Engaging with Shareholders
by Jennifer Stafford
Publisher: Australian Institute of Company Directors (2011)
Reviewed by: Julie Garland McLellan*
David Gonski AO, once remarked "An annual general meeting is not an engagement, it is more like a drunken one night stand with a room full of strangers'. He is a respected Australian governance authority and practising director, and although I have never experienced such a night I can wholeheartedly agree with his comment. It takes more than one large meeting a year to build a relationship of trust and respect between the board and the people who own the company it governs. This book sets out many of the missing ingredients for successful shareholder engagement and also provides good guidance for showing how the AGM can add value to this relationship.
The foreword to the book is written by John Ralph, another of Australia's leading governance authorities. He helpfully states that shareholders "are a diverse group with conflicting objectives." These conflicts are a principle source of confusion for boards and require directors to have a good grasp of the business model and its operation in changing - if not wildly turbulent - environments so as to be able to act in the best interests of the company which ultimately benefits shareholders, staff, customers, suppliers and society as a whole. The statement that few directors equate the best interests of the company with the short term financial interests of the shareholders is contextualised with contemporary research and legislation.
Different shareholder types (institutional, retail, short-long term, etc.) are discussed and ideas for engagement are provided that may meet the needs of each group on your register. The different roles of shareholders are analysed and several hints for improving shareholders' effectiveness through proper communication are given although these may be hard to implement in practice. The discussion of proxy voting processes for institutional shareholders is particularly clear and useful.
The book is based upon research that predates the current eminence of social media as a mechanism for engagement. However it does talk about electronic and internet-based communications. Direct voting is mentioned but the subject undeveloped as it was relatively new when the book was written.
The section on the AGM is businesslike with good directions for voting, polling and managing the procedural issues. This section could be expanded into a book on its own and although the brevity is refreshing it does leave a few wrinkles un-ironed. In particular the discussion about shareholders at the meeting feeling disenfranchised when the Chairman relies on institutional shareholders' proxy votes to support the motion could have been extended into a consideration of how to deal with the issue rather than just naming it and moving on.
As always with this publisher; the book is well produced and a pleasure to read. The glossy paper and grey on blue print in some diagrams will be an issue when reading in poor light but the clarity and brevity are commendable and the book deserves a space on the shelf of every listed company director.
'Engaging with Shareholders' is available from the publisher at https://www.companydirectors.com.au/Director-Resource-Centre/Publications/Books/Publication15.
* Julie Garland McLellan is a professional non-executive director, board and governance consultant and mentor. She is the author of "Presenting to Boards", "Dilemmas, Dilemmas: Practical Case Studies for Company Directors", "The Director's Dilemma", "All Above Board: Great Governance for the Government Sector" and numerous articles on corporate strategy and governance.