Excerpt from report:

Shareholder Engagement: Emergence of Engagement Protocols

Shareholder engagement again took center stage in 2014. In April 2014, ISS published an update to its 2011 study, “Evolving Relationship Between Shareholders, Directors and Executives,” that suggests overall engagement levels are up — in terms of both the percentage of companies undertaking engagement and the frequency of their engagement. Study findings based on ISS’s survey conducted in late 2013 indicate that only 22% of issuers
and 19% of investors did not initiate any engagements that year. Both issuers and investors are paying greater attention and devoting increased resources to engagement, as regulatory and corporate governance trends have encouraged such dialogue. Evolving proxy advisory firms’ and institutional investors’ policy guidelines along with activists’ approaches have also placed greater emphasis on shareholder engagement.

Two new engagement protocols – Shareholder-Director Exchange (SDX) and The Conference Board Governance Center Task Force on Corporate/Investor Engagement – emerged in 2014. The SDX protocol provides a 10-point guide for public company boards and shareholders that determines when shareholder and director engagement is appropriate and how to make these engagements valuable and effective. Earlier this year, the SDX working group sent a letter to the lead directors and corporate secretaries of Russell 1000 companies, asking them to consider formally adopting a policy providing for shareholder-director engagement, whether pursuant to the SDX protocol or otherwise. The Conference Board Governance Center’s guidelines, released soon after the SDX protocol, similarly advocates for dialogue between boards and investors in special circumstances. But unlike the SDX protocol, the Conference Board guidelines do not regard it as a routine method of engagement for most companies and investors.