Ways to “Optimize” Your Retail Shareholder Base

Margaret (Peggy) Foran, Chief Governance Officer, Senior Vice President and Corporate Secretary of Prudential Financial, Inc.

“When Prudential became a publicly traded company in 2001—after being a mutual insurance company that was owned primarily by policyholders—let’s just say we had ‘many millions’ of retail shareholders. Most of them had relatively small ownership positions, but as a group, they constituted a significant part of our population of potential voters and of our spending budget. For many of them, this was the only stock they owned, and many of them did not realize they now owned stock and what that entailed. Communicating with them was extremely expensive, and it was difficult to know if we were really connecting with them at all. Finding new and better ways to actually engage them— and to better manage the expenses of doing so—was very important to us.

“Our ‘Bag or Tree’ campaign—or what many people have been calling ‘Trees or Totes for Votes’ was one of our first big steps and was a huge success. Not only did we increase the retail investor vote, we encouraged investors to ask us questions on the proxy card and to give us feedback, which made many of them feel connected and actively engaged with us, as we’d hoped. It also had and still has a very useful ‘canary in a coal mine’ aspect, which is an added benefit.

“We also began to work harder on all the forms and letters that we and our transfer agent sent—not just to simplify the language but to shorten and simplify the process of doing things, like updating addresses or settling small estates. Very much worth noting, we launched a special sales facility that made it easy and inexpensive for small shareholders to cash out. We get some incredibly moving letters from people who had not known the value of the shares they had, much less how to get at it. One shareholder wrote that she ‘desperately needed a new furnace, and prayed to God for a solution.’ For her, and many other small shareholders like her, our letter regarding the sales facility was truly a godsend.

“We discovered that a significant percentage of our retail shareholders do have other stocks, and brokerage accounts of their own. So periodically we offer information, and a quick and easy way to move shares to a brokerage account—and we offer a $5 Starbucks gift card as an added incentive. I call it ‘the gift that keeps on giving,’ since we achieve savings in recordkeeping, communications and related out-of-pocket expenses year after year.

“Two years ago, we decided to look at all of our shareholder servicing programs from a totally fresh perspective. Rather than issue a long RFP with dozens and dozens of questions, we outlined our somewhat unique history, assembled the key facts and figures about the plans and programs we had in place, and asked a small set of service providers to give us ideas on how we could do things better and more cost-effectively—and how, exactly, they could help us get there. Perhaps the most amazing thing to me was how many people we had throughout the company—and at our transfer agent too—that were carefully monitoring and double-checking one or two very small things, but how few experts we really had when it came to the entire picture. So I’d urge you to find and engage an expert in the field to help you if you do something similar. Equally amazing was how many good ideas we got. We were able to simplify and streamline things that saved significant amounts of time and money on both sides and, best of all, made us feel we were ‘optimizing’ our efforts.”