Beta Group plc (Beta) has its shares listed on the London Stock Exchange and has a wide

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Question:

Beta Group plc (Beta) has its shares listed on the London Stock Exchange and has a wide shareholder base including institutional shareholders, large private shareholders and small private shareholders. Beta‟s registrars have recently alerted Beta‟s Company Secretary to the fact that an activist shareholder, Druid Partners LLP (Druid), has recently been building a stake in the company and is now the registered holder of around 6% of the shares. Druid has not had any dialogue with the Board of Beta but has recently been making public statements which are critical of the Board and its strategy, in particular criticising the track record of Beta‟s CEO. The media has also been running stories suggesting that other shareholders are unhappy with the company‟s strategy following a drop in the share price. Beta is currently preparing its annual report and AGM notice which will be despatched ready for the next AGM, which is due to take place in around four months‟ time. One of the items on the agenda at the AGM will be the approval of a new directors‟ remuneration policy, in the form to be set out in the annual report. The remuneration committee is in the process of finalising the policy and in particular is considering amendments to the nature and level of the targets to be met by the executive directors in relation to their Long-Term Incentive Plan (LTIP). This follows criticism by shareholders of the targets under the current remuneration policy which led to an 18% vote against the remuneration implementation report at last year‟s AGM. The remuneration committee is also considering how to exercise the discretion available to the company under the existing remuneration policy as regards the directors LTIP awards for the current year.

REQUIRED:

Discuss how the Board of Beta should go about understanding the views of Beta‟s shareholders. Include in your answer how it should engage with them in relation to the finalization of its remuneration policy and in relation to any other issues of concern to shareholders.