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Taking Control: How Organizations Can Gain Governance Engagement

Brendan Sheehan, Rivel Research Group.

Effective shareholder engagement has become one of the most important, and oft heard, mantras among corporate management and investors. Institutional investors are demanding – and expect – regular, proactive communication with company management and in many cases the board of directors. To put it simply, ongoing communication is one of the fundamental hallmarks of good governance.

We have seen several examples of how high-quality engagement can circumvent shareholder activism, defeat shareholder proposals and, perhaps most importantly, create long-term shareholder value. So with everyone looking to engage, many companies are examining their investor communication process and raising the question about who should be responsible for this important outreach and “own” the governance conversation. Traditionally the task has fallen to the investor relations office but as governance has become more important and more complicated, the corporate secretary is becoming more involved in the process.

In large part, governance engagement is being driven by the rise in shareholder activism. We are seeing more active engagement from investors of all varieties demanding greater insight into how the board functions, its role in strategy and oversight and its suitability as stewards of owners’ investment dollars. This surge in activism has put board governance under the microscope and required a change in approach from corporate management. The range of topics being discussed has increased and is dominated by the most fundamental of board responsibilities – executive compensation and corporate performance. Proxy access, environmental and social issues (CSR) and risk management are replacing the more structural issues as the most important matters for consideration.

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About the Author

As Managing Director of Corporate Governance at Rivel Research Group, Brendan Sheehan provides Rivel’s clients detailed insight into the minds of institutional investors. He works with the board and management to gain a sophisticated understanding of complex local and global governance issues and how they relate to voting and investment decisions.[/fusion_builder_column][/fusion_builder_row][/fusion_builder_container]

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