Tips for Dealing with Shareholder Activism

Shareholder activism and dissent, such as the climate activists' protest at Blackrock's meeting in April, often make the news, but it's important to note that these disruptions are not very common.

In today's landscape, shareholders, especially retail investors, are more engaged and eager to make their voices heard during the most significant shareholder events of the year. While disruption can occur, businesses must be ready to handle it effectively without stifling the voices of their shareholders. Here are some key tips to deal with shareholder activism:

Distinguish between disruption and debate:
It's essential to differentiate between disruptive behaviour, such as activist investors reworking songs to disrupt shareholder meetings, and engaged retail investors who want to discuss their concerns regarding ESG or executive pay constructively. Create clear criteria for distinguishing disruptive behaviour from constructive dialogue. Actively encourage open discussion while simultaneously monitoring and addressing disruptions. This approach ensures that you treat each investor as an individual rather than applying a one-size-fits-all approach.

Establish a code of conduct:
To prevent inappropriate behaviour, implement a code of conduct before the Annual General Meeting (AGM). Clearly state that sexist, racist, or disruptive comments won't be tolerated, and offenders will be removed. Setting a code of conduct creates a respectful atmosphere for debates and discussions.

Foster healthy debate:
Q&A sessions have become crucial in shareholder meetings, providing a way for shareholders to speak up. Lumi’s Q&A feature let's stakeholders ask questions, either virtually or in writing, and share their thoughts. This helps businesses update attendees on the company's status and engage in open conversations on important topics while maintaining control of the discussion. Don't hesitate to use Q&A and promote debate at your next meeting.

Engage throughout the year:
Address shareholder concerns throughout the year. Invest in investor relations events and maintain regular contact with key investor groups. This approach enhances transparency and builds personal connections with board members. Instead of separating investor relations and corporate governance, adopt a holistic approach to AGM planning and stakeholder relations. Create a "hybrid calendar" of events to strengthen communication between boards and investors, effectively preventing issues from escalating.

Disruptive incidents are relatively uncommon among shareholders. It’s important to prioritise constructive engagement, providing shareholders with a meaningful say in company matters. This approach fosters shareholder democracy, benefiting both companies and investors.