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The 9-Step Shareholder Engagement Programme to Increase Loyalty

The 9-Step Shareholder Engagement Programme to Increase Loyalty

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Executive Summary: Learn why shareholder engagement is increasingly important for issuers and how to develop a simple but effective engagement programme for businesses.

Over recent years, shareholders have become more concerned with the corporate governance processes in place in the companies in which they look to invest. However, many issuers still fail to engage shareholders in an adequate manner, missing out on important benefits for both sides.

What is more, the majority of institutional investors expect to be able to engage with the company’s IR team and directors. In a recent study by Harvard,

Investors widely agreed (81%) that stakeholder engagement approach and outcomes should be disclosed by companies when they present their corporate purpose.

91% of investors said board-level engagement is the most effective way for them to influence board policies.

Following the 2008 financial crisis, there has been increasing pressure on institutional investors to ensure issuers are doing all they can to cut their corporate governance risk. As we head into the jaws of another financial crisis, this pressure will only grow. If your organisation can prove it is willing to enter into dialogue, increase shareholder engagement and improve shareholder transparency, that makes it much more attractive from an investment point of view. 

Table of content

Current Challenges And Opportunities In Shareholder Engagement
How Frequently Should Shareholders Be Engaged?
What Should The Discussion Entail?
Who Should Participate In The Discussion With Shareholders?
How To Prepare A Shareholder Engagement Programme
Shareholder Engagement Best Practices
Where To Start With Shareholder Engagement?
References and Further Reading

Current Challenges And Opportunities In Shareholder Engagement

2020 has brought challenges in many areas of life, and that is no different for issuers. You can expect a slew of difficult questions from shareholders based on the extraordinary events of the year. Boards must be robustly prepared to field a multitude of queries on corporate compensation, reassessing strategy, risk oversight and many more topics that COVID-19 has exposed. 

Whilst those issuers with longstanding shareholder engagement policies may be due some leeway from investors, that might not be true of issuers who have yet to engage. PwC found that “by building shareholder relationships with their most important investors during the “calm times,” companies may find that having that existing connection is more important than ever as they are put to the test in 2020.” The challenge for those issuers who have been slow off the mark until now is to build those relationships while in the midst of fighting fires. 

We should not forget that this crisis is, like any other, an opportunity for well-prepared companies. As issuers step into 2021, they will have to start disclosing the results of a turbulent, and very often, unprofitable 2020. This is where a stronger relationship with their investors could prove critical. That’s why the right time to start working on it is now. 

How Frequently Should Shareholders Be Engaged?

Lilian Taylor, writing for Ethical Boardroom, believes that engaging shareholders too infrequently is damaging for the relationship with the issuer. 

“Investors believe that annual meetings are not providing sufficient time, effort and content towards addressing their range of concerns.” 

There is more chance that investors will support the board’s decisions if they have been in regular contact and built up a bond. Ongoing engagement helps the shareholder understand the company better. In addition, the board comes to understand the views of its shareholders more clearly. It also prevents the only engagement coming when there is a problem, which can make the infrequent communication attempts instantly raise a red flag and put the investor on the defensive. 

A proactive approach provides what PwC terms “credit” with the shareholder, who appreciates the effort the issuer makes whether they want to engage at that time or not. 

It should be noted that this engagement does not need to be in person. A phone call or video conference works to keep the engagement level high without having to take up time organising frequent formal meetings. The Harvard Law School Forum on Corporate Governance’s Director-Shareholder Engagement Guidebook states “ideally boards engage face-to-face annually,” but that regular contact by other means is important. 

What Should The Discussion Entail?

The point of shareholder engagement is to provide insight for investors and to answer questions and concerns. This means that there is no set of rules for what you should discuss. This will be led by the shareholder and will require the representative of the issuer to be frank and open, up to a point. 

It is a good idea to set an agenda before the meeting. This allows both the shareholder and the issuer to properly prepare for the engagement. It also means that both parties know what can be discussed and what cannot. It is up to both parties to come to an agreement in advance of the meeting over what the discussion should entail. 

Who Should Participate In The Discussion With Shareholders?

Harvard Law School Forum on Corporate Governance recommends taking a holistic approach to engagement. You should utilise the talent you have available to meet the needs of the shareholders. This means directors representing the board in general but also taking charge of topics that fall within their wheelhouse. Often independent directors are preferable. 

It is a good idea to let the topics at hand lead the choice of representative — another reason to arrange an agenda ahead of time. Depending on what the shareholders are concerned about, you might want to deploy the following members:


Topics Typically Covered

Board Chair or CEO

•Business objectives
•Risk management
•Board composition

Committee Chairs

•Audit and accounting Issues
•Executive compensation
•Communication and disclosure
•Equity risk mitigation

The Board in General

•Board composition
•Board practices/policies
•Management oversight
•Takeover defences
•Related party transactions
•Shareholder proposals

How To Prepare A Shareholder Engagement Programme

It can be extremely helpful to the business if you approach it with an open mind. In the words of David Richardson, former chairman of Air Canada:

“Go to listen and explain, not to preach or defend. It should not be too time-consuming, and if it does take a lot of time then it demonstrates that there are latent issues that are best surfaced and addressed.”

Here are the steps to preparing a shareholder engagement programme:

1. Lay the groundwork for engagement

Firstly, you need to prepare the board and shareholders for the programme. If engagement has not been high on the priority list beforehand, this will be a big shift in corporate culture. You could look into the proxy statement to see if it is transparent enough. In addition, you can add important details of interest to shareholders on your website. These are excellent ways to increase shareholder engagement immediately. 

2. Get your timing right

This will be different for every company and situation. For example, organising a governance roadshow a few weeks before the annual general meeting helps maximise voting success. In other cases, the autumn outside of proxy season may be a great time to connect with the shareholders, when both the company directors and the institutional investors can spare the time to prepare properly. It is best to experiment and engage shareholders throughout the year to find out what works for you. The most important thing is to be consistent. 

3. Choose the shareholders to engage

It is not realistic to engage all shareholders, so you need to choose carefully. You need to give weight to those who invest the most, but that is not the full story. Rather than simply picking the top 20 investors or those who own a number of shares above a certain threshold, also think about the value of other interactions. One way to make sure you are targeting the right investors is to undergo shareholder analysis

As soon as you have a shortlist of investors you want to engage, study the past interactions with them, understand their concerns and look for correlations between share ownership and voting policies. Then, study each investor’s proxy interactions and determine what impact they have on their voting policies.

Such a thorough analysis will determine your specific engagement strategy and the key topics to address when communicating with these shareholders.

4. Pick the correct medium

Face-to-face engagement is extremely important and can take on many forms, including investor day or other conferences. In this category, governance roadshows can be a very effective tool both for engagement and for prevention of shareholder activism. While traditional roadshows focus on portfolio managers and analysts — the people who make the buying decisions — governance roadshows seek to establish a connection between the sell-side IROs and the buy-side governance team. This improves communication and creates a mutual understanding on topics related to governance and can ensure a favourable vote in case a contentious issue arises. That’s why governance roadshows are best done prior to proxy season. 

As previously mentioned, face-to-face is preferable at least once a year, but logistically not all engagements can be in person. Aside from that, you could opt for virtual roadshows or even “fifth calls”. These are additional phone calls on top of the quarterly calls to update financial results. 

5. Research before the meeting

Once you agree on the meeting agenda, you can begin to research the topics you will discuss. This is necessary for both issuer and investor. The better prepared both parties are, the more fruitful the engagement is likely to be. You should issue the shareholder with the relevant materials they need so they can come into the meeting fully briefed. In addition, the issuer’s representatives should research the shareholder, so that they can tailor the information to their needs. 

6. Pick the right team

Knowing the topics up for discussion means you can assign the correct representatives to the engagement. In order for the investor to get the most from their meeting, and for your business to learn as much as possible from the interaction, it is important that the person best placed to answer the questions attends. 

7. Listen

Interestingly, PwC found that shareholder engagement worked best when the investor did most of the talking. It is important for directors to answer questions, but it is imperative that they listen to the concerns that shareholders raise. Being able to field criticism from activists and consider new ideas are key elements to a productive session. This helps the investor trust that their voice matters to the issuer. 

8. Discuss

It is important for issuers to take criticisms and suggestions on board from activist investors. That doesn’t mean that they have to act on them as is, but they should be the first step in the road to an agreement. Very few experienced shareholders genuinely believe they can march into a business and make them completely pivot their strategy. However, by showing that you consider their feedback seriously, you can come to a civilised agreement on the way forward.

9. Follow up on the meeting

Don’t leave the investor without a resolution, even if it isn’t the one they wanted. You should follow up, explain what happened when the director fed back to the board members, and let them know what follow-up actions you are taking. If there are no follow-up actions, explain why. 

Shareholder Engagement Best Practices  

The ‘engagement’ aspect is a key term to remember. This shouldn’t be a monologue, a lecture or a presentation from the issuer. It is an opportunity to listen, respond and discuss. You are not performing these tasks to tick a box, they are there to build trust and a fruitful relationship with investors. 

The Importance of Director-Level Interaction

One of the key best practices is the directors’ interaction at investor engagement meetings. Previously, this might have been left to management, but involving directors shows a higher level of commitment to the process. Investors want to take their concerns to the board directly and this is important for them.

Harvard Law School’s Director-Shareholder Engagement Guidebook states that previously any engagement process was set up “to protect—not engage—directors from shareholders by filtering requests for contact through the buffer of management.”

It recognises that it can be uncomfortable for directors at times, but the availability of a director for an investor helps to build a bond for the long term, which is in the best interests of the business. 


How Does Impact Investing Influence Shareholder Engagement?

Impact investing is gathering substantial pace, with environmental, social and governance (ESG) ratings factoring high in the minds of an increasing number of investors. To be precise, 85% of investors, including 95% of millennials, are looking into sustainable investments going forward. The sheer weight of momentum towards this shift is likely to lead to more requests for shareholder engagement from investors who want to influence the issuer towards a greater ESG score and better sustainability. 

How Does SRD II Impact Shareholder Engagement?

The revised European Union Shareholder Rights Directive (SRD II) came into force on 3 September 2020. It requires more transparency over engagement policies by investors and asset managers, necessitating that they are available online. In addition, they should be more open about voting behaviour and investment strategies. The idea is to increase long-term engagement and transparency over the whole process. On the sell-side, this can create more challenges and require more resources such as skilled experts to monitor assets, prioritise engagement issues and communicate with investors.

Where To Start With Shareholder Engagement?

The first step to increased shareholder engagement, especially in the long term, is gaining a deeper knowledge of your investors and your shareholding structure. 

Because every organisation is subject to unique shareholding factors, Euronext Corporate Services provides tailor-made shareholder analysis services that help you focus on your most valuable investors. This multi-dimensional analysis provides you with a strong foundation for your shareholder engagement strategy, enriching your records with data from reliable third-party sources.

Request a demo >>



An effective shareholder engagement programme is key for investor relations, building loyalty and establishing a fruitful long-term relationship. Not only is it beneficial for both issuer and shareholder, but it is becoming an expectation rather than an additional extra as may have previously been the case.

Impact investment is on the rise, with millennials particularly looking for sound ESG policies in the companies in which they invest, and being open to suggestions and criticism from shareholders allows you to work together to provide a sustainable way forward.

References and Further Reading 


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