Building investor relationships by leveraging voting insights

Building investor relationships by leveraging voting insights

Almost nine in 10 (86 percent) of investors in Europe would target investments based on a shareholder engagement score for each issuer, given the opportunity to do so. This startling statistic, drawn from ‘Proxy voting and Class Actions: Today’s ESG Challenge’, an October 2023 survey by the ValueExchange and supported by Proxymity, both demonstrates the appetite for increased engagement with boards among shareholders and reveals the shortcomings of the current investor relations landscape. These insights into the investor relations process are critical to adapting current proxy voting processes and fortifying relationships between boards and investors.

Shareholders are becoming increasingly vocal and engaged. Globally, 409 companies found themselves subject to activist demands in Q1 2023, a 6 percent rise on the Q1 2022 total of 386. The macroeconomic environment, marked by the threat of profit warnings across the globe, has driven a shift in investor focus toward more transparent and accountable governance structures​​.

Eight in 10 respondents to Bloomberg’s Markets Live Pulse survey say S&P 500 companies are looking increasingly likely to issue profit warnings ahead of quarterly results, while, in the last year, several UK-listed companies entered the ‘three-warning danger zone’, with 11 companies issuing a profit warning for at least the third time in Q3 2023​​. This scenario has intensified the scrutiny of CEO and board choices, spotlighting the need for revitalized IR and asset-servicing ecosystems.

In the past, the dominant narrative revolved around activist hedge fund investors catalyzing corporate changes. A noticeable trend has emerged, however, where global asset managers like BlackRock are striving to amplify the voices of retail shareholders during the proxy season. This shift underscores a broader movement toward democratizing shareholder influence, epitomized by the rise in ESG-focused campaigns led by both established and new activist investors​​.

Shareholder insights can strengthen IR

Traditional investor communication frameworks, mired in manual processes, have long been a drag on effective shareholder engagement. Indeed, shareholders are less content than issuers with the timing of notifications: 9 percent of issuers are dissatisfied, a figure that rises to 29 percent among investors.

This can be partly explained by differing perceptions in the length of time it takes for accurate meeting announcements to reach investors. While European investors are of the view that announcements take 16 days to reach them, issuers believe the process takes only eight days. Regardless of where the answer lies, the discrepancy in views and lack of a consensus is indicative of a broader failure of current proxy voting processes.

These antiquated systems not only lack transparency but also significantly delay the dissemination of crucial meeting information to investors. This delay, in turn, diminishes the time available for shareholders to thoroughly evaluate their voting options and, at times, even casts doubt on the accurate recording of votes.

Enter the digital pioneers like Proxymity with its Vote Connect solutions suite, which heralds a new era of real-time communication and seamless interaction between issuers, investors and intermediaries across the IR ecosystem. By leveraging state-of-the-art digital systems, issuers can now provide ‘golden source’ information and ensure accurate reconciliation of shareholdings throughout the custody chain.

This digital transformation not only ensures that each vote is recorded but also enables issuers to rapidly disseminate meeting notices and proactively gather shareholder opinions. The transition from days and weeks to minutes and hours in communication lags significantly enhances the engagement and trust between issuers and their investor base.

A new normal is inevitable

The trajectory toward visible, digital, accurate and real-time shareholder democracy is unmistakable. A landscape where shareholders, irrespective of their size, can access regular updates on company affairs and voice their concerns effectively is gradually taking shape. This digital shift is not only propelled by technological advancements but also necessitates a collaborative effort from all stakeholders within the investment ecosystem to elevate shareholder democracy to the next echelon. The compelling case for enhanced accountability, integrity and transparency in governance frameworks is stronger than ever.

The advent of next-generation proxy voting and investor communication technologies is already delivering tangible benefits to issuers, investors and other key players within the IR ecosystem. As more organizations embrace these digital networks, they are poised to unlock unprecedented efficiencies and insights across global markets, thereby fostering healthier and more sustainable public organizations.

This digital transformation, underscored by real-time voting insights, is pivotal in nurturing robust investor relationships, which in turn are integral to steering the corporate sector toward a more sustainable and inclusive future.

This content was provided by Proxymity but originally published on IR Magazine. Please find the original article here.

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