Companies and investors spend a lot of time engaged in dialogue, yet often the outcomes are not as effective as either side would want from the conversation. If it’s not working, then what are the issues, and what can companies and investors do to address them? One of the most frequently cited issues stems from the short-term, transactional nature of the discussion. Corporate governance needs to be a source of value generation rather than an end in itself.
- Dialogue can be crowded-out by shortterm perspectives and proxy issues.
- Strategic issues should be prioritised in discussions.
- There is an appetite to de-emphasise quarterly reporting, and shift to quarterly Key Performance Indicator metrics.
- Boards should focus on creating longterm value rather than maximising shortterm returns.
- Companies need to build relationships, confidence and trust over time, not just in adverse circumstances.
- Issues should be addressed before they become problems.
- It is a challenge to communicate effectively to wider society.
- Regulation is setting the agenda for boards, which crowds out other areas.
- Navigating the different investor perspectives and often conflicting messages isn’t easy.
- Boards look to investors to set a proactive agenda for engagement.
- The influence, approach and accountability of the proxy voting advisers is a concern.
- It is getting harder for medium sized and smaller companies to get time with investors.
These insights have been extracted from our engagements and interactions with companies over the last three years.