With the 2024 proxy season now firmly behind us, public companies and their advisors are already deep into engagement season.

Engagement season is an opportunity for companies to understand the concerns of their investors and explain how they are responding in a bid to win increased support at future meetings. It begins with the disclosure of voting records from the past proxy season, allowing companies to understand which shareholders they have to win over.

 helps companies, advisors, and investors understand the voting, governance and compensation landscape to manage shareholder engagements, and its annual Investor Stewardship report highlights key trends that are shaping the way investors interact with public companies.

Here’s a summary of the crucial lessons from the 2024 version of the report:

 Investors are intensifying their focus on corporate governance. This is evident from their growing support for shareholder proposals and targeted voting practices, particularly against chairs of nomination and governance committees – the board role that receives the lowest level of average support. This trend underscores a shift towards greater director accountability and protections for shareholders in corporate governance structures.

 For the first time, most significant hedge funds are disclosing their votes on compensation matters, marking a significant step towards transparency in a key reform by the Securities and Exchange Commission (SEC). This development gives companies a clearer insight into which investors are supportive of their strategic decisions and allows for a better understanding of the shareholder base. Investor relations teams that have access to and use the data will have a competitive advantage over their peers.

As executive compensation reaches a record high, investor support is also increasing. This is attributed to a reduction in one-time awards and a stronger alignment between pay and performance. Improved engagement and disclosure practices are also playing a crucial role in garnering investor backing.

Shareholder engagement as risk mitigation

: Engaging with shareholders is increasingly recognized as a critical strategy for risk mitigation. Active dialogue between companies and their shareholders can lead to more informed votes and reduce risk by addressing systemic challenges and the disruption that comes from negative vote outcomes.

Keep calm and maintain environmental and social oversight:

 Investors continue to prioritize transparency and oversight concerning environmental and social issues, even as support for shareholder proposals on these topics appears to be on the decline. That decline is because shareholder proposals have become increasingly prescriptive, according to large investors – and the SEC’s higher rate of no-action relief reflects this ongoing concern. Regulatory frameworks governing climate, supply chain, and human capital disclosures should continue to divert engagements away from shareholder proposals and onto more universal approaches, although companies have also got better at negotiating with proponents to withdraw resolutions in return for signs of progress.

As the landscape of investor stewardship evolves, staying informed and prepared is more crucial than ever. Diligent Market Intelligence offers a range of tools for benchmarking, investor engagement, and activism preparedness, including the most comprehensive global voting records. 

For those looking to deepen their understanding and enhance their strategies in investor stewardship, 

 from Diligent Market Intelligence is highly recommended.

What companies need to know about shareholder priorities

The relationship between audit committees and internal audit functions is more important than ever. As regulators and shareholders expect more, companies need to have strong governance structures in place.

Keeping up with the evolving role of corporate governance

It’s no secret that corporate governance is shifting quickly, and beyond mere profitability; companies must now also demonstrate integrity, transparency and accountability. This shift requires organisations to re-evaluate their governance practices to ensure they meet new demands. A good working relationship between the audit committee and internal audit is key to effective corporate governance.

Diligent recently hosted an insightful roundtable event with corporate governance recruitment firm 

 on the evolving role of internal audit, delivering fresh perspectives into the landscape of this role. Throughout the session, we explored topics including internal audit as a critical partner to the board, the importance of building trust to strengthen the advisory role of internal audit, challenges facing the audit committee chair, and strategies for internal audit to manage conflicts with the business.

Here are three key takeaways from the event.

1. There must be a strong, proactive relationship between internal audit and the audit committee 

A robust working relationship between the audit committee and internal audit functions is crucial for effective corporate governance. The audit committee’s strategic oversight and external perspective complement the detailed, operational insights provided by internal audit. Regular, candid conversations between the two can help to build trust and improve decision-making quality.

Internal audit must present its findings in a way that aligns with the audit committee’s strategic objectives, while the audit committee should provide constructive, forward-looking feedback. This two-way dialogue strengthens the relationship and fosters a culture of continuous learning and improvement. A proactive approach ensures that governance processes focus on identifying and managing risks, not just compliance.

“You can learn a lot from the business point of view. This understanding is key to IA's ability to influence across the business, whether to the Head of Audit, or the Audit Chair.”

2. Internal audit must cultivate effective partnerships across the business and support the audit committee chair

A successful partnership between internal audit and the business is built on respect and clearly defined responsibilities. This ensures accountability and effective governance strategies. Open communication is the key to finding, evaluating, and fixing risks quickly. Resources, like skilled talent and new technologies, are needed to help with these tasks. 

Alongside these resources, establishinga framework to evaluate the internal audit function's performance will help to ensure that it meets the high standards needed for effective governance. Regular performance reviews and feedback mechanisms can help to identify areas for improvement and support continuous growth.

"There are a huge number of transferable skills in terms of what audit does and how those can be applied at the board."

3. Understanding the complexities of the audit committee chair role is critical

The role of the audit chair is critical and multifaceted, requiring a careful balance between the board's broader expectations and the audit committee’s specific needs. This role involves a deep understanding of the company’s operations to effectively identify and mitigate risks, ensuring alignment with strategic goals. The audit chair must navigate a complex landscape of operational considerations, industry dynamics, and regulatory requirements.

Beyond a thorough understanding of the business, the audit committee chair will excel at building strong relationships with key executives and board members. This includes maintaining open lines of communication and fostering a culture of collaboration, respect, and trust. Effective leadership in this role means helping the audit committee do its job. It also means making sure all members are well-informed and have enough resources, including oversight of the IA function, external auditors, and financial reporting processes, as well as staying current on emerging risks and regulatory changes.

The audit committee chair is responsible for ensuring that the audit committee operates with independence and objectivity. This means challenging management when needed and making sure all financial and operational matters are open and accountable. The role requires a high level of professional integrity and the ability to make tough choices for the organisation and its people. This role also plays a key part in setting the tone for the audit committee's culture and ethics: They create a culture of improvement and encourage people to find and fix problems early. To do this effectively, audit committee chairs must stay current on corporate governance best practices and ensure that the audit committee’s activities align with industry standards and regulatory expectations.

Evolving from a compliance exercise to a driver for excellence

Creating an environment where people can keep improving is important for making governance and risk management better. This approach ensures that all stakeholders in the internal audit process see it not just as a compliance exercise, but as a driver for organisational excellence. By embracing the insights and recommendations of internal audit, organisations can consistently strengthen their governance structures, improve resilience, and achieve sustained success.

Find out more about how internal audit and governance can work together to navigate risks effectively in 

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What companies need to know about shareholder priorities

3 key insights for improving internal audit and board interactions

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What companies need to know about shareholder priorities

3 key insights for improving internal audit and board interactions

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Your Data Matters

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