Honeywell’s recognition for best shareholder engagement is a testament to being proactive. ‘I’d learned that if you wait for an emergency and then go out to speak to people, it’s too late,’ says Jeff Neuman, Honeywell’s vice president, deputy general counsel and corporate secretary.
When Neuman took the post in November 2012, there wasn’t a formal shareholder engagement strategy or even a list of the company’s top investors. He made it his priority to arrange in-person meetings with the top 30 shareholders, which he still does twice a year.
The company was facing some pressure to separate the CEO and chair roles during Neuman’s first couple of years in the job – almost losing a vote on the issue in 2014 – but executive compensation became the big corporate governance issue in 2015. In 2014 the company had received 91 percent of the say on-pay-vote, but after ISS gave an ‘against’ recommendation in 2015, support fell to 70 percent. It fell again in 2016, to 67 percent.
Until 2015, no board director had talked to a Honeywell shareholder because, Neuman says, ‘it’s a little harder for directors who accomplished great things in a different era to shift their thinking on interaction with shareholders’. But the say-on-pay vote got their attention, he adds.
Honeywell undertook a listening campaign in which the lead director, the chair of the compensation committee and Neuman sought more information on why the company was losing investor votes. Following on from this, the board refined executive compensation and explained why, for example, Honeywell’s CEO was one of the top five highest-paid in the country.
Finally, the group communicated back to the key shareholders about the changes that had been made. ‘It was important for our credibility that the board was able to explain that we had listened and made changes,’ Neuman says. In 2017, support for the company’s executive compensation rose to 93 percent.
Neuman has had more than executive compensation on his mind in recent months, however, as the company has been dealing with activist investor Third Point. In response, Neuman initiated another round of engagement with the company’s top shareholders – where he discovered an interesting trend.
‘I know it sounds like an oxymoron, but I think activists are catalyzing the passives to be more active,’ he says. ‘They don’t like the fact that someone who owns less than they do is suddenly calling all the shots. When you’re talking to activists, you have to be really careful to make sure you speak to the passive funds as well.’
Neuman says his investor meetings during this period have underlined the need to avoid relying on fairweather engagement. ‘That’s where the value of getting to know people and having a relationship with them is extremely important,’ he notes.
This article originally appeared in the Winter issue of Corporate Secretary.
Ben Ashwell
Ben Ashwell is the editor at IR Magazine and Corporate Secretary, covering investor relations, governance, risk and compliance. Prior to this, he was the founder and editor of Executive Talent, the global quarterly magazine from the Association of...
