ARTICLE 24 Nov 2023

Initiating a Shareholder Engagement Program

Five essential components to consider before launching an engagement program.

Shareholder Engagement (1)

Public companies must navigate a difficult landscape when it comes to understanding their shareholders’ expectations on environmental, social, and governance (“ESG”) topics. Most institutional investors have their own approach and define specific areas of focus, creating a large panel of expectations to navigate for companies. In this context, maintaining an open and constructive relationship with one’s shareholders is paramount in maintaining trust as well as understanding as to what to prioritize. 

While in future articles we will go in-depth on how to structure effective engagements with shareholders, this article provides the five basic things to consider before launching an engagement program to make them as efficient and effective as possible.

1. Objectives of the Engagement 

This is the most important step as a lot of companies still engage for the sake of engaging with investors without having a specific agenda (apart from lobbying for a shareholder vote). Before initiating an engagement program, it is important for companies to understand what they would want to achieve from this exercise – is it to secure votes at an upcoming general meeting? is it to get feedback on the company’s governance and sustainability practices? Is it just to check-in with the investor to ensure that they remain interested in the company’s strategy?

Having these objective(s) clear from the beginning will allow companies to tailor their engagement program to increase their “Return on Engagement”, a term coined by AQTION’s parent company, SquareWell. Every interaction should matter, and lead to an outcome. 

2. Which Investor to Target and Prioritize

Companies should have a clear understanding of the key characteristics of their shareholder base to determine which investors they should prioritize depending on the topics of focus. This includes, but is not limited to, how they are organised internally to discuss “ESG” topics, their receptivity to activists, and what their expectations on specific topics are. For example, a company should prioritize engaging with Pictet Asset Management over Charles Schwab Asset Management (“CSAM”) to discuss climate issues, even if CSAM is a larger holder.  

Companies need to remember, investors are not a homogenous group. AQTION allows its users to prioritize their shareholders based on their objectives from an engagement program. 

3. When to Engage

Depending on the objectives of the engagement, an engagement program may be either off-season or during peak season (these seasons will vary depending on the jurisdiction of the company). If the objectives of the engagement is to build a long-term relationship with the company and discuss high-level strategic issues, it is recommended that such engagements take place in the off-season to ensure that investors have more time to engage and prepare. If looking to secure a favourable vote ahead of a general meeting, then it is best to wait until meeting materials are published so that the investors have all the information available to give a more informed view. This type of engagement, however, is very transactional and will likely do little for the company to build a meaningful relationship with the investor.

4. Who Should Participate from the Company? Any Board member(s)?

Identifying the participants from the company is important to ensure that specific topical questions can be answered right away. For example, if discussing sustainability matters, having someone from  the sustainability department would be handy for engagements to ensure detailed questions get immediate responses. Depending on the objectives of the engagement, as well as the relevance of the investor, having representation from the top echelons of the company (C-suite, Board members) also demonstrates a commitment to the engagement process and underscores the significance placed on shareholder relations. Board members specifically play a pivotal role in building trust with investors, especially in high-stake situations.  

5. What Format Should the Roadshow Be (Hybrid, Physical, Virtual)?

The format should align with the preferences and constraints of the target audience while considering the approach of peers and the culture of the company (a technology firm may benefit from a purely virtual roadshow). Virtual roadshows can broaden accessibility, overcoming geographical barriers, while physical engagements may enhance the personal connection and encourage a more transparent discussion. Hybrid formats offer flexibility, allowing participants to engage in a manner that suits their preferences, with higher priority targets encouraged to engage in-person. 


Authored by: Harri Johnson, Project Manager at SquareWell Partners.