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BUSINESS

How technology can help transform American investor relations

By Jonathan Smalley, COO of Proxymity

Jonathan Smalley

Shareholder communications in North America require an overhaul. During this AGM season, issuers and shareholders require better channels of communication to ensure that votes are both cast and received in a swift and efficient manner. While there will always be debate between boardrooms and shareholders, the most practical way to keep such debate healthy is through the use of technology which can transform the inefficient proxy voting processes which currently exist.

In previous decades, certain companies would have been considered immune from public demands for change from their shareholders. However, investors have grown bolder in asserting their demands, and this new reality must be adjusted to, and quickly. This rise shows no sign of slowing, with ongoing headline coverage of activist investors advocating for change, indicating a shift in shareholder engagement dynamics.

It has become clear that public companies are searching for a new way to navigate issues such as ESG and remuneration, as well as the general trend towards ‘shareholder democracy’ in which corporate structures are to be more decentralised.1 In the interests of American listed companies and those they serve, there is an urgent need to rebuild trust between shareholders, boardrooms, and CEOs. One way to do so would be to modernize the current proxy voting and AGM system, where outdated technology and methods make the process far more opaque and fractious than it needs to be.

Failure to communicate

One consistent theme in the recent debates between shareholders and corporate leadership has been a lack of transparency. But it is important to recognize that the current systems of investor relations lend themselves to such accusations. Most American listed companies still use traditional voting systems. Ballots will arrive late or get lost, and the need to mail these materials means that shareholders seldom have time to consider the proposals put before them in any detail. Shareholders understandably feel as if proposals are rushed without being given enough time to weigh the pros and cons. This antiquated proxy voting and AGM system also makes it difficult for corporate leadership to furnish shareholders with critical documents, or to make their case in favor of more controversial proposals. With these systems still in place, it is little wonder that shareholders often complain of being left in the dark.

Increasing trust through technology

Digitalization would overhaul these systems and would start to put shareholder relations on a surer foundation. Proxymity provides a centralized digital proxy voting and AGM service. Investors can vote digitally, seamlessly receive key documents, and communicate directly with companies and custodians.

Having launched in the US in September 2023, Proxymity understands the potential that digitization of this kind can have in substantially rebuilding trust in American investor relations, particularly in a market as large as the US. Digital proxy voting eschews the need for mail ballots. This gives shareholders the time to weigh up difficult choices carefully, generating a feeling of shareholder buy- in to corporate decisions. By making use of a digital platform such as Proxymity, corporate leaders and boardrooms will now be able to articulate their cases to investors properly; they will now be better able to transmit documents, reports, white papers, speeches, or video content to those they want to convince. With these new systems that Proxymity has brought to the US market, shareholders and companies alike will benefit from more transparency.

In addition, Proxymity’s expansion into the US does much to help American companies begin to navigate the transition to shareholder democracy. A more direct relationship between all parties along the chain of custody will lead to greater engagement, helping shareholders become better informed about corporate decisions and – ultimately – helping them play a larger role in shaping them.

There are no easy answers to questions of executive pay, ESG, and the green transition. But the first step for listed companies in navigating these questions is to open up clearer and more transparent lines of communication – technology can and will facilitate this.

1 https://www.alpha-week.com/why-2024-should-be-year-shareholder-democracy 

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