Connecting companies and investors online

01/31/2011

Author: National Post

“The way that companies can and will communicate with shareholders is undergoing a quiet revolution, the result of regulatory changes, technological advances and growing consumer and investor acceptance of online and mobile communication platforms.”

The way that companies can and will communicate with shareholders is undergoing a quiet revolution, the result of regulatory changes, technological advances and growing consumer and investor acceptance of online and mobile communication platforms.

Just as participation in in-person shareholder meetings is declining in the United States as a result of implementation of regulations surrounding meetings, the opportunities to conduct virtual or hybrid meetings have been created in the wake of a Delaware law allowing for electronic meetings and guidance from the U.S. Securities Exchange Commission on the conduct of web-based shareholder forums, notes Cathy Conlon, vice-president, strategic development, at Broadridge Financial Solutions, Inc.

While regulators are coming to grips with the notion of Internet-based solutions to shareholder communications, a set of technological advances have moved virtual meetings from fiction into the realm of fact. In particular, the spread of broadband access in Canada and the United States has allowed for a large increase in Internet streaming of live and on-demand events. Perhaps most importantly for public issuers, shareholders are online in huge numbers. Broadridge sent out approximately 164 million emails in 2010, up from 93 million sent in 2008, and the numbers continue to grow at an impressive rate.

The growth of “Web 2.0,” notes Ms. Conlon, means that investors are increasingly comfortable with live streaming, interactive applications and social media. Against this impressive backdrop of Internet innovation, an electronic application such as Broadridge’s Shareholder Forum is not a jarring development for shareholders. The most developed online platform of its kind in the industry, Shareholder Forum allows validated shareholders to submit questions, answer surveys and participate in other interactive, online communication with issuers. Shareholder Forum improves the proxy process by instantly delivering shareholder input, perspectives and ideas to company management and directors. To date, early adopters of Shareholder Forum in the United States have used it to deliver key feedback and opinions to management ahead of the annual meetings.

Perhaps the most significant attribute of Broadridge’s Shareholder Forum is that it acts as an electronic gatekeeper, allowing only validated shareholders to submit questions and attend a virtual shareholder meeting, where they are allowed to watch the proceedings and tender their votes just as if they were physically in attendance.

“It is not just like a traditional message board where people can just go there and say whatever they want,” says Lisa Howes, vice-president of sales with Broadridge. “We make sure that only validated investors can log on to Shareholder Forum, so it really provides the investor with the sense that others attending electronically are all shareholders. For corporations, they do not have the issues that they have with blogs, posts or other Internet communications where they don’t know if this person is actually an invested shareholder.”

Benefits of new Internetbased communications platforms, currently best illustrated by the use of Shareholder Forum, include plain old good corporate governance. Using the Internet to connect more shareholders with the companies they own allows for better two-way communication. The Internet also removes all geographic boundaries and, ultimately, provides cost efficiencies for the issuer.

“What we are trying to do is provide issuers with a platform where the shareholders are validated, interested and motivated to communicate with the company.” says Ms. Howes.

Shareholder Forum also allows companies to create more relevant and engaging annual meetings for shareholders and get the conversation going before the annual meeting, by providing more options to deliver information to investors and draw them to a company website. Companies can allow pre-meeting questions to be submitted ahead of the annual meeting or even year-round, and categorize questions to allow for generic responses to similar questions.

Reporting on shareholder sentiment and trends from online forums and annual meetings can also include share range weighting and investor type, which gives companies insight into ‘who’ they are communicating with while still maintaining the shareholder’s anonymity.

Feedback from early adopters in the U.S. is that corporations appreciate the investor interaction, because it affords them the opportunity to understand what their investors are thinking, in advance of the annual meeting.

Further, it’s an effective way to improve transparency in investor communications. Given the positive response to the online forum experience to date, Canadian companies are beginning to look more closely at ways to incorporate online tools in their investor relations practices.