Proxymity takes a wide-angle look at how digital proxy voting can help companies move beyond box ticking when it comes to environmental, social and governance (ESG).
With activist shareholders and disgruntled boards battling it out in boardrooms across the globe in 2022, investors will be unlikely to sit on the sidelines when it comes to debates over corporate governance in 2023.
However, the current system responsible for allowing investors to voice their concerns or provide them with visibility or influence over where their money is going, is ultimately failing.
Consequently, disengaged shareholders and board directors have failed to come together to address the pressing ESG challenges which many listed companies are facing.
However, one such solution to this problem could be provided by digital voting technologies, which promote enhanced ESG by improving communication between issuers and investors, and therefore facilitates effective engagement between the two groups.
Delving further into the capabilities and application of such a solution here is Dean Little, the co-founder of the digital investor communications platform Proxymity.
Proximity’s recent deal with Blackrock for its digital proxy voting service, Vote Connect Total, is being dubbed a ‘revolution in shareholder democracy‘ and signals a dramatic shift in the future of investor relations.
As highlighted here, Little believes that the key to any healthy investment ecosystem is a transparent and effective system of shareholder democracy, and that digital proxy voting can help companies move beyond box ticking when it comes to ESG.
Transforming investor relations: How new technology is connecting companies and their shareholders in real time
As we begin a new year, macro-economic headwinds, geopolitical tensions and the fear of a global recession continue to loom, with the World Bank expecting the economy to grow by just 1.7 per cent this year, down from three per cent in June 2022.
However, the market is not devoid of investor optimism, with global inflation stabilising and the expectation that central banks are nearing the peak of their monetary tightening programmes.
Under these circumstances, and with ESG targets now carrying significant weight in many corporate mandates, public firms are looking to step up their communication with their shareholders.
And so with AGM (Annual General Meeting) season on the horizon, transforming shareholder engagement to foster trust and establish enduring relationships is higher than ever on the agenda.
Investors drive toward increased accountability and communication
ESG has played a growing role in influencing where investors choose to deploy capital, with many wanting to know that their portfolio companies have a beneficial influence on society and are governed in ways that are consistent with their beliefs.
Moreso, shareholders of all types and sizes are increasingly looking to play a role in shaping the sustainability, impact and ethics of their companies and ensure their vote counts where it really matters.
Investors are also understandably anxious about the macroeconomic environment, as seen by the 69 per cent year-over-year increase in profit and cost warnings issued by UK-listed companies in the third quarter of last year.
These concerns were confirmed when 28 UK-listed businesses were labelled as being in the ‘danger zone’ after posting warning profits three times in the previous year, increasing investor scrutiny of CEO and board choices.
The media has widely reported the role activist hedge fund investors have played in recent years in promoting corporate changes. Retail shareholders have, however, seldom had a voice until lately, as leading global asset managers, such as BlackRock, are looking to offer them more input during proxy season.
The challenge: revitalising the IR and asset servicing ecosystem
Increased accountability and transparency in investor relations (IR) would help investors feel secure about their investment and more connected with the company’s goals, however, most issuers, investors and intermediaries agree that the corporate governance ecosystem must be updated with new tools and technology to enhance communication and foster more timely collaboration.
For years, traditional investor communication has used manual processes that lack transparency and frequently aren’t time-effective, and raise the risk of human mistake and non-compliance. Issuers are often unable to immediately inform investors of voting action, as they must rely on outdated, paper-based proxy voting processes and technologies that can hinder efficient communication and – in issues that arise – require expensive investigations into voter behaviour.
For investors, this antiquated approach provides minimal time to study their alternatives and make judgements before voting deadlines, and can even leave them uncertain as to whether their vote was actually recorded in the meeting.
Made up of multiple institutions that service and safeguard investors’ and issuers’ interests, the asset custody and investor relations ecosystem has always been complex and interconnected. And yet to allow businesses to engage and empower their investor base, barriers must be removed throughout, a challenge that has seemed too great in the past.
The digital process pioneers
But today, supported by industry-wide cooperation and the latest technologies, a digital process is finally able to allow real-time communication between issuers and investors.
New end-to-end digital systems, like Proxymity’s Vote Connect platform, can connect issuers, investors and intermediaries throughout the IR ecosystem with reliable ‘golden source’ information and accurate reconciliation of shareholdings straight through the custody chain.
This seamless communication provides true digital confirmation to all investors that each vote has been recorded, and empowers issuers to deliver rapid meeting notices, and to proactively collect the opinions of their informed and vocal shareholder base, in minutes or hours rather than days.
This allows them to give serious and timely attention to as many shareholders as possible, and for communication to be two-way.
The future is digital, accurate and real-time
The future of shareholder democracy is digital, where all shareholders, regardless of size, can get regular information on company affairs and make sure their voices are heard effectively. This will enhance governance and result in healthier, more sustainable public organisations.
In addition to the technological tailwinds supporting this trend, it will take continued cooperation from businesses throughout the investment ecosystem to take shareholder democracy to its next level. The case for accountability, integrity and transparency in governance has never been stronger.
The new generation of proxy voting and investor communication technologies are already providing direct benefits to issuers, investors, and other players in the IR ecosystem, and as more organisations connect through these digital networks, they will unlock additional efficiencies and insights across markets globally.
