Over the Past 30+ Years – And Advice for Effectively Engaging Now – From Two Pioneers of Good Corporate Governance
When we announced the theme for this year’s Special Supplement to the OPTIMIZER—our thirtieth edition—one of our advertisers noted that “thirty years ago, the idea of ‘engaging with investors’ was virtually unheard of.” He was right! Back then, activist investors—and especially shareholder proponents—were often treated with outright disdain by corporate officers. Many executives went out of their way to make such investors feel unwelcome at annual general meetings (AGMs) and “shut them down” as quickly as possible.
Two of the original pioneers of engaging with investors immediately came to mind, starting with the inimitable Peggy Foran, who, when serving on the Advisory Board for the NY Chapter of the Society of Corporate Secretaries in the early 1990s, hosted quarterly meetings at Pfizer’s headquarters. She invited both institutional and activist investors to attend these meetings, participate in discussions, ask questions, and mingle with other attendees. It was at one of these events that we realized activist investors were not adversaries but intelligent, reasonable, and, in fact, very nice people—just like us.
Peggy and her boss at the time, Terry Gallagher, were the first to hold the title of “Corporate Governance Officers,” and Peggy went to even greater lengths to engage effectively with institutional investors—who, by the way, were steadily gaining more of the voting power, year after year. As you’ll see from her recollections below, it was not always an easy path.
Margaret “Peggy” Foran
Chief Corporate Governance Officer, Senior Vice President, and Corporate Secretary, Prudential Financial
I cannot believe that in 2007, when I was the Chief Governance Officer at Pfizer, famed attorney Marty Lipton (Wachtell, Lipton, Rosen & Katz) called the Pfizer action of inviting their top 30 shareholders to meet with the Board leaders ‘Governance Run Amok’ in a memo sent to hundreds of his clients. That Pfizer shareholder meeting went exceptionally well. More companies started meeting with their shareholders, and they began to include directors in those meetings. Engagement became a major focus and part of governance best practices.
Today, at Prudential, our board is actively involved in shareholder engagement, and every year we speak with over the majority of our large shareholders. The Board looks forward to this engagement, but in addition to these meetings, we engage with all our shareholders through yearly videos, plain-English proxy statements that answer questions shareholders have asked, and highlight important issues in blue boxes.
Our board members also attend meetings where our investors attend, particularly CII meetings, and have one-on-one conversations with investors. Our investors have given us positive feedback on this practice, and our Board members feel this is a great way to hear, firsthand, what is on our investors’ minds.”“In addition to institutional investors, we communicate with registered shareholders via plain-English documents, videos, user-friendly websites, and our ‘Tote-for-Vote’ program, which has been running for 12 years. This program rewards shareholders with an environmentally friendly tote bag—or a tree planted in their name—if they vote. This has been very effective in increasing our registered vote and engaging more shareholders.
Timothy Smith
Senior Policy Advisor, ICCR
I appreciate the opportunity to add some personal reflections to the theme ‘Effectively Engaging Your Shareholders.’ I have been involved in engaging companies on corporate responsibility issues since 1971. That year, a religious investor filed the first-ever shareholder resolution, sponsored by the Episcopal Church, to General Motors on apartheid in South Africa. That resolution opened up a half-century of dialogues between investors and management on issues ranging from human rights to governance.
I was one of the early staff members of the Interfaith Center on Corporate Responsibility (ICCR) coordinating shareholder advocacy. From 1971 to 2000, I worked there and continued focusing on shareholder advocacy at Boston Trust Walden. I retired in 2022 but returned as Senior Policy Advisor to continue this work.
Marty Lipton called the Pfizer action of inviting their top 30 shareholders to meet with the Board leaders ‘Governance Run Amok’ in a memo sent to hundreds of his clients.
The Early Days of Engagement
In the 1970s, a new era emerged for both investors and companies when institutions began to utilize their right to file shareholder resolutions. There was no roadmap for management on how to respond as these shareholders began using this novel approach. Corporate Secretaries, General Counsels, and CEOs were often perplexed about how to proceed, and many church officials were inexperienced in petitioning business. Some saw resolutions as confrontational weapons, while others viewed them as opportunities for discussion and persuasion.
Today, the landscape has changed dramatically, with investors advocating for a wide range of issues, from environmental concerns to human rights and good governance. Shareholder activism has grown significantly, and there are now many more companies embracing sustainability and social responsibility. However, there is still a wide range of reactions from management—some view advocacy as hostile intervention, while others recognize the value of constructive engagement.
The Key Elements of a Constructive Engagement
- Understand the Concern and the Investor
Who is raising the concern, and what is their track record? - Is the Concern Broad or Specific?
Is it a common concern across many companies or specific to your firm due to a controversy? - Past Engagement Attempts
Has the investor tried to engage with your company previously but was ignored? - History of Productive Engagement
Does the investor have a history of reaching agreements with companies, or are they engaging purely for ideological purposes? - Has the Issue Been Addressed?
Is it something your company is already working on? If so, can you inform the investor about your actions? - Is There Middle Ground?
Is there a possibility of finding common ground or at least initiating meaningful dialogue? - Build Trust
Is it worth having a conversation to build mutual understanding and trust?
This Advocacy is Making a Difference
Over the last five decades, shareholder resolutions and dialogues have led to numerous improvements in corporate governance and company behavior. Examples of better governance, expanded disclosure, and modernized policies abound. Even if a resolution does not align perfectly with your company’s needs, a significant vote in favor (e.g., 20% or 40%) shows that a substantial portion of shareholders believe the proposal has merit.
For instance, this year, several companies received resolutions asking for expanded reporting on lobbying expenditures. Despite some companies seeking to have the resolutions omitted through No-Action letters to the SEC, many still reached out to engage in dialogue, hoping to find common ground and avoid a repeat of the issue in the following year.
Summary
Many companies now recognize the importance of sustainability and good governance. Increasingly, they understand that engaging constructively with their investors—large and small—is the right course of action. Shareholder advocacy continues to drive meaningful change in the corporate world, and those who fail to engage risk missing out on valuable feedback that can help protect and grow their business.
Additional Resources:
ICCR/SRG Statement on Shareholder Rights and Corporate Governance
Shareholder Engagement on ICCR Website
Catalyzing Corporate Change: Impacts of Shareholder Advocacy
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