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The rise of governance roadshows in the era of ESG

· Buy side,Investor Relations,Governance,ESG,Roadshows

What are governance roadshows?

Governance roadshows represent a fast-evolving trend in Investor Relations (IR). More and more institutional investors are focusing on the “governance” aspect of their assets. This has led to increased instances of proxy votes over key issues of governance, sometimes even going as far as influencing board elections.

With institutional investors seeking to take a more active “stewardship role,” IR teams are being forced to focus on the growing throngs of governance experts among their investors. This represents a break from the past, where IR teams were focused almost exclusively on portfolio managers who made the all-important buy/sell decisions.

Companies usually embark on governance roadshows well in advance of the proxy voting season to connect with their important investors. The objectives are usually two-fold: increase communication and understanding between the board and investors, and to try and avoid conflicts and hostile voting in the future on important corporate matters.

How are governance roadshows different from ESG Roadshows?

Up until a few decades ago, the prevailing idea was that businesses had only a single social responsibility: delivering profit to its shareholders. This popular dictum from Milton Friedman is largely obsolete in the modern era, where the world is beset with increasing concerns about social and economic turmoil and ecological disasters.

Corporate Social Responsibility has evolved and grown over the past few decades to include diverse factors like the Environment, Social, & Governance (ESG). In an era when all major stakeholders are taking an ever-increasing interest in ESG policies and attitudes of an enterprise, business leaders have to adapt and evolve accordingly.

ESG-focused roadshows have become more commonplace in the last decade or so as Investor Relations teams try to connect with all major groups of stakeholders on issues related to environmental policies/attitudes, other social outreach and impact measures, and the overall corporate governance aspect of the business.

In contrast, governance roadshows tend to focus solely on experts from large institutional investors. The focus is more on building a dialogue here. In the case of ESG, it is often a mix of building consensus with all stakeholders, as well as projecting a desirable image of the company in an era of sustainable development.

Latest investor trends that influence the shift towards governance

Issuers across the world are witnessing an increase in the number of shareholder proposals related to ESG. Institutional investors are also starting to factor in principles like Sustainable and Responsible Investments (SRI) as part of their long-term strategies.

According to a report on ESG and Fixed Income Investment by the World Bank Group, SRI has shown strong growth in recent years, with over $23 trillion invested in ESG-compliant businesses in 2017, compared to roughly $18 trillion in 2015 (an increase of 25% in two years). That represents nearly a quarter of the total assets under professional management around the world.

Global institutions have also contributed to this trend in recent decades, like the UN Principles of Responsible Investment (UNPRI 2006), and the European Commission Expert Group on Sustainable Finance. BlackRock, the global behemoth in asset management, has hedged its bets on the ESG bandwagon in recent years, putting further pressure on enterprises to focus on their corporate accountability and commitment to ESG goals.

Large investors like BlackRock and Vanguard put primacy on the issue of corporate governance. There is a growing preference for senior members of the company to make their contribution to governance roadshows. The investors want a direct line to the board these days. It is not uncommon for companies these days to appoint a specific member of the board to handle these governance roadshows.

Nestle and BNP Paribas have an excellent track record when it comes to handling governance roadshows. Nestle has its Chairman and several senior board members tasked with a very proactive governance outreach program comprised of roadshows, stakeholder convenings, and roundtable discussions. BNP’s Chairman Jean Lemierre also has a very hands-on approach to governance roadshows, much appreciated by investors.

Main topics discussed during governance roadshows

There is no strict formula regarding the actual contents discussed in a governance roadshow. A lot of it depends on the individual company and the interests of its investors. But several topics do come with increasing frequency these days:

● Environment impact and carbon footprint

● Sustainable business practices

● Diversity & inclusiveness

● Board membership, tenure and pay packages

● Transparency and accountability

● Oversight on corporate culture

Implications for IR teams along with some best practices

Governance roadshows come with a clear set of advantages as well as some not so desirable pitfalls for both the company board as well as its IR team:


● Allows the board to make informed decisions, sway votes, and avoid conflict

● May help in preempting proxy voting of activist investors

● An effective platform to impress the big investors


● Increases the workload of IR teams with the potential for more meetings and events

● Requires bigger teams

● Dialogue on contentious topics may backfire, worsening investor relations

Best practices to consider while planning governance roadshows:

1. IR teams should do a thorough homework on the governance issues affecting their company

2. Build a capable team, with a dedicated senior officer or board member to act as the key communicator

3. Make a list of the most important shareholders/investors to talk to; the deeper your list, the more meetings you must do

4. Have a clear understanding with the board regarding the objectives of the outreach program, and keep a clear agenda

5. Research the investors to figure out their interests, motivations, and past voting behavior

6. Target proxy voters in the off season to have more success in securing meetings during the roadshow

7. Use a combination of physical meetings and modern communication channels like calls, and teleconferencing to increase the reach of the roadshow

8. And finally: Investors increasingly want governance roadshows involving a board member to be decorrelated from the general meetings in order to have more time and not be related to the topics of the next AGM

Special thanks to:

Matthieu Simon-Blavier, Managing Director of Georgeson France, a leading Global Corporate Governance Consulting


Patricia Giraud, Compliance Governance Specialist for the last 20 years with tenure at Skema business school and advising large Institutional Investors


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