Chris Wightman, a partner and founder of CamberView Partners and formerly with Vanguard, recently shared his views with Labrador on investor-company relations, the effects of changes in ownership and shareholder activism.
Since CamberView’s founding in 2012, Chris Wightman says that the type, and frequency, of engagement between investors and companies has changed dramatically. While investors have maintained their focus on core shareholder issues like strong corporate governance, board practices and value creation, they are also interested in hearing how the board is overseeing sustainability risks and opportunities as well as how topics like executive compensation is linked to a company’s broader strategic direction.
Chris says a major shift in the investor landscape was, in large part, the result of strong growth of index funds. Index funds are now among the top holders in virtually all public companies globally. “This shift has changed the relationship between companies and their largest investors. The index funds at the top of shareholder registers take an increasingly active stewardship role in the companies in their funds. That’s reflected through proxy voting, engagement and more public positions and statements about the importance of good governance and sustainable business practices.”
Investor priorities take hold
The 2018 proxy season demonstrated how the priorities of the world’s biggest investors are driving the broader conversation. Investors, he says, are continuing to speak up through engagement and voting about everything from the direction of long-term corporate strategy to executive compensation to sustainability and diversity. “Increasingly, there is a built-in majority of investors who are willing to support shareholder proposals on topics like climate change risk and new disclosure on board composition,” he said.
Further, investors also appear willing to vote against compensation in ways that they haven’t before, as reflected by an uptick in companies failing on Say on Pay voting this year. “Low votes on compensation really drive home the point that companies need to improve how they communicate on investors’ priority issues,” says Chris. “Getting that right is often the difference between solid support for management’s proposals and potentially being on the wrong side of your investors and proxy advisors.”
Active activists season
He identifies shareholder activism as the other major event this year. “There has been an explosion in terms of the number of campaigns but also in their sophistication and success. Activism is not going away and it’s important for companies to understand their investors and recognize how they are viewed in the market well before an activist shows up at the door and takes control of the message.”
He emphasizes the importance of engaging with your investors throughout the year. “If your Say on Pay vote passes but isn’t that great, you really need to be out talking to your investors about your pay program and how it ties to the business. If your company is being targeted around disclosure, the path forward is through engagement.”
Chris says that companies have some significant opportunities to meet these changing expectations. “The most effective way to build relationships with your investors is to engage with them about how the company thinks strategically about the business, governance, compensation and sustainability and to have that discussion prior to a contentious issue appearing on the ballot. Today, it’s really incumbent upon directors and management teams to address these matters before investors bring them to the table before activists or proxy advisors fill the vacuum.”
Chris Wightman is a partner and founder of CamberView Partners. Chris advises clients on a range of issues including investor perspectives on executive compensation, sustainability, and shareholder activism.
CamberView is an advisory firm set up to provide independent investor-led advice to management teams and boards of public companies. The firm was started in 2012 by the former heads of governance at some of the world’s largest asset managers to help bring an investor perspective to the advisor space.
Interview by Molly Doran