How to manage shareholders

Your board is panicking about being voted down by rebellious investors at your next company meeting. Here's a crash course in keeping shareholders onside, and your credibility with the investment community intact.

by Alexander Garrett
Last Updated: 09 Oct 2013

Know your investors. Many of the names on your shareholder register are nominees, holding the shares on behalf of beneficial owners. 'Companies really need to talk to the investment advisers who often make the decisions for pension funds and other institutions,' says Cas Sydorowitz, chief executive of European advisory at shareholder consultancy Georgeson. The biggest shareholders should be the focus of your efforts.

Be inclusive. Pay attention to small or overseas shareholders too, as they can represent a big block of equity. Sarah Wilson, chief executive of proxy adviser Manifest, says: 'All material facts should be available to all shareholders, via the annual report or disclosure. Selective briefing to deal with interpretation or misunderstanding is fine, but it's better to make information available in the first place.'

Engage early. Don't wait until your AGM is imminent. 'Investors say, talk to us outside the proxy season,' says Sydorowitz. 'In April, they may be voting on hundreds of meetings a day. So talk to them when they have time.'

Don't be complacent. Corporate governance is often not seen to matter when company performance is good, says Ruth Bender, reader in corporate financial strategy at Cranfield School of Management, but there will be a time when you need goodwill. 'When things are going well is a good time to get your house in order, because you've got nothing else to worry about,' she says.

Listen, but don't take orders. 'Institutions can tell you what they think, but they shouldn't be micro-managing the organisation,' says Bender. 'It's for you to make decisions in the best interest of the company.'

Talk to the right people. Larger investors have corporate governance people as well as the fund managers and analysts who buy and sell shares. 'You may find you are talking to a fund manager who says he will support your resolution, but he's not responsible for the corporate governance voting decision,' says Emma Burdett, head of investor relations at financial comms consultancy Maitland.

Factor in the proxies. Investors' decisions are increasingly influenced by proxy voting advisers such as ISS, Manifest, ABI, Glass Lewis and Pirc, which now speak for 25% to 30% of votes at UK company meetings,' says Burdett. Wilson says proxy advisers get their data from publicly available sources, so getting that right should be the first priority.

Choose your battles. Follow the principle of 'comply or explain'. 'If something doesn't matter it's easier to comply with the regulation, but if it's something critical to the company, you should explain,' says Bender.

Do say: 'In this instance we have decided not to comply with the Combined Code and we would like to explain why.'

Don't say: 'The only thing shareholders care about is if our profits are growing.'

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