DealLawyers.com Blog

The SEC’s Division of Corporation Finance threw a bit of a monkey wrench into this year’s proxy season when it issued new and revised CDIs that narrowed the scope of investor engagements that could be undertaken without investors risking their eligibility to use Schedule 13G.  Many investors responded to Corp Fin’s guidance by either pausing engagements with the companies in which they invest or by adopting a more conservative approach to those engagements, and it’s fair to say that their approach is continuing to evolve.

A recent publication by H/Advisors Abernathy offers some suggestions for boards and management teams on how to respond to this evolving environment. Here are some of the firm’s recommendations:

– Use offseason to deepen or refresh investor understanding of governance, valuation and growth strategies. Engaging with investors now can help uncover concerns about corporate governance and other matters ahead of the next proxy season and enable companies to incorporate feedback from conversations into their proxy statement and related disclosures. These conversations also can serve to strengthen relationships with investors and build trust, which can be critical to garnering support in the event of an activist campaign. Additionally, regular investor engagement in the offseason helps you stay on top of new vulnerabilities and concerns and mitigate risks in advance.

– Review and enhance the proxy. A company’s proxy statement continues to be the most effective tool to communicate with investors. Conduct a thorough review of the disclosure in light of changing engagement regulations to ensure the proxy can truly stand on its own as an annual investor narrative vehicle. Elevate the content to contain bigger picture themes, as the upfront letter, director descriptions and compensation sections will carry greater weight in this environment. The aesthetic matters too, and a refreshed proxy design can help bring the story to life.

– Build an owned, outbound communications pipeline. In an era where issuers may not be able to rely on learnings from engagement with investors, it is even more important for companies to execute an investor-focused campaign of outbound communications. Build your IR website into an investor-focused news hub, with “owned” content and news flow designed to help manage investor perception and control your narrative. Execute a more assertive, yet disciplined, campaign of media interviews, appearances and coverage to amplify your company’s results, track record and differentiators.

The article also recommends developing a customized digital content strategy to help reach investors quickly and identifying – and appropriately preparing – members of the board who are effective communicators to respond to particularly difficult situations.

– John Jenkins