Transforming investor relations: How new technologies are connecting companies and their shareholders
Proximity takes a wide-angle look at how digital proxy voting can help companies move outside the box when it comes to environmental, social and governance (ESG).
With activist shareholders and disgruntled boards battling it out in boardrooms around the world in 2022, investors are unlikely to sit on the sidelines when it comes to corporate governance debates in 2023.
However, the current system responsible for allowing investors to voice their concerns or give them visibility or influence over where their money goes is ultimately failing.
Consequently, disengaged shareholders and directors have not come together to address the pressing ESG challenges facing many listed companies.
However, such a solution to this problem can be provided by digital voting technologies, which promote improved ESG by improving communication between issuers and investors, and therefore facilitate effective engagement between the two groups.
It is here to delve further into the possibilities and application of such a solution Dean A littleco-founder of the digital investor communication platform Proxymity.
Proximity’s recent agreement with Black stone for its digital proxy voting service, Vote Connect Total, is being called a ‘revolution in shareholder democracy’ and signals a dramatic shift in the future of investor relations.
As highlighted here, Little believes that the key to any healthy investment ecosystem is a transparent and effective system of shareholder democracy, and that digital proxy voting can help companies move outside the box when it comes to ESG.
Transforming investor relations: How new technology connects companies and their shareholders in real time
As we start a new year, macroeconomic headwinds, geopolitical tensions and fears of a global recession continue to prevail, with World Bank expects the economy to grow by just 1.7 percent this year, down from three percent in June 2022.
However, the market is not devoid of investor optimism, with global inflation stabilizing and the expectation that central banks are nearing the peak of their monetary tightening programmes.
Under these circumstances, and with ESG public enterprises, which now have considerable weight in many corporate mandates, want to strengthen communication with their shareholders.
And so with AGM season on the horizon, transforming shareholder engagement to foster trust and establish lasting relationships is higher than ever on the agenda.
Investors are moving towards increased accountability and communication
ESG has played an increasing role in influencing where investors choose to spend capital, and many want to know that their portfolio companies have a beneficial impact on society and are governed in ways that are consistent with their beliefs.
Moreso, shareholders of all types and sizes are increasingly looking to play a role in shaping the sustainability, impact and ethics of their companies and ensuring that their voice counts where it really matters.
Investors are also understandably anxious about the macroeconomic environment, as seen by the 69 per cent year-on-year rise in profit and cost warnings issued by UK listed companies in the third quarter of last year.
Those concerns were confirmed when 28 UK listed businesses were labeled as “at risk” after posting profit warnings three times in the previous year, increasing investor scrutiny of CEO and board selection.
The media has widely reported the role activist hedge fund investors have played in recent years in promoting corporate change. However, retail shareholders have rarely had a voice until recently, as leading global asset managers, such as BlackRock, look to offer them more input during proxy season.
The challenge: revitalizing the IR and asset services ecosystem
Increased accountability and transparency in investor relations (IR) will help investors feel confident about their investments and more connected to the company’s goals, but most issuers, investors and intermediaries agree that the corporate governance ecosystem needs to be updated with new tools and technology to to improve communication and promote more timely collaboration.
For years, traditional investor communications have used manual processes that lack transparency and are often not time-efficient, increasing the risk of human error and non-compliance. Issuers are often unable to immediately inform investors of voting actions, as they must rely on outdated, paper-based proxy voting processes and technologies that can impede effective communication and – when issues arise – require expensive surveys of voter behavior.
For investors, this antiquated approach leaves minimal time to study their options and make judgments before voting deadlines, and may even leave them unsure whether their vote was actually recorded at the meeting.
Consisting of multiple institutions serving and safeguarding the interests of investors and issuers, the asset custody and investor relations ecosystem has always been complex and interconnected. And yet to allow companies to engage and strengthen their investor base, barriers must be removed throughout, a challenge that has seemed too great in the past.
The digital process pioneers
But today, supported by industry-wide collaboration and the latest technology, a digital process is finally able to allow real-time communication between issuers and investors.
New end-to-end digital systems, such as Proxymity’s Vote Connect platform, can connect issuers, investors and intermediaries throughout the IR ecosystem with reliable “golden source” information and accurate reconciliation of shareholdings right through the custodian chain.
This seamless communication provides true digital confirmation to all investors that every vote has been recorded, empowering issuers to deliver quick meeting notices, proactively gathering the opinions of their informed and vocal shareholder base, in minutes or hours instead of days.
This means that they can give serious and timely attention to as many shareholders as possible, and that communication can be two-way.
The future is digital, accurate and real-time
The future of shareholder democracy is digital, where all shareholders, regardless of size, can receive regular information about the company’s affairs and ensure that their voices are heard effectively. This will strengthen governance and result in healthier, more sustainable public organisations.
In addition to the technological tailwinds that support this trend, it will take continued cooperation from companies throughout the investment ecosystem to take shareholder democracy to the next level. The case for accountability, integrity and transparency in governance has never been stronger.
The new generation of proxy voting and investor communications technologies are already providing direct benefits to issuers, investors and other players in the IR ecosystem, and as more organizations connect through these digital networks, they will unlock additional efficiencies and insights on across markets globally.
