We’ve heard plenty about shareholder engagement in the past couple of years, a bit of it sensible, most of it useless pretense.

It started in 2013 with three different programs, promoted by corporate interests for corporate interests. We reviewed each in detail, finding what amounts to various means of protecting directors from eager (or irate) investors.

It continued last week, as Wachtell, Lipton weighs in about the best ways for BoDs to distract engage shareholders. As we critique its advice, we suggest some ways for investors really to engage with directors.

Another Way to Ignore Shareholders

Unlike the earlier efforts, Wachtell doesn’t prescribe detailed ways for BoDs to recite the company script. Instead, it recites platitudes about engagement as “a powerful tool if used judiciously by companies in service of their strategic goals.”

Watchtell bestows two big, wet, sloppy kisses, on big institutional investors and on corporate secretaries. Big investors (BlackRock, Vanguard) are “deeply committed to maximizing long-term growth and prosperity” and “far less rigid and agenda-driven” than proxy advisors like ISS and Glass Lewis, and presumably these advisors’ pension fund clients and activist investor contacts. It encourages engagement with these corporate fanboys.

Corporate secretaries get props as “ideally positioned to help directors and chief executives understand and respond to shareholder concerns.” Wachtell advises corporate secretaries to “purposefully build relationships with large shareholders, institutional investors, and proxy advisors, in order to be fully up-to-date on the general trends and specific issues that concern both active and activist shareholders, as well as the agendas of key participants in the corporate governance debate.” Of course, Wachtell serves companies exclusively, and mostly corporate general counsel who typically serve as corporate secretary. Its clients, who record minutes at BoD meetings and interpret Federal and state corporate law and SEC regulations, gain power and influence this way.

For BoDs, Wactell advises:

1. [Do not] allow...business judgment to be usurped or overly influenced by investors, advisors, or other board outsiders.... [I]nteract strategically with investors...address their concerns, and...reinforce the company’s long-term goals.... [K]eep in mind that activism, corp gov, and engagement change nothing about the fundamental fiduciary duties of directors.
   

Elsewhere we show that the entire purpose of a BoD is to express the influence of investors. The fundamental fiduciary duties of care and loyalty concern only how to best represent investors. Yet, we read this as listen to investors a little while toeing the company line.

How Really to Engage with Companies

Our earlier review of engagement programs proposed for BoDs a simple five-point plan for effective communication with investors. That plan revolves around BoDs asking shareholders about company goals and performance, rather than repeating the company story, talking arcane corp gov details, and defending the CEO.

In our experience, most shareholders view BoD meetings as a way to learn about the company. We think it should also become a way for investors to express opinions about the company.

Thus, we recast that plan here, from the investor perspective.

1. 1.Seek frequent communication with directors, our elected representatives.
   

2. 2.Convey your views on corporate strategy, growth rate, risk preference, and balance sheet structure. Explain your thesis, analysis, and valuation. Talk corp gov later, if at all.
   

3. 3.Listen to directors’ standard script about company goals, results, and corp gov. Then, ask the questions that matter most to you, about strategy, finances, and operations.
   

4. 4.Respect BoD limits on discussing confidential information, such as personnel matters, trade secrets, and material non-public information. Know what Reg FD will and will not allow.
   

5. 5.Remember that you’re only one investor, with your own views about the company. If you suspect or know other investors share your views, say so. Directors must sort through many such (diverse) views, so help them out.
   

6. 6.Insist on meeting directors, with executives (CEO, corporate secretary, IR) present only as necessary. Convey your resolve to vote against directors that insist on hiding behind executives, or to nominate and elect other directors that will communicate better.
   

Ignore the usual boilerplate in proxy materials about routing inquiries through IR or the CEO. At the very least, start with IR, and quickly escalate communications to directors. If needed, track down individual directors and call them directly.

In other words, engage on your terms. Let the BoD know what you think, thoughtfully and forcefully. Insist on more than just shareholder engagement platitudes and pretense. It may not get you as far as you’d like, but it’s better than just letting the BoD tell you what the CEO tells them.