According to data from the 2024 PwC 2024 Stewardship Investor Survey, 23 percent of investors say that they are dissatisfied with the quality of engagement discussion they have with board members, which suggests that communication between corporate boards and their shareholders could be improved. Nearly one in four shareholders is a high ratio—one that could translate to more aggressive shareholder activism and attempts to replace board members.
The survey suggests that some boards may be underestimating the need for better shareholder engagement. Researchers found that “While nearly half (49 percent) of respondents say that over the last two years there has been no change in their ability to engage with board members, 19 percent say it has become more difficult, and 5 percent say they have not been able to meet with any board members over that period.” The fact that engagement has become more difficult for nearly one-fifth of investors is concerning, especially with the recent emphasis on transparency and disclosure at publicly traded companies. These shareholders may be frustrated without the board knowing how they feel. It might be a good idea to re-evaluate your company’s shareholder engagement process if it hasn’t been reviewed in recent years.
While it is clear that most boards do a good job engaging with their shareholders, the survey shows there is room for improvement. When looking to engage with shareholders, PwC advises that “Engagement meetings are dependent on aligning your agenda with when investors want to talk about it.” Being as flexible as possible and adjusting to your shareholder’s schedule to discuss issues where there may be conflicting views may help keep meetings less contentious. Of course there are no guarantees.
Corporate board members may also consider the following:
Reach out and schedule early. Engagement meetings should be an important agenda item that is addressed at the start of the year. Making engagement meetings with your largest shareholders a routine event that happens about the same time each year may strengthen your relationship with key stakeholders that can yield real benefits. When these meetings are easier things generally run more smoothly.
Poll shareholders on key concerns. ESG, political contributions and other social issues can result in shareholder proposals that are not aligned with the board’s agenda. If there are shareholder concerns about how management is running things, the discord could end up in a proxy fight. Try to stay aware of how these issues might affect your company by finding out your largest shareholders’ views as soon as possible.
Create alliances before you need them. Engagement meetings allow the board to build trust and recruit allies. It should feel like an opportunity to improve relationships, not something to be avoided. At some point the board is going to need support from key shareholders, so it is important to cultivate those alliances before you need them. Once problems arise, it may be too late to expect investors you’ve had conflict with to partner with you.
