This year’s “Annual Shareholder Meeting Season,” investor relations officers and general counsel will experience real pressure from their company’s institutional investors regarding more background and transparency surrounding shareholder value strategy, addressing risk factors (economic and environmental), board governance, direct access the board as well as the minutiae of board & CEO compensation and succession.
A leading concern will be improving the process of engagement between investors and directors, particularly through one-on-one meetings with lead directors. Historically, board communications have been viewed as mechanical and squelched by investor relations. This invariably taints any investor-board dialog with a hue of insincerity and unattachment.
Further, institutional investors are working with companies to have the board “elect” one or two directors as point to create meaningful and apt engagement with investors regarding the board’s role in developing corporate strategies.
One positive step gaining momentum is that boards are searching for more investor-savvy directors, whether from the outside investment ecosphere or from the inside corporate environment: ex-C-suite executives who have successfully worked with investors.
According to a new report from Akin Gump, here are 2016’s top ten topics for directors:
- Oversee the development of long-term corporate strategy in an increasingly interdependent and volatile world economy
- Cultivate shareholder relations and assess company vulnerabilities as activist investors target more companies with increasing success
- Oversee cybersecurity as the landscape becomes more developed and cyber risk tops director concerns
- Oversee risk management, including the identification and assessment of new and emerging risks
- Assess the impact of social media on the company’s business plans
- Stay abreast of Delaware law developments and other trends in M&A
- Review and refresh board composition and ensure appropriate succession
- Monitor developments that could impact the audit committee’s already heavy workload
- Set appropriate executive compensation as CEO pay ratios and income inequality continue to make headlines
- Prepare for and monitor developments in proxy access.
Lastly, both sides of the company-investor conversation want sharper definition on their exact roles and responsibilities for interactions… in a positive manner. This two-way transparency will undoubtedly lead to less “aggressive” activism and increased returns and above all increased shareholder value.