The relationship between companies and investors hasn’t always run smoothly. Historically, some company executives have been reluctant to involve shareholders in all but essential decisions, fearing they won’t understand the intricacies of their company’s best interests.
Meanwhile, investors have sometimes felt undervalued or disengaged, finding it hard to see their input impacting the way the business is developing.
However, this is all changing.
Both public companies – which must hold a shareholder meeting every financial year – and private companies, which do not always have fixed AGM requirements (although it is mandatory in some regions), are realising the value of closer investor communications. And technology innovations are enabling them to think differently about how they approach this opportunity and engage their investor base.
Long-windedness leads to lethargy
The challenge companies face when it comes to involving investors in board resolutions is that current voting processes are painstaking, slow, and often lethargic in their uptake. Only a quarter (27%) of retail shareholders vote in corporate decision-making, according to US research, and most of that is done either during an AGM, via letter or by email.
This set-up is almost destined to fail companies and investors, as it doesn’t make life easy for either party. Not every shareholder has the time or capacity to attend face-to-face meetings, while any form of paper-based communications takes a lot of effort to organise, execute and respond to.
Even email voting can be a long-winded process if investor data is stored across word documents and spreadsheets, and the way in which data is handled during the voting process can sometimes leave companies vulnerable to non-compliance.
Fortunately, however, new technologies reaching the market are significantly speeding up the voting process. This is making it much easier for companies to ask questions to their investor base, and for shareholders to respond.
Own is part of this revolution, as we recently launched My Own, an application that allows investors to vote on board resolutions via their smartphone.
Enterprises can upload polls and pre-determine what shareholders can answer – for example, yes and no, or add an abstention option – before investors are sent a push notification. They then have a set amount of time to cast their opinion. Company personnel can track how many votes have been logged at any point during this time, and how those interim results are reading.
What makes our technology particularly interesting is that all data is stored on the blockchain. This means it is immutable once votes have been made. Investors know their results are secure, and companies are assured that anyone who logs in is seeing the same up-to-date information.
The risk of a low voter turnout
It’s not just the digitising process that is changing company attitudes to voting, either; it’s the realisation that a better tracking process can help enterprises to direct results.
If only a quarter of investors are currently voting on average, those investors may not be a representative sample of the entire shareholder base. They could easily swing results away from the outcome that companies want. Under traditional voting systems like paper and email, however, it’s not easy for organisations to see who has or hasn’t voted, to know who they still need to contact.
This is another major area in which the blockchain is making a major difference to investor/company relationships. Own is pioneering the world’s first Decentralised Share Register, which enables enterprises to upload and manage investor data through the blockchain free of charge.
More importantly, our DSR includes built-in analytics tools, which enable companies to understand their investor base and segment communications on any topic – including voting resolutions.
We recently launched a quorum report for this specific purpose; users can set the overall percentage of votes that their business needs in order to pass a motion, and search for the minimum number of investors they must positively direct to achieve the result they want.
Our quorum report will bring up a list of the investors that comprise this percentage, and firms can then set about nurturing each of these individual investors to secure the outcomes they want – with the report dynamically changing as they alter the optimum percentage.
Influence to innovate
The risk with a low number of participants is that investor voting can swing the wrong way for companies. However, the reward of influencing the right people is that even getting a few selected individuals involved can positively direct the result.
By using technology to make the process quicker and more interactive, enterprises can focus on the investors that will make the biggest difference to their decision-making. Not only that, they can ensure the actual voting process is quick and easy for their shareholder base.
In addition, digitising the company/investor relationship makes it much easier for shareholders to keep in touch with business updates. They can check their information is correct, and feel more involved in the way the organisation is run.
This gives investors a much greater sense of value, encourages custom and brand advocacy, and creates an environment that new investors want to join – expanding the fundraising opportunities available to growing businesses. And this set-up is particularly attractive to Millennials, who are digitally driven and want to connect with companies through their mobile, instantly, on the go.