The events that unfolded as many companies held their 2020 annual shareholder meetings will have a significant impact on planning and engagement for 2021. COVID-19 left many U.S. companies scrambling to shift to virtual annual meetings while also addressing business disruption and a raft of related issues, including employee safety and well-being, financial performance, and supply-chain issues. Then, the death of George Floyd and subsequent civil unrest in response to systemic bias and racism amplified social justice issues that stakeholders expect business leaders to help address.
Timing is everything. While these events did not reflect shareholder sentiments and expectations in the proposals that were voted during the 2020 proxy season, companies will have to face them next proxy season. Consequently, companies should anticipate and address these issues now. Given the events of the first half of the year, boards may need to reassess which environmental, social, and governance issues are most critical for their companies and revisit how they communicate the company’s actions on those issues to shareholders and other stakeholders.
Shareholder proposal trends, our conversations with investors, and investors’ public statements suggest the upcoming proxy season will feature a heightened focus on human capital management, diversity and inclusion, health and safety, risk management, climate change, and political activity. Investors may also ask that progress on many of these issues be measured and disclosed.
Institutional investors are setting higher expectations of boards. The past is not prologue. Even if your company had little to no engagement previously, plan to proactively engage this proxy season. Directors should keep the following considerations in mind as they prepare to engage:
Going forward, companies and their boards should proactively communicate their journeys to investors and gain their confidence and trust by demonstrating effective management of these critical environmental and social issues.
This article originally appeared in the September/October 2020 issue of NACD Directorship magazine.
Some or all of the services described herein may not be permissible for KPMG audit clients and their affiliates or related entities.