ICD Publishes Guidance for Director-Shareholder Engagement

Many boards today realize that proactive engagement between directors and shareholders can address shareholder concerns which, if ignored, can manifest themselves in undesirable ways such as negative votes on “say on pay” resolutions, withheld votes for directors, proxy contests or other forms of shareholder activism.

The Institute of Corporate Directors (“ICD”) has now published “ICD Guidance for Director-Shareholder Engagement” (the “Guidelines”) to assist boards with shareholder engagement processes and procedures.

The ICD Guidelines are intended to be flexible and are meant to be tailored to a company's individual circumstances. The ICD Guidelines are based on six factors discussed below:


The ICD recommends that management should inform the board about the company’s most significant shareholders, including details such as:

  • the investor’s strategy, philosophy, track record and, to the extent known, the cost basis for its investment;
  • the investor’s percentage holding of the company and whether the investor has been adding to or reducing its position;
  • the structure and hierarchy behind the investor’s decision-making process;
  • how the investor votes (e.g., does it always follow the recommendations of a proxy advisory firm?);
  • the percentage of the investor’s portfolio that the company comprises; and
  • any and all material policy restrictions under which the investor operates.

The Guidelines also recommend that management should regularly report to the board on the aggregate short position in the company’s shares.


The ICD believes that boards that adhere to the Guidelines will know how management is regarded, how shareholders and the market view the company’s strategic direction and other important information.


The ICD recommends that the board should keep track of its significant shareholders and make time each year to meet with them.

The Guidelines recommend that the board identify:

  • the circumstances in which it will engage with shareholders;
  • the criteria for identifying shareholders with which it will engage; and
  • the frequency of the engagement.

In determining the shareholders it should engage with, the board should consider factors such as the size, make-up and breadth of its shareholder base, as well as the size of the company’s business and industry-related factors.


Prior to meeting with investors, the ICD recommends that a clear agenda should be set. Appropriate areas for directors to discuss include:

  • board oversight of strategy;
  • corporate mission and goals;
  • executive compensation;
  • succession planning and board composition;
  • board oversight of risk, accounting and auditing and internal controls; and
  • board decision-making process.

Topics relating to operational matters or financial performance should be left to management as management is best able to speak and respond to such matters and the risk of selective disclosure is higher. However, if investors share views on operational matters or financial performance the ICD recommends that directors listen to such views and share this information with the board and management.

In advance of any meeting with shareholders, the company should develop a clear and consistent disclosure policy to avoid any selective disclosure of material non-public information. Directors must also be aware of the limits on communication under proxy solicitation rules which prohibit communications under circumstances reasonably calculated to result in the giving, withholding or revocation of a proxy for any matter to be voted upon at a shareholder meeting.


Meetings with shareholders as part of any shareholder engagement program should be attended by the Chair of the board and at least one other independent director. It may be appropriate for the other present director to be a committee chair, depending on the topics to be discussed. On the investors’ side, the meeting may be with an individual or a group. In the case of an institutional investor, it is wise to have key decision makers from both portfolio management and governance teams who regularly attend these meetings for the sake of consistency.

It is important that directors are prepared and briefed before any meeting with shareholders. Prior to any meeting, the corporate secretary, investor relations personnel or other company personnel should inform the directors and provide briefing materials in respect of the relevant information about the investors, including potential hot button topics that may be brought up by the investor.


The ICD Guidelines recommend that directors attending shareholder engagement meetings share the results of these meetings with the rest of the board for the board to consider and reflect upon, either on an annual basis or more frequently. Having the directors report to the board on the information shared in these meetings allows the board to consider the questions it should be asking management based on feedback and input from the company’s most significant shareholders.

The Chair of the board should also maintain regular dialogue with the CEO of the company regarding issues raised by shareholders in the shareholder engagement meetings.

For the full text of the ICD Guidelines, see http://www.icd.ca/getmedia/b2bf5cc8-324d-4b5c-842f-1af40026fe5b/ICD_Engagement_Paper_EN.pdf.aspx


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