Broadridge On Retail Voting

A Deciding Factor In Close Elections

Increasing pressure from ‘say-on-pay’ and shareholder activism is placing a premium on corporations’ ability to mobilize and influence the full spectrum of voters. While a wide range of shareholder services cater to institutional investors, the retail community has historically lacked the same level of engagement. That’s changing rapidly with the growing use of Big Data and more sophisticated analytical tools to monitor, target, and sway the individual investor.

More than 30% of the shareholdings of US public companies are held in retail hands, but only 29% of that segment voted in 2014, and retail participation hardly varies based on company size. This apparent impasse presents a major opportunity for corporations looking to bolster support for an array of strategic or sensitive initiatives. The retail base holds the potential for a significant increase in turnout – especially important in close proxy votes. While there are numerous institutional shareholder services available from software providers and information vendors, to date there has been little support for the retail community. As a result, many corporations have been limited in the segmentation of their retail investor base by the lack of granular information.

The value of retail shareholder data

There are three core reasons why corporations are increasingly leveraging retail investor data: 1) to better understand who their shareholders are; 2) to engage and influence shareholders; and 3) to gauge sentiment and voting patterns on key issues, such as executive compensation. Involving retail constituents is especially important for microand small-cap companies, for which individual investors represent 71% and 35% of the total vote, respectively. Without detailed knowledge of the prospective voter base, companies may not be able to complete a funding round or get approval for major corporate initiatives. In both these cases, the business ramifications could be highly significant.

Understand investors

Understanding retail shareholder behavior can have a significant impact to corporate governance strategies. Simply put, increased retail participation leads to more favorable proxy results. In a 2014 survey of directors by the consultancy firm PwC, 58% of directors said that even negative voting of less than 25% against would cause them to be concerned about re-nomination.

Influence perspectives

While more accurate targeting of investors can help change sentiment, the pre-requisite for any successful retail initiative is the leveraging of data to deliver greater insight. As a result, governance professionals can measure the response to communications, better understand prevailing sentiment, and take action when voting requirements and internal thresholds are at risk.

Increasing pressure from ‘say-on-pay’ and shareholder activism is placing a premium on corporations’ ability to mobilize and influence the full spectrum of voters. While a wide range of shareholder services cater to institutional investors, the retail community has historically lacked the same level of engagement. That’s changing rapidly with the growing use of Big Data and more sophisticated analytical tools to monitor, target, and sway the individual investor.

More than 30% of the shareholdings of US public companies are held in retail hands, but only 29% of that segment voted in 2014, and retail participation hardly varies based on company size. This apparent impasse presents a major opportunity for corporations looking to bolster support for an array of strategic or sensitive initiatives. The retail base holds the potential for a significant increase in turnout – especially important in close proxy votes.

While there are numerous institutional shareholder services available from software providers and information vendors, to date there has been little support for the retail community. As a result, many corporations have been limited in the segmentation of their retail investor base by the lack of granular information.

Gauge sentiment

As the retail shareholders’ participation becomes more important, the ability to analyze investor behavior over time, and take the necessary steps to capture additional share of mind, will become increasingly valuable. It will also likely increase the role and importance of investor relations professionals.

Data use cases

The ability to mobilize and influence the voter base is perhaps the most important reason for considering a more modern and dynamic approach to target individual investors. Take the case of a small West Coast provider of security technology. With retail voter participation languishing below 50%, the company needed greater insight into its retail shareholder base. The Investor Relations department considered hiring a lawyer, who recommended calling shareholders and sending reminders. But investing in analytics to inform and focus its outreach beyond its institutional shareholder base, the firm drove a 12 percent increase in retail voting participation.

In another example, a $10 billion equipment manufacturer with a global franchise was concerned about retail shareholder participation in future proxies. Its goal was to remain proactive and engaged with its shareholder base. Its strategy was to send out an interim communication to select targeted, high-value shareholders based on prior voting behavior. The results were remarkable: the targeted group now voted at a rate of up to 19%, depending on the delivery channel.

Making strategic decisions around a shareholder communication strategy requires intelligent use of data and analytics, which is increasingly possible in our digital world. Individuals are now using the internet for 68% of shares voted, and a majority of the voted shares of recipients who received communications are voted online. Of course, this retail behavior still lags well behind the institutional marketplace, in which 98% of shares are voted electronically. But therein lies the opportunity.