The ascent of activist investors and the need to adapt to board-to-investor communications are producing drastic changes in the way companies interact with their shareholders.
THIS IS PART THREE OF A SERIES: read Part Two.
QUESTION > How have social media and technology affected shareholder communications? How are you advising clients?
John Viglotti > From an investor’s standpoint, a company’s website is one of the first places they go when researching a company, and companies are enhancing how they present corporate governance issues online. Coca-Cola is a great example of a company making their proxy materials more accessible in a graphically enhanced and finger-friendly format for investors using mobile devices, making it easier for investors to “meet the board” and find the issues of importance to them. Last year was the first time I saw companies include video in their proxy. Prudential and GE have incorporated video from their lead independent director in their online proxy, providing a more engaging method to present the board’s view on proxy issues.
Another trend is the continued growth of mobile activity. Two years ago, traffic from mobile devices to the investor relations websites that we host for public companies represented 16% of overall traffic. This January, the percentage of overall traffic from mobile devices was 45%. Accessing 150-page black-and-white PDFs from a smartphone or tablet is not an inviting experience for investors. We expect to see an increase in mobile-friendly shareholder communications and greater use of video to communicate the company’s story and the board’s position on proxy issues.
Chris Ruggieri > It’s an interesting question, because before now, companies have been cautious about using social media as a communication medium with investors – primarily because of legal and confidentiality concerns. Of course, social media is a great medium, and it’s one that increasingly pervades all aspects of our lives. But it’s also something that is difficult to control. As a result, I think many companies have been cautious when it comes to leveraging social media as a communication vehicle with investors.
Companies are clearly using it for purposes of building their brand in the marketplace and engaging with customers, but when it comes to investors, I think the mindset has been to learn, get confident with the technology, understand its advantages and limitations, and only then deploy it. They want to make sure that it adds value to their dialogue and doesn’t put the company or its investors at undue risk.
Lex Suvanto > Technology has certainly created more communications platforms for companies and investors. We’re building websites more frequently for more clients and in more situations – it could be websites devoted to certain company initiatives or for activist investor situations, for instance. These are becoming part of the standard approach.
Another innovation is in targeting: whereas in the past you put out a press release or did an investor call and hoped the right people were tuning in, with digital technology there are ways to execute more targeted programs. You can use resources such as LinkedIn, Twitter and paid advertising to target audiences in terms of geography and other areas.
Kai Haakon E. Liekefett > The last innovation I would mention is video, which is becoming more a viable and credible vehicle for shareholder communications. We’re starting to see companies experiment in a serious way with building videos for investor relations purposes, and that is starting to change the approach to messaging. A press release is a written document of a certain length, while a video is something entirely new in terms of length, approach and also entertainment value. One way to think about video creation is to imagine you were in the TV industry, because it is a form of entertainment, and it requires that companies communicate things in a concise and engaging manner.
We are still very cautious about using social media for shareholder communications. In most industries that I work in – banking, insurance, oil & gas – it’s really not the vehicle you want to use to communicate with your shareholders. Typically, you’re only focused on your top 10-15 institutional investors anyway, so sending a tweet is not the way to reach their hearts and minds, let alone their wallets.
As for shareholders using social media, it has been used in a handful of cases but is still not very prevalent. And that’s for the same reason – obviously everyone was fascinated when Carl Icahn started doing it, but unless your company has a huge retail component in your shareholder base, it doesn’t matter that much.