HR Policy Association’s Center on Executive Compensation hosted a recent webinar exploring proven techniques to successfully negotiate shareholder proposals.
Shareholder proposals are here to stay. This proxy season, a record 929 shareholder proposals were submitted, according to Mr. Walter, who also discussed the history of the proposal process and current trends. Although overall support for these remains low, the time and resources that HR and Legal teams spend on addressing a proposal and engaging with the shareholder on the topic is high. Businesses now view these proposals as “the norm” and have refined their internal processes to reduce the likelihood of going to a vote.
Understand the true ask. Ms. Sharma discussed that proposals are often written in a way that makes it hard to interpret what the proponent wants; it may be something unrelated to the proposal. She recommended thorough due diligence to help develop your response strategy.
- Coordinate with the legal team to understand the true nature of the investor’s request and the landscape of the proposal.
- How common is this topic within the industry?
- How have peers responded?
- Do the proxy advisors generally support this type of proposal?
- How common is this topic within the industry?
Ms. Stadelman described a similar approach and shared how her team uses data to drive negotiation strategy. This includes examining the likelihood of obtaining an SEC no-action letter (allowing the company to exclude the proposal from their proxy statement) and considering the track record of the investor in withdrawing proposals. She also described how to project voting support and create a detailed engagement plan to address investor concerns.
Internal alignment is key. Both panelists emphasized the importance of getting subject matter experts involved early in the process to gain alignment, educate all parties and get to a common language before preparing to engage with the proponent.
- Assess the current gap between what the company is already doing and what is being proposed to get a sense of what additional commitments the company may be comfortable making.
Listening is the name of the game. The purpose of the initial engagement meeting should be to listen carefully to what is important to the proponent, better understand their motivations and identify areas of common ground. It is also a great opportunity to educate shareholders on the company’s philosophy and point to existing disclosures.
Keep at it. All the panelists agreed that engagement is an iterative process to get to a withdrawal of the proposal and even those that come in the 11th hour are a “win.”
