Ahead of the 2022 proxy season, the pandemic-driven reliance on digital technology and the impact of younger investors on the marketplace are making shareholder engagement far more interactive By Sherry Moreland
A field that has traditionally seen marginal advances, investor communications has recently undergone rapid change. The Covid-19 pandemic has forced us all to incorporate digital experiences into nearly every aspect of our lives.
In less than 24 months, consumers moved from using digital technology for shopping online and occasionally checking their bank account balances to expecting a digital experience in all their daily transactions, including investing, scheduling appointments and obtaining medical care.
The faster pace of advancement is also the result of the influx of younger, more tech-savvy retail investors who are eager to engage, amplify their voices and learn about their investments and the effect they can have. This combination plus several changes in practices impacting investor communications have resulted in a paradigm shift in shareholder engagement.
First, a passive audience experience has now become an active user/consumer exchange. The passive, uni-directional consumption of financial communications from corporate issuers and fund managers to shareholders is a thing of the past. Millennial and Gen-Z investors don’t sit back and wait for postal carriers to deliver proxy materials and financial disclosures.
These younger shareholders want the freedom to decide, communicate and choose. They want to hear directly from companies about who they are and what they stand for – as well as take the initiative to conduct their own research online and share their opinions and findings on social media platforms.
The past year has demonstrated all too well that these more active, tech-savvy investors have immense power to move markets and create new risks for companies: look at the impact Reddit and other social media sites had on the stock prices and trading volumes of companies like GameStop and AMC Entertainment Holdings.
Second, mono-media has evolved into omni-media. Much of the IR industry has continued to produce physical, printed communications due to tradition and familiarity, and the belief that it is a best business practice. But the pandemic proved that digital communications are just as, if not more, effective in engaging shareholders. Companies can no longer take a one-size-fits-all approach to investor communications – they need to use all possible media channels and platforms to enable shareholders to participate on their terms.
Third, periodic, non-real-time communication has become continuous and real time. Before social media, corporate communications could be distributed in print periodically, according to a predetermined timetable. Now, with news instantly breaking and going viral, companies have to be able to communicate with shareholders, and address their questions and concerns, on a frequent, ongoing basis.
Lastly, mediated channels have become non-mediated. Historically, when corporate issuers or secretaries issued proxy statements, they could control the narrative through these mediated communications. But social media platforms like Reddit are non-mediated communication channels where investors can express opinions and post information in response to proxy statements, regardless of accuracy. This can make it extremely difficult for IR professionals to control the narrative and prevent untruths from going viral.
Expanding engagement parameters How can the different players in the IR industry – issuers, brokers, advisers and regulatory bodies – adapt to this paradigm shift? By harnessing innovative technology and all available communication options to meet investors where they are, however they prefer to be engaged. New avenues for driving engagement and participation align with what investors expect as consumers of other products and services. These include capabilities for allowing shareholders to vote their proxies through Alexa or use application programming interfaces to send notifications to shareholders through brokers’ apps.
But issuers and brokers can also create more meaningful engagement with shareholders by providing interactive tools that meet investors’ hunger for knowledge. The phenomenon of meme stocks, as well as the ongoing use of social media, demonstrate that investors want to learn more about the companies in which they invest. Unfortunately, the information they find on their own can be misconstrued.
For example, earlier this year, shareholders of special purpose acquisition company (Spac) Churchill Capital Corp IV misunderstood instructions for voting on the Spac’s proposed merger with Lucid Motors. Initially, very few shareholders cast their votes, mistakenly believing that not voting meant they sided with management’s decision to merge. After appeals were made for shareholders to vote, which pointed out the necessity of majority shareholder vote approval for the deal’s completion, approximately 98 percent of votes cast voted in favor of the merger.
Videos, animations, interactive Q&As with board members and other interactive features on company websites can give shareholders upfront and transparent communications that prevent this type of confusion. Meanwhile, the SEC’s changes to Rule 30e-3, allowing for the electronic availability of mutual fund disclosure documents, further cements the paradigm shift toward stronger, ongoing shareholder engagement, ahead of the 2022 proxy season and for years to come.
Sherry Moreland is president and chief operating officer of Mediant
Mediant delivers investor communications solutions to brokers, corporate issuers and funds. Our solutions are driven by leading technology and strict compliance with industry regulations, which allows clients to balance innovation with requirements. We enable brokers to effectively manage all potential touchpoints within the investor communications lifecycle – from proxy statements and prospectuses to voluntary corporate actions. We provide corporate issuers with turnkey proxy processing and we empower mutual funds, real estate investment trusts and insurance companies with a full-service, end-to-end proxy solution.
