SHAREHOLDER ENGAGEMENT: BlackRock, CalSTRS, among other investors, upping pressure on boards.

Author:Tahmincioglu, Eve
Position:ON THE TABLE FOR 2018

Whether it's the impact of iPhones on kids or employee retraining, major investors are looking to corporate leaders to do more.

In January, BlackRock s CEO and Chairman Laurence D. Fink sent a letter to executives at major companies to not only focus on profits but also the social good. The letter addressed a host of issues seen as creating the world's polarization, including automation's displacement of workers and the lack of secure retirements among low-income workers.

In particular, Fink singled out boards as the lynchpins in creating strategies around what BlackRock, which manages $1.7 billion of funds, is looking for:

The board's engagement in developing your long-term strategy is essential because an engaged board and a long-term approach are valuable indicators of a company's ability to create long-term value for shareholders. If companies don't adopt what BlackRock calls "a new model of corporate governance," Fink said the firm "can choose to sell the securities of a company if we are doubtful about it's strategic direction or long-term growth."

Also last month,JANA Partners LLC and the California State Teachers' Retirement System (CalSTRS), that hold $2 billion worth of Apple shares, sent an open letter to the company warning that it's most successful product, the iPhone, may be "too much of a good thing" when it comes to children.

The JANA/CalSTRS letter stated:

... even the original designers of the iPhone user interface and Apple's current chief design officer have publicly worried about the iPhone's potential for overuse, and there is no good reason why you should not address this issue proactively. With recommendations for Apple that include creating an expert committee to review the issue and assigning a top executive to monitor the problem and produce yearly reports--the letter blew up on social media and was covered by news outlets around the world. It's the kind of attention no one in the boardroom wants.

These examples shed light on how crucial it is for directors to listen to shareholders, especially in the "current media environment with heightened public sensitivity," maintains Gary Lutin, chairman of The Shareholders Forum.

There's an obvious need for and benefit from communications between shareholders and directors, he adds. "You need to manage engagement and that does not include selective communications; hold them in an open process. Engagement is good. Selective engagement is bad."

Joseph Fuller, a professor of...

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