The night before a companys annual shareholder meeting probably isnt the best time for executives to start getting ready for potential questions from investors. When shareholders are going to be stepping up to the microphone, a little preparation goes a long way.
Have no fearPricewaterhouseCoopers LLP is here for you. For years, PwC has been providing executive management teams with a list of possible shareholder queries so they know what to expect. As we survey the economy, news headlines, and generally whats happening in the world, were trying to draw managements attention to what could get asked, says Catherine Bromilow, a partner at PwCs Center for Board Governance, and the author of Audit Committee EffectivenessWhat Works Best and Board EffectivenessWhat Works Best.
Recently, CorpCounsel.com spoke with Bromilow about the top seven topics on the minds of investors this year. Below is a list of what company execs should know about what shareholders want to know.
The Top 7 Topics for Shareholdersand the Questions They May Ask
1. Capitalizing on the Economic Recovery
From how economic turmoil in Europe will impact U.S. companies to the implications of U.S. tax policy for the company books, long-term shareholders in particular want to understand how management plans to deal with uncertainties in the economy.
Questions to Expect: How is the recovery changing the companys strategy? What changes are being made in the companys operation to take advantage of the recovering economy? How is the different pace of economic recovery throughout the world being used to the companys advantage?
2. Handling a Crisis
This boils down to whether companies have crisis management plans in place that will allow them to react nimbly, and in a coordinated way, to a crisis. Bromilow also emphasizes the importance of leveraging social media so that companies can stay on top of a viral story and deliver their own message effectively.
Questions to Expect: Are crisis management plans regularly reviewed by the board? Does management revise the crisis plans to reflect lessons learned from the crises of other companies? How does the board get comfortable with the companys overall appetite for risk? Is social media a consideration in any crisis management plan?
3. Political Contributions
Between the impact of the U.S. Supreme Courts 2010 Citizens United decision on corporate political spending and this years presidential politicking, you dont have to look far (or wide) to know a companys political giving is a hot topic.
Questions to Expect: Aside from administrative support of its corporate political action committee (PAC), does the company contribute money to organizations that seek to influence the political process? Does it contribute to trade associations and other tax-exempt organizations that use the money for political purposes? Does the company request a report from trade associations and tax-exempt organizations on the use of the funds it contributes for political purposes?
4. Executive Compensation
Not only is this the second year of say-on-pay votes, but Dodd-Frank calls for rules that would require companies to disclose how executive compensation corresponds with company performancewhich is sure to keep attention trained on this area, according to Bromilow.
Questions to Expect: How is executive compensation determined? To what extent was company performance, compared against both its business plan and performance of competitors, considered in setting executive compensation?
5. Technology
Executives need to be able to say both how the company is leveraging the benefits of technology and how its responding to tech-based threats. When it comes to the use of social media by younger employees, executives should be prepared to speak to how those employees are being trained and informed by company policyespecially when it comes to safeguarding confidential information.
Questions to Expect: What is the companys strategy for cloud computing and plan for the future? Are social media outlets monitored for any grass-roots campaign that could put the company at risk? Does the company have policies in place regarding the use of social media by itself and employees?
6. Whistleblower Reports
As CorpCounsel.com readers are undoubtedly aware, the Securities and Exchange Commissions whistleblower rules that went into effect last year have been the source of much hand wringing at companies. With that in mind, setting the tone at the top to encourage internal reporting is crucial. Its really important within companies to encourage employees to use the companys whistleblower hotlineeven if they do choose to go to the SEC, says Bromilow. Its also very important that complaints to the companys hotline are investigated properly by people who are independent of the complaint
Questions to Expect: Has the SEC contacted the company about whistleblower reports it may have received directly? Have investigations been done by independent competent parties?
7. Board Qualifications
Whos serving on the board matters to shareholders. Lets take, for example, how important technology is as an opportunity and as a risk factor. Then consider, says Bromilow, the fact that there is, relatively speaking, on most boards very little technology expertise among directors. Naturally, thats an area where shareholders might have concerns about a disconnect, she says.
Questions to Expect: Do the current members of the board have the qualifications and experience to help guide the company into the future? What skills and attributes does the board need in its members? Why arent long-tenured board members stepping down so new board members may be brought in?