How good investor relations makes for good governance
By Dean Little, CEO of Proxymity
This 2024 European voting season, it is important to revisit and learn lessons from this time last year. 2023 illustrated that a strong working relationship with shareholders is critical not just for its fiduciary benefits, but also for making a valuable contribution to the actual running of a company. Thankfully, corporate senior managers are now in a position to leverage the latest technology in digital investor communications to maintain a clear and open dialogue with shareholders and ensure that true shareholder democracy is realised, not just at the AGM, but throughout the fiscal year
Talking helps
One of the primary benefits of good investor relations is the financial stability that it gives companies. Building up trust in a company’s business model and leadership makes a company far more financially resilient; better able to weather reversals or general economic downturns. A reputation for good relations with shareholders will then, in turn, do much to attract new investment.
What is seldom discussed is how good investor relations can lead to a better-run business. Shareholders have, in a literal sense, a stake in the future of a business – and a successful one will take full advantage of this relationship through ongoing dialogue.
For one, shareholders are often sector insiders themselves, or seasoned businesspeople. As such, they can be an invaluable source of feedback and expertise for any listed company. Regular informal communications – such as forums, seminars, or ‘Town Halls’ – are an excellent way to sound out ideas from an informed and motivated audience.
Indeed, this kind of communication is important if CEOs and boards are to avoid becoming insular, set in their ways, or mired in ‘groupthink’. Regular contact with shareholders increases a sense of accountability and transparency amongst corporate leadership, helping to promote best practices throughout a company, correct errors, and subject a company’s business model to regular scrutiny.
Talking past each other
Unfortunately, most companies are currently not logistically capable of reaping the full benefits of good relations with shareholders. This has much to do with the current systems of proxy voting and AGMs, which are often disjointed – with many of them still relying on traditional methods.
As a result, it is very difficult for companies to maintain any kind of consistent and transparent contact with their shareholders. Disconnected systems mean that investors often have precious little time to think over key decisions. Such systems also make it very difficult for corporate leadership to give regular updates, solicit feedback, or provide key information. This can lead to surprise and in some cases, unhappiness come AGM season and as other meetings are announced during the year, with shareholders abruptly learning of policies, practices, and strategies. There is, in other words, a direct link between outdated systems and sub-optimal investor relations.
Opening channels of communication
It is clear, then, that open and consistent dialogue with investors is key for any listed company. The way to achieve this is through a new technology-based approach to investor relations. We at Proxymity view this as our mission: to provide the digital tools to put relations between listed companies and shareholders on a surer foundation, providing both transparency and accuracy in real time.
More generally, a digital online dashboard for investor relations would help build a strong working relationship. A real-time flow of information from the golden source would instantly transform investor relations. Such a solution would allow leadership to seamlessly send along documents, reports, videos, speeches, and other materials to those they want to bring along. This would also create the infrastructure for deeper cooperation: allowing shareholders to give their insights, and for leadership to hear them. Equally, Issuers will benefit from early sight of voting intentions and quite simply early receipt of actual votes.
Shareholders have a positive contribution to make to any firm. The infrastructure of investor relations must now catch up; allowing for relationships to become collaborative rather than adversarial.
Jesse Pitts has been with the Global Banking & Finance Review since 2016, serving in various capacities, including Graphic Designer, Content Publisher, and Editorial Assistant. As the sole graphic designer for the company, Jesse plays a crucial role in shaping the visual identity of Global Banking & Finance Review. Additionally, Jesse manages the publishing of content across multiple platforms, including Global Banking & Finance Review, Asset Digest, Biz Dispatch, Blockchain Tribune, Business Express, Brands Journal, Companies Digest, Economy Standard, Entrepreneur Tribune, Finance Digest, Fintech Herald, Global Islamic Finance Magazine, International Releases, Online World News, Luxury Adviser, Palmbay Herald, Startup Observer, Technology Dispatch, Trading Herald, and Wealth Tribune.