07 November 2017 by Jo Randle
Companies need to work with hostile shareholders to address negative sentiment and turn it into brand advocacy
Hostile shareholders can exert an inflammatory influence on an otherwise successful annual general meeting (AGM). Bringing bad feeling to proceedings, their actions can steal the attention, usurping the chairman’s agenda and grabbing headlines in the process.
No matter how well-produced the event or how well-prepared the board, there is potential for it to come crashing down because of a vocal group.
For example, for a number of years, a large high-street retailer endeavoured to create an industry-leading AGM (produced by ourselves at Aspect).
A huge amount of work and attention was put in to create the best experience for shareholders and it was well attended, with over 2,000 shareholders and guests turning out.
However, there was a small group of vocal and antagonist shareholders; their comments and opinions voiced during the Q&A were reported in the press, affecting headlines and in turn driving the share price down.
“It is all too easy to dismiss this group of antagonists as a nuisance”
What seems to be a common theme – whether it be the case of the AGM above, or AGMs in any other sector – is that this group of vocal shareholders care passionately about the company they have come to see, but their comments and opinions are channelled in the wrong way.
It is all too easy to dismiss this group of antagonists as a nuisance. Instead they should be viewed as shareholders with valid concerns, because it is only with this mindset that the situation can be dealt with properly. Their feelings and beliefs are important to them and cannot be trivialised.
Certainly, dealing with the same questions year in year out can be draining. But they are not there just to make trouble; in the antagonist’s mind, their umbrage is valid.
Companies need to work with these embittered shareholders in order to fix negative shareholder sentiment and, instead, turn it into brand advocacy.
The AGM is an opportunity for the shareholder base to air their views and hold the company to account. They should be able to find resolution, no matter how highly their concerns score on the list of the company’s priorities.
One of the traditional approaches to dealing with hostile shareholders is to be aware and identify them at registration, in order to potentially ‘man mark’ them with a member of the AGM event team – or in some more extreme cases a security guard.
While this is a straightforward way of being seen to do as much as possible to manage the situation, in reality it creates additional tension for all involved.
It should not be a question of trying to limit their activities on the day; it’s about taking a genuine interest in what they have to say, providing a forum for them to air their views and making them feel they are important and taken seriously.
Most of the bad feeling comes from the fact they feel marginalised and without a voice, so they use the only means available to be heard – the AGM.
Instead, there are a number of techniques that can be adopted to help defuse shareholder negativity. Having the board meet with shareholders before the AGM is extremely effective.
Unfortunately, board members rarely have the time to interact with shareholders before the meeting due to other commitments and final AGM preparations.
Having key business leaders or knowledgeable staff attend and available to answer questions – perhaps as part of an exhibition or experts area – is a common and effective way of defusing some negative situations, but they are unlikely to mean a shareholder or a group of shareholders will not still ask their questions during the business of the meeting.
Using a question registration management system is a good way of identifying disgruntled shareholders.
Encouraging shareholders to register their questions in the foyer before going into the meeting identifies the shareholder and their topic so the board can be briefed in advance, minimising the negative impact.
Additionally, registering a question in advance provides the opportunity for the shareholder to be encouraged to go and speak to an expert about that topic outside of the AGM meeting and potentially have their question resolved prior to the meeting.
“Most of hostile shareholders’ bad feeling comes from the fact they feel marginalised and without a voice”
We have seen this practice work well as the shareholder is able to have an in-depth discussion about their issue or concerns with a senior expert in the business – they get the detailed information they need and the ‘air time’ to make them feel they have been taken seriously and listened to.
However, for some shareholders this still does not go far enough, as it is the board they really want to speak to and hold to account – so the hostility will still continue to make its way through to the meeting itself.
We have found the most successful strategy for defusing shareholder hostility is to invite vocal shareholders to meet with the chairman – and sometimes other board members or company executives – before the AGM. This usually takes place at specially-arranged shareholder forums a month beforehand at the company’s head office.
It is an informal way to hear the shareholders’ views and answer their topics more promptly. It also provides the chairman with an opportunity to form a relationship with the people concerned and gives the company a clear understanding of the more general issues on shareholders’ minds.
Of course, it also means that the company can be fully prepared to answer these topics clearly and succinctly at the AGM, thereby reducing the threat of antagonistic comments and potential hostility towards the chairman as far as possible.
Both parties have found these pre-AGM meetings to be extremely useful – shareholders feel valued, that they are being taken seriously and see their commitment to the company being rewarded.
By establishing a personal relationship with the chairman they are less inclined to take up valuable time during the meeting. For example, when the chairman cites the discussion during the AGM, it tells the shareholder that they have been heard, and that what they said is important and will be acted upon.
We have seen some clients take this a stage further and formalise this approach on an annual basis. This is done by running shareholder engagement programmes throughout the year. They are invited to attend a series of events, including visits to corporate sites, or meetings or lunches with board members.
Furthermore, this is tied in with a VIP experience at the AGM, which usually involves a dedicated area for them to meet before or after the meeting, perhaps with access to some of the board members, to encourage them to positively influence their shareholder network.
This builds a base for loyal shareholders and creates brand ambassadors – developing them as friends, rather than antagonists, to the business.