ISS: Improved Investor Engagement In Sight

Approximately 87 per cent of issuers responding to an online survey reported having engaged with shareholders at least once in the past year using methods including emails, meetings and conference calls.

The uptick in investor/issuer communications is largely the result of regulatory changes and governance reforms, which have focused on engagement, according to experts. And the financial crisis has increased this focus.

‘I think this is a positive sign,’ says Mary Lou Christy, an investor relations expert and managing director of the Collingwood Group, a Washington-based investment and advisory firm. ‘Companies need to be more proactive in making the first move.’

Issuers, asset owners and investors do not always agree on what constitutes a ‘successful’ engagement, according to the report. All three groups do, however, consider an engagement to be successful when it involves constant communication on a specific issue such as sustainability, executive compensation and boardroom independence

‘Companies need to understand what kind of information should be disclosed,’ says Christy, adding that a good investor relations team can help companies to achieve that end. ‘A successful engagement occurs when there is a forum where the investor gets the information they need while the company values their views and realises that engagement is a two-way street.’

Christy further emphasises that engagement has to occur throughout the year.

Marc Goldstein, head of research engagement for ISS says, ‘the financial crisis continues to be a stern reminder of the consequences of poor governance and lax oversight. [But], investors around the world are increasingly concerned with the sustainability of their portfolio companies, and are encouraged — if not mandated — to exercise their responsibilities as owners. For all these reasons, engagement only will increase in importance going forward.’
IRRC Institute commissioned the ISS to execute the study, which was based on an online survey conducted of 161 investment managers, pension funds and other institutional investors and 335 corporations.

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