11 Mar 2019

Issues for companies in 2019

Morrow Sodali

2019 will be another year of transformative change in relations between companies and shareholders.  Here is a list of ten trends that are altering both the expectations of shareholders and the ways that companies are viewed in the marketplace.  During the next several weeks we will discuss how companies can respond effectively to each of these trends.

  1. Board Primacy – After decades of governance reform, the board of directors now has clearly defined responsibilities for which institutional investors hold them accountable, creating a need for greater transparency about board decisions and more direct participation by board members in communications with shareholders.  

  2. Compensation – The perennial governance issue, compensation is viewed by shareholders as a window into the boardroom and even more deeply into the character, values and sustainability of the business enterprise.

  3. Stewardship Principles – Institutional investors are now exercising fiduciary care in their oversight of portfolio companies and their proxy voting decisions, increasing the importance of the annual meeting and the impact of proxy voting.

  4. Corporate Reporting – Institutional investors are looking more deeply into the inner workings of companies and pushing for information that goes well beyond the traditional disclosure framework of quarterly reports and 10Ks.

  5. Engagement – In addition to traditional Investor Relations road shows, companies and boards are now expected to conduct governance road shows that reach out to institutional stewardship teams as well as portfolio managers.

  6. Activism - Shareholder activism is a mainstay, narrowing its attention on companies with poor performance, suboptimal governance, or unclear business strategy and giving rise to an increased need for greater transparency about business strategy, financial performance and corporate governance.  

  7. ESG – No longer viewed as “soft” or “moral” issues, environmental, social and governance practices are now defined in terms of financial risk and long-term sustainable performance.

  8. Regulation and Legislation – The SEC will likely begin a process of restructuring the U.S. proxy system and increasing oversight of proxy advisory firms.

  9. Technology, Social Media and Retail Shareholders – Companies face new challenges and risks in the form of robo-brokers, millennials investing (and potentially voting) through digital devices, high-frequency trading, cybersecurity concerns and social media commentary on corporate behavior.

  10. Integrated Reporting – the International Integrated Reporting Council (IIRC), a global movement attempting to transform both how companies think and communicate, is beginning to attract the attention U.S. companies and investors.  

Topics

Issues for companies in 2019 Global