Shareholder Engagement Inside and Outside the Shareholder Meeting

Important capital market, regulatory and technological developments have created greater investor appetite and capacity for engagement with public companies. This development is highlighted by investors’ current efforts to engage with companies in various markets on material environmental, social and governance (‘ESG’) issues, such as climate change. Our paper explores the key engagement mechanisms and techniques employed today by public company shareholders. The paper’s analysis yields several important insights. First, contemporary shareholder-company engagement is a multi-dimensional and evolving phenomenon. Shareholders use, to varying degrees, a wide range of engagement techniques. These include the shareholder meeting, behind-the-scenes interactions, public campaigns, and online technologies such as discussion boards and messaging apps. The latter technologies are particularly favoured by younger retail investors and have been used with remarkable effect to marshal the governance influence of such investors in recent high-profile cases. Second, shareholders often mix and match different engagement techniques in a synergistic manner to leverage their governance influence. Third, shareholders increasingly undertake their engagement activities collectively, highlighting the growing capacity of public company shareholders to overcome traditional collective action challenges. Finally, despite the engagement alternatives available to shareholders, the shareholder meeting remains an important engagement mechanism. Its formal, in-person and public nature sets it apart from other mechanisms and gives it unique potential as a forum for scrutiny and accountability. Although low attendance rates indicate that shareholders do not routinely utilise the meeting to maximum effect, we argue that the meeting is better conceived as having contingent significance. This is because its potential as an accountability mechanism may prove critical when a company experiences serious governance problems. These insights have important implications for understanding — and regulating — the governance of public companies. In particular, the multidimensional and evolving nature of contemporary shareholder-company engagement practices means that the processes which shape corporate decisions are becoming more diffuse and potentially less transparent. Ensuring accountability is a more complex issue in these circumstances and requires a careful focus on the various channels of influence-wielding