eq-2014-12

Lifting the game with
shareholder engagement
By Ian Curry, Chairman, Australian Shareholders’ Association
For many years the main forum for directors to engage with
shareholders has been the annual general meeting (AGM).
More recently, there has been considerable discussion about
the role of the AGM and its continued relevance. Whilst it
is true that attendance levels at the annual gathering has
dwindled over time, shareholders continue to want to be
heard and it remains important that companies acknowledge
the significance of providing retail shareholders with an
appropriate forum to do so.
The Australian director-shareholder relationship is unique in
that engagement has unquestionably resulted in changes
to corporate governance and remuneration practices. As
the Australian Council of Superannuation Investors recently
reported, the median take home salary of chief executive
officers has decreased in the past year. The ASA has also
witnessed changes to executive remuneration arrangements
which are generally reflective of longer-term alignment with
the interests of shareholders, which we see as the result of
a trend towards shareholders acting more like owners and
boards responding by becoming more engaged.
It is important for companies to continue to focus on
improving the dialogue with shareholders and the AGM
experience for retail shareholders. More often, we are seeing
directors speaking to their elections at AGMs and companies
providing a simple question form with the notice of meeting
which shareholders can submit ahead of an AGM. The ASA
was extremely pleased to see ASX provide attendees at
its AGM in September 2014 with copies of consolidated
responses to commonly asked investor questions. This
shows that companies are keen to listen and actively engage
with shareholders. For example, in some, the responses from
ASX indicated that ASX was minded to consider changes
to its practices and policies raised in the questions.
Companies are increasingly under pressure to make their
communications clearer and more relevant to readers. Annual
reports, company filings and other disclosure documents
should be written with the intended audience in mind, rather
than simply providing the required legal disclosures and
assuming that no reader will ever get through the content.
Readers should not have to sift through pages of materials
to look for the information that is relevant to their decision
to invest or disinvest in the company. As an example, banks
and managed funds often include many pages of individual
transactions in their substantial shareholding notices. It
is true that these are included at the end of the lengthy
disclosures, but that information ought not be included
unless absolutely required and in any case, thought should
be put into presenting the information in a manner that is
useful to the reader. At some point, market practices will
need to be reconsidered in this regard.
ASA believes companies should also turn their minds to
providing information to shareholders in a timelier manner. In
September 2014, the ASA reported on the companies which
reported their half-year and full-year results on the last day
possible. Disclosing financial results and the remuneration
report earlier means that investors have ample time to review
that information and make better informed decisions about
their investments.
The ASA is seeing more companies wishing to engage with
not only institutional investors but also retail investors. We are
frequently contacted by companies to arrange discussions
about corporate governance and remuneration issues and
directors are keen to be involved with smaller-scale events
involving retail investors. The ASA has organised a number
of successful site tours of ASX companies over the past
two years, with feedback consistently indicating that the
tours helped investors better understand the companies
which they essentially owned.
Stronger and better communication leads to more
effective engagement and better informed investors. This
applies to face-to-face interactions, public disclosures
and investor information provided on company websites.
Communications should be prepared with all audiences in
mind including institutional investors, super funds and retail.
Important information about the company and its policies
should be readily available on a company’s website.
Going forward, we would like to see increased engagement
with shareholders via less formal forums and on a more
regular basis. There is no reason why retail shareholders
could not be invited to and encouraged to attend investor
briefings and we would encourage companies to embrace
technology to allow more people to attend and participate
in AGMs (eg use of webcasting), as opposed to denying
those not as technologically literate their right to participate
in activities of interest to shareholders.
It is one thing to advocate that the AGM has become less
relevant and should be abandoned. But the more important
question then is, what alternative will provide an adequate
forum for retail investors to communicate their views to
those whom they have entrusted to run their company
The challenge is and will be for companies to find better
ways of engaging with shareholders.
This article was first published in the ASX publication titled Listed@ASX.
EQUITY December 2014 Page 16