Communicating with Shareholders

Since SEC rules now let shareholders vote on issues such as compensation, it is a matter of time before investors will soon be able to weigh in on an abundance of topics. A recent article in NYSE Magazine offers a few best practice ideas to consider in your communications based on the opinions of a panel of experts including ASCS, ISS and Society of Corporate Secretaries & Governance Professionals, Inc. Did you happen to notice that NYSE magazine is now available online and is capable of being downloaded?

The idea is relatively simple, when you want someone to embrace your point of view and side with you in a decision, what do you do?  No, you don’t bribe them with chocolate! You communicate your goals, mission and educate them on why you feel that way, right? Same general idea for shareholder communication. To ensure that you will receive the support that you desire on key issues, it’s important to ramp up outreach to educate and engage investors. In the new disclosure environment, the most successful boards will be those that get in front of shareholders with credible messaging and encourage feedback through new lines of communication in advance of the proxy vote.

To close the communication gap between boards and investors there are 3 things that you can do:

  1. Publish proxies in plain English. In other words, make sure your proxy is straightforward and readable. Companies have a tendency to cram too much information into too few pages and in doing so, lose out on the benefit of utilizing the proxy as a vital communication vehicle.  Confusion resulting from a complex proxy can lead to a unwanted vote.  Consider dedicating more real estate in your proxy to the issues at hand and explain how and why these issues are in the best interest of shareholders.
  2. Tell your story in your own words.  Involve the right people to ensure that the right message is being conveyed. A well told story is likely to be remembered an rewarded and is crucial in building a long term relationship with shareholders. Consider having a senior officer join to speak from experience and offer well-informed details on the issues.
  3. Listen. Be open to feedback from shareholders. Consider inviting portfolio managers to visit with the management team to build rapport and foster open-ended discussion.  Another recommendation is to communicate beyond the typical quarterly discussions to focus on other issues such as executive compensation, succession planning and corporate governance.

Preparation, open communication and execution is the name of the game.