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TECHNOLOGY

The digital IR revolution: how new technology is bringing companies and shareholders closer together

The digital IR revolution: how new technology is bringing companies and shareholders closer together 45

The digital IR revolution: how new technology is bringing companies and shareholders closer together 46By Dean Little, Co-Founder, Proxymity

Today, more than ever, shareholders are demanding their voice be heard. Against a backdrop of macro-economic headwinds, geopolitical tensions and global recession, and with ESG targets at the forefront of many corporate strategies, public companies need to commit to better communication and engagement with their shareholders to build confidence and strengthen long-term relationships.

With the new year quickly approaching and the subsequent build up to proxy voting season, the need for enhanced shareholder engagement is clear. Key to improving this is a digital IR renaissance, using new technologies to create a transparent and dynamic investor relations ecosystem.

Urgency from shareholders driving action and change

Shareholder democracy is not a novel concept – it is only natural that investors should wish to participate in the shaping of the company in which they invest. It has, however, gained momentum in recent months, with digital transformation and new technology platforms at the forefront of this push.

Most recently, BlackRock CEO Larry Fink hailed a “new era for shareholder democracy”, stating that it is “clear there are investors who don’t want to sit on the sidelines; they have a view on corporate governance, and they want a meaningful way to express those views.”[1]

Responding to growing client interest, the firm has expanded its Voting Choice platform, partnering with Proxymity in the UK to make proxy voting easier and more accessible for its clients.[2] The collaboration seeks  to provide investors in select UK mutual funds with the ability to exercise greater choice in how their shares are voted.

Direct engagement between issuers and investors is crucial, with shareholders now expecting the reassurance that they can have their say and know that they are being heard. This transparency and accountability are enabled only by a digital approach.

Increased scrutiny over environmental, social and governance concerns

ESG has played an ever-growing role in affecting where investors choose to deploy their capital, with many shareholders wanting to know that companies they are involved with have a positive impact on society and are aligned with their values. Similarly, the current macroeconomic climate has naturally concerned shareholders, with soaring costs and profit warnings issued by UK-listed firms increasing 69% year-on-year in the third quarter of this year.[3]

Confirming these fears, 28 listed companies in the UK were described as being in the “danger zone” due to issuing warning profits three times over the last year[4], intensifying investor scrutiny of critical decisions made by executives and board members. More accountability and transparency in investor relations will ensure investors feel aligned to their business and confident in their investment.

The role activist hedge fund shareholders have played in recent years in pushing for corporate reforms has been extensively covered in the media. Retail investors, however, have had little chance to speak up until quite recently, with leading global asset managers like BlackRock exploring ways to give them a greater say during proxy season.

Revitalising the corporate governance process

It’s clear to most issuers, investors and intermediaries that the corporate governance ecosystem needs to be refreshed with new tools and technologies to replace legacy processes and improve communication and collaboration.

Lacking transparency and often not time-effective, traditional IR communication increases the potential for human error and non-compliance. Using legacy, manual proxy voting mechanisms, issuers cannot directly notify investors of voting action, which can obstruct effective communication and necessitate costly investigation into voter activity.

The approach typically gives shareholders little time to consider their options and make decisions before voting deadlines, as well as a lack of confidence on whether their vote was actually captured. Impediments need to be removed as businesses increasingly want to interact with and empower their investor base.

End-to-end digital platforms such as Proxymity’s can guarantee that shareholder democracy is available to all investors by giving them immediate meeting notifications and real assurance that each vote has been received and recorded. This seamless communication method is effective in ensuring businesses are hearing from as many investors as possible, with them under increased demand to take the opinions of their knowledgeable and vocal shareholder base seriously.

Whereas historically the barriers may have been too onerous, a digitised procedure mutually fosters conversation between issuers and investors. It changes the way issuers communicate and gives investors the time they need to consider their options.

A digital-first future  

While digital solutions are at the vanguard of this movement, firms throughout the investment ecosystem will need to collaborate effectively in order to transform shareholder democracy. The case for integrity, accountability and transparency in governance has never been clearer.

Cutting-edge proxy voting technologies are at the heart of this revolution, with real-time voting and investor communication set to provide tangible benefits directly to issuers and investors, as well as others throughout the IR ecosystem.

The future of shareholder democracy is digital, where shareholders, regardless of size, can receive updates on business matters throughout the year and ensure their voices are heard clearly and productively, improving governance and creating better and more sustainable public corporations.

 

[1] https://www.blackrock.com/corporate/about-us/investment-stewardship/blackrock-voting-choice/proxy-voting-power-of-choice

[2] https://proxymity.io/news/proxymity-and-blackrock-empowering-investors-through-voting-choice/

[3] https://www.ey.com/en_uk/news/2022/10/profit-warnings-issued-by-uk-listed-companies-in-q3-up-69-percent-year-on-year

[4] https://www.proactiveinvestors.co.uk/companies/news/996250/28-listed-companies-in-danger-zone-as-profit-warnings-hit-14-year-high-996250.html

 

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