A new approach to shareholder engagement

A new approach to shareholder engagement the Shareholder Value Proposition

21 March 2017

A new platform for stakeholder engagement - Shareholder Value Proposition

Given the increasing complexity and volume of information available to investors as a result of regulatory, competitive and community engagement requirements, we believe there is a more strategic and proactive approach to engaging the multiple shareholders companies have, and that one size does not fit all.

Best practice shareholder engagement has become a year round process, not just something the investor relations or corp comms team focuses on twice a year. While the Annual Report and Half Year Report remain strategically important the changing investor communications dynamic has means constant and different levels of scrutiny across investor groups. Whether it’s about shareholder value, executive pay, financial performance, transparency in your reporting, your ESG strategy, dividend policies, future growth prospects, different stakeholders want to and do access and engage different levels and types of information all the time.

Companies often approach us to help them address their Annual Reporting needs. As a result of working with hundreds of companies we believe many are approaching their shareholder communications as a functional task rather than as one part of their company’s total communication with shareholders.

In discussing this with our clients we realised that in terms of the information/communication shareholders receive, for many companies there is no underlying platform that connects a company’s shareholder communication to the strategic intent of the business across the corporate communications, investor relations, marketing and sales areas.

This has two main impacts for a company’s shareholder communications messages.

  1. Key messages are fragmented at best and could be contradictory at worst;
  2. Companies often aren’t aware of just where and what information shareholders are sourcing, a scenario that sometimes leads to a reactive approach to investor communications (especially in the case of activist investors).

Knowing your investor audiences – and knowing how, why and where they consume information about your company – needs to be a core knowledge platform shared across the key communications touch-points in your company. Why? Because the benefits of investor confidence beyond share price can provide some resilience within your investor groups, especially when faced with any external market forces, times of internal change and in dealing with major events.

Building a Shareholder Value Proposition approach
At the core of our Shareholder Value Proposition (SVP) approach is the belief that investors are not people companies have to engage, they are people who have a close interest in your company that you need to create a relationship with. As with all relationships, this requires understanding the needs and motivations of the other person, communicating in a way and frequency that they want and sharing relevant information.

‘By undertaking a deep dive into what, how, where, why and when your shareholders engage information about your company we, and our clients, are significantly better equipped to create and deliver communications, how, when and where they want.’ Jennifer Armstrong, Creative Director

All your investor touch points and communications channels must provide a consistent and mutually reinforcing Shareholder Value Proposition with content optimised specially for each channel and audience.

The challenge of multiple stakeholders
The challenge for listed companies is that simply can’t engage all shareholders individually so you need optimise your content specifically for each audience and channel. To do this you need to:

  • ensure your shareholder base is segmented into meaningful groups;
  • develop strategies and actionable content programs to engage the different groups at specific times;
  • deliver the appropriate communications pieces across the various platforms/channels; and
  • share the overall strategy and goals across the company’s investor, corp communications, marketing and HR teams.

Applying our SVP approach we work with our clients to develop a holistic strategy for their shareholder communications based on a thorough understanding of the different shareholder groups and information platforms. Our clients then roll-out the communications to each group on the platform and frequency identified, and in the content form and style the specific audiences respond to. Engagement is reviewed, responses managed and feedback gathered.

Most importantly, our SVP methodology ensures that the overall messages, key financial and non-financial information are integrated throughout all communications, re-purposed and presented in the style, format and platforms each investor group responds to best.

Delivering best practice shareholder engagement
In 2017 we want to encourage companies to be proactive about developing a Shareholder Value Proposition and a more rigorous approach to evaluating what information, in what form and what platform, their various shareholders want. As Rivel Research Group noted: ‘Investor Relations can account for a total variance of 35% in a company’s valuation – ranging from a premium of 10% for ‘superb’ IR to a discount of 25% for ‘poor’ IR.’

Source: Valuing IR. IR’s Impact on a company’s valuation. Rivel Research group, Q1 2010 White Paper.

Your shareholders can be your greatest advocates or detractors. Improving how, when and what you communicate to them can deliver a stronger, more supportive shareholder group as they are better informed and better able to understand your strategic decisions, share price fluctuations and inevitable negative commentary.

Truly value your shareholders and they’ll provide a stronger, more resilient shareholder group. This benefits your business as it supports a medium to -longer term planning approach to your business strategy. We’d welcome the opportunity to have an initial discussion with you.

If you’d like to explore our Shareholder Value Proposition methodology please call Carlton Boyse on 9262-2130 or carlton@armstrongq.com.au