Could Perks Be Helpful? Educating the retail investor is a core part of the process to increase proxy voting participation, but would incentives also help draw the vote? Watson recalls how Lindt Chocolates for many years of- fered voters chocolate for casting a vote whether they voted with or against management. Financial institutions such as banks, she says, have donated to charities of the shareholders’ choice for voting on the proxy. “Progressive issuers,” Lambert notes, “are discovering the best
way to get retail investors to vote is to build direct relationships and give them rewards of ownership, shareholder discounts, loyalty points, VIP status or access to management. Every shareholder is a consumer and they are hungry to be invited to the party.” Tat’s the key here. Lines are often blurred between shareholder and stakeholder or shareholder and consumer. It is not just how a company is performing financially, but how people view and think about the product. Levin, who has been closely following Starbucks’ labor issues, explains that the Starbucks Workers United Union launched a proxy contest on behalf of Starbucks employees requesting three directors’ seats. “Running three candidates hasn’t been done in a long time,” Levin notes. “Tere are going to be Starbucks shareholders [and in turn Starbucks consumers] who get excited about that and want to vote.” Will Starbucks give out free frappuccinos for casting a vote? Likely
not, but the blurred lines between shareholder and consumer might be enough to increase retail participation in proxy voting. Goldstein reminds issuers who may want to leverage perks or rewards that “it’s essential to navigate the delicate balance between motivating participation and adhering to regulations. Prudential, for example, found a compliant way to acknowledge proxy participation by al- lowing shareholders to choose a ceremonial gift, either a branded tote bag or planting a tree in a shareholder’s name. Tese gestures serve as tokens of appreciation rather than incentives tied to the direction of one’s vote.”
What This Means for IROs As an investor relations officer (IRO), I like to pride myself on what I call “seeing around corners.” Not just thinking about what may happen today or tomorrow, but what I need to prepare myself and my company for several years down the line. BlackRock’s Voting Choice pilot for retail offers IROs the unique opportunity to plan and think proactively about shifts in corporate governance that are taking place now and in the future. At a minimum, it is essential that IROs understand their
shareholder composition. What percentage is institutional ver- sus retail? Within that retail base, which investors hold shares
3 2 SPRING 2 0 24 ■ IR UPDAT E
directly in their own registered name and could vote the proxy individually and which hold shares through a fund like IVV and may now consider Voting Choice? Te important part of this exercise is not to wait until the week
of your AGM. Be passionate about year-round engagement with your shareholders—educate them 365 days a year so panic does not ensue at proxy time. If there’s an issue that shareholders— institutional or retail—are concerned about, then this is some- thing the IR community and their support teams—in-house and external counsel along with proxy advisors—should be thinking about months in advance of the annual meeting. Valerio encourages issuers and their IR teams to provide
“regular touch points with retail investors throughout the year so that they are conditioned to receive communications from the company. We can then utilize those same communications channels and techniques to articulate the importance of voting and voting in line with the board’s recommendations on the various shareholder meeting agenda items.” Remember though, in the case of Voting Choice, there is no
direct communication with the underlying fund holders. Regular touch points can be used for those registered shareholders that hold shares in their own name or via a broker dealer. New meth- ods of communicating with fund holders are in development. Even if there are limitations on communicating directly with the underlying funds holders, Lambert believes that issuers and their IR teams should “ignore retail investors at your peril. Tey are growing their stake and influence in your company and should be treated as the owners and consumers they are.” At the same time, retail cannot be ignored. Conn notes that
the “IROs have an opportunity to shine by understanding the potential impact of various voting choice programs. Whilst IROs cannot prevent the rollout of these new fund-related programs, they need to embrace this new dynamic of influence. Tey can then retain control of their company’s corporate strategy and their own destiny.” Tere is consensus that the trend towards empowering retail
investors with more direct involvement in the proxy process will continue. Tat is our destiny. Coates emphasizes, “I do think more index funds will continue to experiment with different ways to allow them to have some influence in a cost-effective way.” If this trend continues, then IROs should be prepared to tailor their communications strategies accordingly. While the underlying themes of the issuer’s messaging should remain the same whether directed to an institutional or a retail investor, the methods, and platforms in which IROs communicate with the retail subset are different.
niri.org/ irupdate
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