Understanding the perspectives of portfolio managers, analysts and stewardship teams
Many investors have come to expect far greater engagement with companies than has traditionally been the case. They are also increasingly looking for that engagement to take place year-round, involve ESG issues and – in some cases – include directors. As a result, governance teams are increasingly part of engagement programs that have in the past been part of the IR team’s remit.
At Regions, it is Nolan’s IR team that meets with portfolio managers and financial analysts. But she notes that the IR and governance groups collaborate by helping each other understand the perspectives of the different people involved on the investor side and what they are interested in. They will also sometimes participate on the same investor calls.
On the governance side, Mehlman undertakes extensive engagement work that includes face-to-face meetings with shareholders at industry conferences. She is one of only two corporate members of the Council of Institutional Investors’ board, where she sits on the policy committee, and she is vice president of the Society for Corporate Governance’s southeastern chapter.
Mehlman is also an advocate for director involvement in the engagement program. For example, she organized – and both she and Nolan attended – a dinner for investors to meet with the chair and three committee chairs from the Regions board. Her team has also invited investors to come to board meetings, meet with committees and share their views on corporate governance.
‘Shareholder engagement was traditionally very much a function of the IR group. But the advent of say-on-pay votes in the US led IR and corporate secretary teams to work together to engage with shareholders on a range of governance issues that historically were beyond the scope of investor days and analyst calls,’ says Warren.
That has been the case at Salesforce.com. Siamas notes that a few years ago the company had a low say-on-pay vote it was determined to improve. The result was a great deal of shareholder engagement and a lot of work involving both his team and IR. Now the company has a healthy say-on-pay vote it continues to make extensive outreach efforts but fewer investors want to talk because they no longer have concerns, Siamas says.
If the company plans to make changes to its compensation scheme it first conducts comprehensive engagement involving the IR, legal and executive compensation teams. They hear investor feedback on the planned changes and adjust their plans accordingly, with the revised changes then reflected in the proxy statement, Siamas explains.
Orowitz says the decision on which team takes the lead in engagement will depend on the company and the investor at issue, such as whether it is driven by stewardship teams or portfolio managers, and whether it is passive or active. For example, the corporate secretary/legal group may be the most suitable to meet with stewardship teams, she adds.