The Strategic IRO: Changing Dynamics of Shareholder Outreach

November 19, 2018 05:30 PM EST
Domain 7:
Strategic Counsel and Collaboration
Domain 10:
Corporate Governance

On November 19th, NIRI NY launched the first of a series of ‘Strategic IRO’ panels, beginning with what activism looks like today and how we proactively prepare our management and board.

The discussion was moderated by Alexandra Deignan, head of Investor Relations at Lazard and included the following panelists: Jim Rossman, Managing Director of Shareholder Advisory at Lazard, also co-author of Quarterly Review of Shareholder Activism - Q2 2018, Jim Tierney, Chief Investment Officer of Concentrated US Growth at AllianceBernstein, also co-author of The Megaphone Effect Amplifying The Impact Of Engagement With Management and Quality Control: Three Questions for Stocks in a Changing World and Susan Kendall, head of Investor Relations at Citi.

Here are several takeaways to strengthen shareholder engagement in today’s environment:

A shareholder risk assessment is bigger than just identifying your vulnerabilities. Commit the time to do the simulation exercise. Track shareholder sentiment. Approach activism as ongoing risk management. Identify the potential issues or gaps within your corporate strategy, financial structure and governance framework.

Master your shareholder base – both current and target investors. Be actively engaged and do your homework to know what your investors expect of you. Manage that relationship closely. Gone are the days that activism is only for the large hedge funds. With a growing portion of U.S. stocks held in index funds and overall shift to vocalism, there’s no one ‘standard’ influencer on the Street.

Knowledge is power – so get your data house in order. There is no shortage of data that exists on your company, particularly with a growing number of ESG firms often drawing their own conclusions that your investors rely on. So, collect those assessments. Review, update, challenge and correct that data as inevitably, discrepancies exist.

Advocate for best-practice governance – otherwise, you are easily exposed. Long tenured board? No diversity? Unclear connections between director expertise and long-term company strategy and goals? These are issues investors will quickly point out when looking to reinforce their agenda.

Get your board involved – early and often. They should be primed to engage with investors and not confined to a conference room. No one is expecting them to be interchangeable with management but investors should feel confident they are fulfilling their oversight responsibilities.

Our thanks to our panelists for their candid and informative dialogue as well as the more than 80 attendees that joined us.

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