The Age of the Shareholder

Small and growing companies increasingly rely on the loyalty of investors to stay afloat, bringing the importance of solid communication between companies and shareholders to an all-time high.


Over the past 40 years, shareholders have been steadily gaining influence over the companies in which they invest. In a LinkedIn piece by Nikolas P. Gilding, the Unquoted Limited Managing Director argues that companies are more focused on building long-term relationships with their investors than ever before.


You may have assumed that companies have always placed a very high priority on shareholder knowledge and perceptions, but a quick look into the recent past reveals why that emphasis has been heightened even further. The Harvard Business Review has outlined the recent shift from managers making unilateral decisions to a philosophy that increasingly puts the investors first. Let’s take a look at the philosophical and practical reasons behind this significant trend in business.


The Public’s Perception of Business

A renewed demand for regular and transparent communication from public companies stemmed from very public corporate scandals in the 2000’s that left shareholders out to dry. The collapse of Enron and the conviction of stockbroker Bernard Madoff demonstrated that new controls were needed to prevent fraud.


This, in combination with the implosion of CDCs that brought about a deep recession in 2008, has made shareholders more determined than ever to know more about how their investment is being used, as the Harvard Law School Forum explains.


For larger companies, much of this determination has manifested as formal regulation. Gilding writes that “robust financial market regulation and corporate governance guidelines have required a more wide-ranging and open dialogue between issuers and investors.” The Dodd-Frank Act of 2010 is an example of such guidelines: among other things, the bill protects shareholders from the misuse of funds by allowing them to vote on executives’ remuneration.


Smaller companies, on the other hand, have heightened responsibility for shareholder communication. Unbound by many of the regulations that apply to major financial institutions, mid- and small-cap companies are typically paid little attention by analysts and must therefore communicate important developments proactively to stakeholders.


The dangers associated with poor communication are not to be taken lightly. No company wants to have angry shareholders speaking out at their AGM or withdrawing their investments altogether. Possible consequences could be even more dire: the New York Daily News describes how “furious shareholders” filed lawsuits against Toyota when the company failed to effectively communicate the extent of a technical problem their cars were experiencing.


Mobile Platforms for Communication

Some businesses, conscious of keeping investors fully-informed, are wisely moving toward a communications strategy that utilizes native mobile apps. The mobile platform has enormous IR potential for most businesses, allowing them to put information at their shareholders’ fingertips quickly and efficiently. This is especially important for smaller companies, which must take full responsibility for the safety of their shareholders’ investments.


To that end, the relative ubiquity of the mobile app is significant: Nielsen has reported that the amount of time that people spend on smartphone apps is well over 30 hours per month. Moreover, app usage rates dwarf the amount of time users spend on the mobile web, according to Smart Insights — in other words, though mobile optimized websites are still an important part of any comprehensive IR program, an app can far more easily grab your shareholders’ attention.


Given the power of the mobile app, companies worldwide are using this platform to communicate with more than just their investors. Apps also provide a direct channel to journalists, research analysts, board members, or really anyone with an interest in the company.


Customized investor communication platforms like ShareholderApp allow stakeholders to access the information they want in a highly-accessible and convenient format. Target audiences are instantly alerted via push notifications whenever significant news is released, and these apps also allow for seamless, one-touch access to relevant documents, presentations, and press releases.


We’ve entered an age in which shareholders expect to be kept up-to-date via the platforms they use most — and native mobile apps offer a happy meeting place for them to connect with the companies they invest in.




(Main image credit: leep/flickr)