Growing shareholder-director engagement

Global trend towards increased shareholder-director engagement. This is apparent in the US with the formation of the Shareholder-Director Exchange (SDX).

Shareholder-Director Exchange Protocol
Shareholder-Director Exchange, February 2014

We are seeing a global trend towards increased shareholder-director engagement. This is apparent in the US with the formation of the Shareholder-Director Exchange (SDX). The SDX is a working group of leading independent directors and institutional investor representatives that provides guidance to other investors and directors about shareholder-director engagement.

The SDX Working Group has developed the SDX Protocol – a practical framework for effective, mutually beneficial engagement between public company boards and institutional investors. The Protocol can be adapted by boards for engagement with other types of shareholders.

The Protocol addresses why, how and when public company directors and institutional investors should engage directly with each other (but acknowledges that company management has primary responsibility for investor relations). It draws attention to the value that both investors and directors can realise from direct engagement, including improved transparency and mutual understanding.

In July 2014, investor members of the SDX Working Group further called on directors to consider (in consultation with management) adopting a formal shareholder-director engagement policy. See the letter from investor members of the SDX to US company directors.

The considerations and approaches to shareholder-director engagement in the SDX Protocol may be useful for Australian directors and investors. Like in the US, the trend towards greater shareholder-director engagement in Australia is growing.

For additional suggestions on what boards and shareholder can do to facilitate effective engagement, please see the Global Network of Director Institutes’ perspective paper on Board-Shareholder Communications.

For information on engagement between shareholders and directors in Australia, please see Company Directors’"Institutional share voting and engagement report" (October 2011) download below: