kids birthday parties this spring were happening. I know a lot of families are having significant discussions surrounding events for “engagement” parties. While talking around our company’s “virtual water cooler” – the word “engagement” comes up a lot. However, the word is used in a much different context. I was daydreaming of being able to have a “drive by” engagement session with ISS, or a “reveal party” for when Glass Lewis issues a report…..but that is two worlds colliding. Yes, I am a strange puppy at times!

So, what is “Shareholder Engagement” and why is it so important?

Shareholder engagement entails opening a dialogue between companies and shareholders behind closed doors. In some cases, this dialogue can be supplemented by more public declarations like open letters and presentations.

At a 30,000-foot level – Companies also seek to “engage’ with their investors and proxy advisory firms in the ‘off-season’ to do the following:

? Understand where their investors heads are at. What is on their mind?

? No surprise that it would be a good strategy to have a handle on what is on the minds of investors and other constituents and not be caught by off guard when shareholder meeting season comes around

? Deliver a consistent message to these constituents. Make sure the Investor Relations, Corporate Governance and Corporate Communications teams tell the same story

? Answer concerns brought up by these constituents and factor these issues into your planning for the year ahead

? Influence proxy advisors and institutional investors to support your proxy proposals in the upcoming shareholder meeting season

Often, a team from a corporate issuer which likely includes legal, governance, investor relations and C-Suite level leaders comprise the team which engages with investors during the “off-season.”

A list of issues that investors will bring forward in 2021 include – but are not limited to:

? Say on Pay: The “usual” issues of Executive Compensation/Say on Pay. Special attention will be paid to issuers who furloughed a significant number of employees due to COVID-19 and increased compensation to corporate executives.

? COVID: Investors will be looking at how issuers are dealing with the pandemic on a lot of issues. Be prepared to quantify your response this time around.

? Diversity in the boardroom, executive team, employee base and suppliers. Investors will desire data to demonstrate commitment to diversity. Some issuers are increasing programs aimed at recruiting minorities and women employees.

? Overboarding of Directors: Investors want to see Executive Directors be on no more than 2 corporate boards (including the one they are an executive of), and Non-Executive Directors be on no more than 4 boards. This is to accomplish two goals: to avoid both overcommitment, having the board member ‘spread too thin’ and limit tenure. Overboarding fosters a need to bring in “new blood” and create an opportunity to make boards more diverse. This pleases proxy advisory firms.

? Lobbying: There is always extra scrutiny on lobbying in the time surrounding Federal elections. Shareholders wish to connect lobbying activity to actual action taken by issuers to fulfill promises made. We are seeing an increase in shareholder proposals which seek to force issuers to prove that their lobbying efforts do not run contrary their stated commitment to enact climate change initiatives. This could be an area which activists are taking a closer look at.

? Virtual Meetings: Depending on how things are ‘on the ground’ next year – some issuers will be inclined to continue with Virtual-only shareholder meetings. Steps should be taken to make sure all shareholder voices get heard.

Now that you know some of the issues that you will bring to the “engagement party” – you can better plan for it.