ISS/IRRC study: Shareholder engagement at all-time high
Barry B. Burr
April 10, 2014 4:28 pm | Updated 4:31 pm
The level of engagement between institutional investors and U.S.
companies has reached an all-time high and produced high degrees of
success, ranging from constructive dialogues to changes in corporate
policies, according to a study released Thursday prepared by
Institutional Shareholder Services and commissioned by the Investor
Responsibility Research Center Institute.
The study — Defining Engagement: An Update on the Evolving
Relationship Between Shareholders, Directors, and Executives — found
nearly half of investors and companies attributed say on pay — the
requirement that U.S. companies conduct a non-binding shareholder vote
to ratify compensation of the CEO and other top executives — as the
cause for increased engagement since a 2011 study.
Among investors, 55% reported more than 10 engagements, up from 31% in
the earlier study. Among companies, 47% reported initiating more than
10 engagements with investors, up from 30% three years ago.
The study defines engagement as direct contact between a shareholder
and a company.
Aside from compensation, investors pointed to an increase in proxy
fights and “vote no” campaigns on directors or social, environmental
and governance issues as reasons for engagement. Beyond pay issues,
companies cited financial results, mergers or industry-specific
In measuring success, 73% of responding investors cited companies
agreeing to provide additional disclosure or a change in policies or
practices. Almost two-thirds of investors defined success as a
constructive dialogue. Among corporate respondents, 93% cited
constructive “dialogue on specific issues of concern was sufficient to
make an engagement successful; while 69% of issuers said that the
establishment of a dialogue, even if contentious, was sufficient to
constitute success,” the study said.
The 48-page study included an online survey open from September to
December 2013. The survey generated responses from 133 U.S.-listed
companies with a combined market capitalization of $2.3 trillion and
82 institutional investors with a combined $17 trillion in assets
under management. Investors included public employee pension funds,
multiemployer pension funds, money management firms, hedge funds and
mutual fund firms. The survey was followed by in-depth interviews with
20 issuers and 25 investors conducted from November 2013 to February
2014, the report said.
The study is available on the IRRC
— Contact Barry B. Burr at