In this guest article, Dean Little and Jonathan Smalley, Co-Founders of Proxymity, discuss the importance of effective shareholder communication and proposes digital solutions like Proxymity to enhance engagement, transparency, and accountability.

Archie Norman, Marks & Spencer’s Chairman and former Conservative MP, recently wrote an open letter to the Government in which he argues that UK companies were “rapidly losing sight of their investors.” There is no denying the fact that outdated shareholder communications are a significant barrier to effective investor engagement.

Companies need to do more to communicate effectively with their shareholders and build stronger relationships that are beneficial to both parties. Digital technology solutions, such as Proxymity, can streamline shareholder engagement and fix faulty proxy voting processes.

Building trust

The importance of shareholder communication cannot be overstated. Effective communication helps to build trust and accountability between boards and their shareholders, which is essential for sustainable business growth. Shareholders invest in companies with the expectation of a return on their investment.

As such, they have a vested interest in the company’s financial performance and long-term success. Companies need to provide their shareholders with regular updates on their performance, growth plans, and risk management strategies to keep them informed and engaged.

Moreover, shareholder communication is vital for corporate governance. Shareholders play a crucial role in holding boards accountable for their actions. Companies that have a strong shareholder communication strategy are better positioned to respond to shareholder’s ESG concerns, engage with their stakeholders, and manage risks effectively. In turn, this helps to build a stronger and more sustainable business.

However, the traditional proxy voting system has failed to engage shareholders effectively. The system is slow and complex, with outdated paper ballot systems and communication methods considerably hampering shareholder engagement. Shareholders have little visibility over where their votes are going and what impact this will have.

As a result, they have become increasingly disengaged, leading to a vicious cycle of proxy voting seasons that fail to rally shareholders to address some of the most pressing social, environmental, and governance challenges that companies around the world face.

New technology transforming shareholder engagement

This is where digital communication platforms come in. Digital communication platforms provide companies with a more efficient and effective way to communicate with their shareholders. Platforms such as Proxymity’s can transform the way in which companies engage with investors. Proxymity has already been adopted by over 65% of FTSE 100 companies, showing the real appetite for new communications technology.

Digital communication platforms also provide a platform for easier issuer and shareholder engagement. Digital proxy voting represents the foundation for more effective communication between boards and their shareholders. By improving proxy voting plumbing, companies can increase

transparency, and build stronger relationships that are beneficial to both parties. Shareholders can access relevant information more easily, engage with management, and participate in proxy voting effectively.

Furthermore, digital communication platforms can unlock the power of retail shareholders. Retail shareholders have traditionally been overlooked by companies due to the comparatively high costs of engagement. Digital communication platforms, however, make it easier for retail shareholders to participate in proxy voting and make informed decisions about where to invest their money. This can be particularly beneficial for smaller companies, which rely on retail shareholders for funding.

Responding to shareholder activism

The rise of shareholder activism in recent years highlights the growing gap between boards and their shareholders. Activist shareholders seek to influence the direction of the company and hold boards accountable for their actions. Companies that have a strong shareholder communication strategy are better positioned to respond to activist shareholders, engage with their stakeholders, and manage risks effectively.

The need for companies to fix their faulty proxy plumbing to better communicate with shareholders this AGM season cannot be overstated. Companies that embrace digital investor communications will be better positioned to engage with shareholders, build trust and accountability, and drive sustainable business growth.

The rise of shareholder activism and the increasing demand for change in UK proxy voting highlight the urgency of this issue. It is time for company boards to take action and adopt new technologies in order to build a stronger relationship with their shareholders.

This article was originally published on Business Leader.