The Shareholder Revolution Will Not Be Televised. It's here, already: Online.
- Alexander Cohen, Urvin
Today’s financial markets are a paradox.
Financial markets are global in reach, teeming with information, and lightning-fast. Yet because of the sheer scale and complexity of their operations, markets can also appear unpredictable, indecipherable, and capricious.(1) Unfortunately public companies don’t have a choice - navigating this uncertainty isn’t a spectator sport, it’s an existential imperative.
Shareholder relations are no exception. In fact, they are attempting to navigate this uncertainty day-in and day-out. On the one hand, today’s retail shareholders are the most connected, informed, and diverse pool of retail investors in history. Yet, on the other hand, individual shareholders are elusive – hard to locate, difficult to understand and fundamentally disengaged. Like the markets themselves, shareholders often appear capricious.?
The disconnect that exists between shareholders and companies is an anachronism - a relic from a pre-digital era. And despite its persistence, it is a disconnect that is finally solvable. The technology for companies to build rich, persistent, and deep relationships with their shareholders exists.?
The shareholder revolution will not be televised; it’s already here, online. But before we get into what’s new, let’s talk about the old.
Out with the Old: Disengaged Shareholders
Consider the following …
Shareholder Proxy Voting
Shareholders vote - at least in theory - to have a say in corporate governance and to impact the direction of their investment. However, the current system undermines this somewhat straightforward if not lofty goal, especially when it comes to individual investors.(2)
“The current voting solutions are opaque, expensive and often still paper based. Given modern technologies, how comfortable people are using them, it’s time shareholder governance took steps to modernize.” Dean Little, CEO of Proximity (3)
Today, proxy advisory firms, institutional investment fund managers, and activists can play an outsized role in shaping voting outcomes and public narrative. Recent headlines bear this out.(4) While some of these entities are guided by sound research and empirical findings, many others carry biases and conflicts-of-interest into their role as voting delegates. To achieve these conflicted ends, some even endeavor to buy shareholder votes.(5)
This is made possible by Shareholder Disengagement. Shareholder Disinterest. Shareholder Indifference.
All too often, retail investors are either entirely unaware of their voting rights or entirely uninformed on the issues at stake in shareholder votes.(6) It’s not because of companies’ lack of effort - shareholders by the millions are sent educational materials and proxy voting ballots. Metric tons of paper mailings flood the system. But who reads them, let alone responds? How much ends up mostly unread, in the landfill??
There’s no need to guess, we have the answer. The vast majority of individual shareholders abstain from voting, with only 25% of retail investors participating in shareholder voting - compared to 90% of institutional investors.(7) Ultimately, this dynamic largely cedes critical corporate votes and relinquishes corporate decision-making to institutional investors - or activists - who may represent a small but relatively loud minority of shareholders.?
Everyday investors have been taught to believe their votes don’t matter, particularly against the outsized voting power of institutional investors. It doesn’t matter that it’s not true - individual shareholders contain tremendous combined power - the result becomes a self-fulfilling prophecy. Shareholders believe they won’t be heard, and forfeit the chance to use their voices.?
Unclaimed Property
Make no mistake, it’s all about the money. With over $70B already sitting in state coffers, increasingly cash-strapped States are enacting draconian abandoned property policies as a source of revenue.(8)? Much of this newfound revenue is taken from individual shareholders deemed prematurely to have abandoned their accounts, primarily people who lost touch for one reason or another. Life gets in the way. For most companies this represents more than just a monetary cost - it’s often accompanied by reputational risk and potential harm. People become angry when they feel they’ve been robbed, and the only way to avoid it is clear, consistent and persistent communication.
However, the mechanisms and existing strategies for notifying shareholders leave much to be desired. Many who have been dispossessed of their assets become angry and disillusioned with markets, even if they manage to recover their property. Until now, engaging shareholders with “unclaimed property”—an estimated 33 million Americans—has been a practical and logistical impossibility. Technology can help to solve this problem. Companies can meet people where they are - online - versus sending mail to a last known address, where you hope they’ll be.?
Cross-marketing
Customers who feel connected to brands are more likely to increase their spending and 76% more likely to buy from them over a competitor.(9)? That makes intuitive sense, people like supporting the brands that they, well, support. This support can take a lot of forms. Whether it’s investing, buying goods or services, spreading word-of-mouth marketing, or filling out surveys, people can and will “support the team.” They’re hardwired to; we all seek out community. However, there are several challenges when cross-marketing to shareholders. Companies struggle to find ways to effectively identify their individual shareholders in a meaningful time, place and manner. And even once identified, reaching shareholders can be an exercise in futility. And then what?
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The opportunity for cross-over between shareholders and consumers is ripe. Shareholders have the innate potential to become a company’s most loyal customers, and to help share its future.
In with the New: Engaged Shareholders
The highly-anticipated, much-discussed Great Wealth Transfer has begun.(10) The good news for public companies is that this has led to an upsurge in direct ownership of stocks - the largest change ever according to the Federal Reserve. Since 2017, the number of families that directly owned stock rose by 40%, and now number over 1 in 5 households.(11)
Beyond that, who are these new shareholders? Not in general, but specifically: who are your new shareholders? Do you know? Are they the same as the old? Are they just a random amalgamation of apparently unrelated individuals? Are they a concentrated community of deeply engaged supporters that might be able to satisfy your every shareholder services’ wish? Who are they really? And, more importantly, should you engage with them??
Spoiler alert: Today’s investors are a new breed of digital natives, and if you haven’t started engaging with them, now is the time.(12)
Right now, on a day-to-day basis, building an understanding of retail shareholders is a near impossible task - with thousands of metaphorically blank faces staring at you, all just names on a list. The lack of connection, the lack of depth, the lack of understanding, is all derived from a lack of visibility and transparency. This makes the work of engaging shareholders particularly inefficient, time-consuming, and less impactful than it could - and should - be.
Shareholders are changing, and so must you.
As co-founder of Urvin, I’ve experienced firsthand the shifting perspectives and attitudes of retail investors. Over the past years I’ve engaged with tens-of-thousands of individual investors, hundreds of companies, members of Congress and leadership at the SEC. Everywhere I look I see the winds of change in favor of the individual investor, and it’s not an accident. It is part of the clear and mounting evidence that a growing number of shareholders want to engage with the companies they invest in. Many of them already are.
Generations of investors are coming of age with expectations about the availability of information, the transparency of processes, and the accessibility of the companies they invest in. This is creating a new kind of shareholder - active and engaged.? The challenge today is bridging the gap between their desire and an actual way forward.
The Technology: Connecting Shareholders?
Bots accounted for almost 50% of all internet traffic in 2022. Think about that for a second. We hear about bots and artificial sentiment all the time, but what does it mean? It means that - among other things - the value of your company’s online ad spend is greatly diluted. It means the online arena is filled with inauthenticity, bias, and potentially malicious manipulation. The rising presence of bots is not only an alarming trend, but makes shareholder engagement that much more difficult. In an environment where reaching shareholders is already a near impossible challenge, the growing din of non-human noise threatens to drown out the sound of real information and engagement. That’s yet another problem public companies face. But this one is solvable.
As a result of this online chaos, many companies are justifiably wary of doing more than the minimum online. Wisely, very few enter the deep end of social media spaces in any attempt to engage with shareholders. With no certainty of authenticity, and no controls, the risk/reward isn’t there. But what if certainty emerged and authenticity could be guaranteed? The rewards of genuine - verified human - shareholder engagement become more and more compelling. Public company goals become achievable.
Technology exists today to build verified shareholder communities—bringing together active, online investors who want to engage. Safe, secured, verified environments with actual, real, human beings.
Technology exists for retail investors to access shareholder materials and proxy statements in an environment rich with data, information, and tools.?
Technology exists to create a forum for finding, maintaining, and recovering shareholders, for engaging in real-time dialogue, and for stimulating shareholder participation.?
It’s not a pipe dream, it’s here today.
Companies like Urvin have built this new technology for the benefit of issuers and shareholders alike. We see these communities as a powerful new way to build meaningful connections between retail investors and the companies they invest in.
The shareholder revolution will not be televised, it's here already - online. Are you prepared?
You can reach the author at: [email protected]
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