The Governance Institute of Australia’s new shareholder engagement guidelines help clarify, for both companies and institutional investors, appropriate communications and other procedures and processes to ensure the efficacy of engagement, and a genuine understanding, between them.  Companies and institutional investors should familiarise themselves with the new guidelines which are intended primarily for ASX 200 companies and institutional investors in respect of their ASX 200 investee companies, but are also promoted as good governance in relation to smaller companies.

The Governance Institute of Australia’s Improving engagement between ASX-listed companies and their institutional investors: Principles and Guidelines (Principles and Guidelines) aim to improve the efficacy of engagement between companies and their institutional investors.

The Principles and Guidelines provide the following 6 Principles of Engagement:

  • Principle 1:  It is good practice for institutional investors to explain how they vote and engage with companies; for companies to explain how they engage with institutional investors; and for each of them to keep abreast of this information;
  • Principle 2:  It is good practice for institutional investors and proxy advisers to explain their voting and other governance guidelines; how they apply them to voting; when they can engage; and for companies to keep abreast of this information;
  • Principle 3:  It is good practice for companies to know their significant institutional investors; for institutional investors to know their significant investee companies; and for companies to know and engage with intermediaries;
  • Principle 4:  It is good practice for companies and institutional investors to have a regular, efficient and meaningful engagement program;
  • Principle 5:  It is good practice for companies and institutional investors to incorporate environmental, social and governance issues in engagement; and
  • Principle 6:  It is good practice for companies and institutional investors to take advantage of technology to facilitate disclosure and engagement.

They also provide:

  • a set of practical Guidelines on how to implement each Principle; and
  • commentary providing further context and explanation to assist users.

The Principles and Guidelines are intended primarily for ASX 200 companies and institutional investors in respect of their ASX 200 investee companies, but recognise that how each company applies them will depend on its circumstances, size and particular issues.  While the Principles and Guidelines recognise that engagement by and with smaller companies is complex, it is promoted as good governance for smaller companies to endeavour to implement them, and for institutional investors to engage with smaller companies that do so.

See also media release dated 28 July 2014.