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Nov 18, 2015

Investors and companies diverge on strategy, says CMi2i

Sixty-three percent of investors expect to increase engagement in 2016

Investors and companies are both placing greater emphasis on corporate governance, but are increasingly diverging on the areas of governance they focus on, according to a study by advisory firm CMi2i Proxy.

The survey reveals a ‘significant and growing divergence between the areas of corporate governance on which investors seek to focus and those that are considered important by companies’, with investors placing much greater importance on matters of security, strategy and engagement, CMi2i says in a press release.

Eighty-eight percent of the investors surveyed, who manage a combined $10.4 tn in assets, see risk management as a critical area of focus, compared with 29 percent of companies that see it as a topic worthy of engagement with investors, the research shows. Unsurprisingly, 81 percent of respondents say risk management will affect the way they vote in the coming proxy season.

Within the risk management area, 38 percent of investors cite cyber-security as the crucial topic of the upcoming proxy season, while another 38 percent cite social and environmental issues. A quarter of respondents name internal controls while another 25 percent cite succession planning. Strategy is a further area of divergence, with 89 percent of investor respondents citing it as a key area for engagement in the upcoming proxy season, versus 59 percent of companies.

Sixty-three percent of investors say they expect their level of engagement overall to increase next year, up from 55 percent who said the same thing in last year’s survey. No investors this year say they expect their level of engagement to decrease.

‘Companies need to be aware that investors have not only broadened the scope of what they consider to be a corporate governance issue but also that they are actively seeking to discuss these issues with companies – and each other – on a more regular basis,’ says Tony Quinn, managing director of CMi2i.

‘This level of dialogue is healthy and reinforces ownership responsibilities. But these trends ask important questions of companies that need to be able to address a range of topics that are increasingly important to all shareholders, not just isolated individuals.’