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Use of available relationship management tools to win support of investors


Note: Broadridge Financial Solutions, Inc., whose executives are quoted in the article below, provided leadership support of the Forum's 2010 "E-Meetings" program that established marketplace standards for the use of electronic communications in shareholder meetings, and that stimulated the Forum's subsequent 2012 "Fair Investor Access" program with the initial purpose of supporting expanded applications of electronic communications and related analytics.

For the initial Broadridge-PwC report of analytic data referenced in the article, see


Source: NACD Directorship, September 2013 cover story


Understanding Investor Behavior

It’s time for corporations to view shareholders as customers. Data helps.

September 11, 2013 by Judy Warner

The knot in the stomach that begins to tighten early each Sunday evening for Broadridge Financial Solutions’ Bob Schifellite is as predictable as the ticking of the stopwatch in the 60 Minutes’ opening. Monday is coming, and that’s when the big data game is on.

Bob Schifellite


“Broadridge and its broker-dealer clients actively process a mountain of data that is unique,” Schifellite, president of the investor communications solutions division of Broadridge, says during a telephone interview. “Even with all of the caveats of protecting individual privacy and of limitations on its use, what we have access to is just astounding. We process important information about a majority of beneficial shareholders—approximately 121 million of them. We know them by name, what they own, and how to reach them. We also know about their proxy voting behavior—how they typically vote, if they vote, when they vote, and what information they receive and respond to. We know if they use a financial advisor or whether they are using a retail online account.

“That’s powerful information,” he adds. “The knot in my stomach is the anticipation that comes from making sense of all this information, and working with our clients and partners to appropriately create value from it while carefully safeguarding the privacy of investors’ personally identifiable information. Ultimately, this adds value to the communications services we can provide.”

In this era of data mining, Broadridge executives set out more than a year ago to better understand shareholder voting trends and analysis. “We knew we wanted to focus on governance because that is the right area, but the challenge is how to use the data to improve governance,” Schifellite says.

Led by Broadridge CEO Richard Daly, Schifellite and other top executives began talking both to clients and other stakeholders in corporate governance to map out and understand what’s of value to corporate boards and management. Schifellite described one eureka moment when, following the re-election of President Barack Obama, a corporate secretary cited the campaign’s use of data to pinpoint specific voting behaviors. Making sure individual voters were reached by campaign volunteers and driven to the polls on Election Day was just one example of the level of precision that led to a big win for the Democrats. In fact, Obama’s data analytics team, led by then-30-year-old Dan Wagner, was largely credited with producing the re-elected president’s five million-vote margin of victory over Republican challenger Mitt Romney. (Since the election, Wagner has formed a consulting company, Civis Analytics, based in Chicago with an office in Washington, D.C.)

Like the analytics that allowed Wagner’s team to better understand the habits of voters, Broadridge technology enables analysis of proxy voting. It powers services for more than 90 percent of public companies and mutual funds in North America, and processes more than $4.5 trillion in fixed-income and equity trades per day. It tabulates the voting results of some 600 billion shares at more than 12,000 annual meetings. The opportunity, as Schifellite explains, is to mine this aggregated shareholder voting information to better understand the mind-set and habits of today’s investors. Providing insights to public company mangers and directors can ultimately lead to improved shareholder engagement.

To that end, Broadridge has partnered with PwC to produce reports called ProxyPulse that analyze and synthesize vast amounts of shareholder voting data. The reports—published on the website—study stock ownership and voting results by company size as the proxy season progresses. Based on its analysis of 2,858 shareholder meetings from Jan. 1 through May 23, 2013, ProxyPulse reports that voting outcomes vary by company size and can be affected by ownership mix, communications approach, and ongoing shareholder dialogue. For instance, institutional shareholder ownership is highest at large-cap companies and lowest at micro caps. Overall, 71 percent of “street” shares were voted. (Approximately 75 percent to 80 percent of all shares are held in street name.). Of these votes, 62 percent were voted by institutions and 9 percent by retail. The percentage of retail versus institutional votes is just one data point worth further examination. (“Institutions” refers to mutual funds, public and private pension funds, hedge funds, investment managers, managed accounts, and vote agents. The term “retail” refers to individuals whose shares are held beneficially in brokerage accounts.)

Broadridge data show, for example, that retail shareholders are more important to company governance than many executives realize. As a group, retail shareholders own a larger stake than some have supposed, and their voting is more consistent in supporting management. Such an understanding of the voting base, just like in politics, can help corporations anticipate and communicate before a problem leads to a proxy proposal. “A more complete view of all shareholders allows for better decision making,” says Schifellite. “We think we are well positioned to start to do some things to help companies get a better understanding of their shareholders.”

One little-known metric is that the split between institutional and retail ownership among all firms whose meeting took place this past proxy season was 67 percent to 33 percent, respectively— revealing a dramatic difference from the perception that the vast majority of shares are owned by big investors like TIAA-CREF, Vanguard, CalPERS, and CalSTRS, while retail has little influence. The question is, why does such understanding matter? “It matters,” Schifellite responds, “because of two phenomena. A more complete view of all shareholders is better than a view of one segment of the shareholder base. Institutional shareholders vote at a high rate. Retail shareholders vote at a much lower rate and tend to vote with their feet. If retail shareholders are unhappy, they will sell the stock. But if they hold the stock and you can engage them, many will vote out of a sense of responsibility and because they believe it is important for their voice to be heard. Retail shareholders often have a longer-term perspective, and they are far less likely to use the proxy to invoke change.” The opportunity is to better customize communications between company leaders and shareholders to get more shareholders to vote. With the advent of say on pay and majority voting, in addition to momentum building around issues such as corporate political spending, shareholder communications should be a big concern to boards and CEOs.

“There is a saying,” says Charles V. Callan, senior vice president of regulatory affairs at Broadridge, “that 70 is the new 50. That’s true at least for director elections and pay proposals. If you get less than 70 percent support but still a clear majority, proxy advisors and active institutions may begin to look at the company differently.” Proxy advisor firms such as Institutional Shareholder Services and Glass, Lewis & Co. are more likely to scrutinize the company compensation plans that receive less than 70 percent approval. In such cases, where shareholder support is on the cusp, retail shareholder votes can change the outcome. Directors need ask themselves whether the company anticipates a close vote on a sensitive issue, and to be mindful of situations where additional outreach to retail voters might make a difference.

Tools for Engagement
In addition to its ongoing analysis of shareholder voting behavior and trends, Broadridge hosts shareholder forums that are growing in popularity. Usually conducted in conjunction with a virtual annual meeting, the shareholder forum is a tool that allows management to ask specific questions of their investors. While most companies hold shareholder forums in conjunction with the proxy, Broadridge recommends using them throughout the year. “Using technology and doing surveys of investors around say on pay, for example, can help formulate best practices while obtaining some very good direction in advance of the voting,” Schifellite says. “This does come down to using big data to make better decisions. With bigger and better tools such as those afforded by big data, better decisions are empowered by better information.”

The Coca-Cola Co. offers an example of big data at its best. As a 127-year-old company with a powerful, engaging brand, it was seeking ways to enhance its shareholder engagement. Three years ago, the global beverage marketer partnered with Broadridge and began using the shareholder forum as an additional means of engaging shareholders in connection with its annual meeting. Shareholders can participate in the forum and learn more about the company. They can watch video, review proxy materials, vote their shares, respond to an online survey, and submit a question prior to the annual meeting. After the annual meeting, shareholders who have registered for the forum receive responses to common questions submitted through the forum. This year, more than 1,000 shareholders participated in Coca-Cola’s shareholder forum.

Virtual shareholder meetings are also growing in popularity, matched by increasing participation in the annual meeting. Quite simply, in addition to the traditional in-person meeting, companies that allow investors to attend via computer have expanded participation. It is time, both Schifellite and Callan say, that companies begin to more proactively view shareholders as customers.

“What do investors look like, and how do they vote? We are starting to get data on that. For one large company, we started looking at share ranges and identified large holders [investors that own 10,000 shares or more]. In a couple of instances, when the company reached out to these shareholders by sending a proxy reminder by priority mail, the participation rate was extraordinarily high. To me that suggests, ‘Wow, if you show just a little bit of TLC, that the company cares how you vote and that your vote matters to me,’ you get a better response. We just started testing these and other highly effective and efficient strategies,” Callan says. Personal calls from the CEO, reminding investors to vote, function much like the calls on Election Day—but better.

Broadridge is piloting a program that enables issuers to target outreach to specific shareholders based on their previous voting behavior and/or shareholder thresholds. The pilot is focused on electronic communications (e-mail) and paper delivery (ranging from standard mail to overnight packages). This program enables issuers to:

  • Use behavioral data to inform the development of proxy engagement strategies.

  • Target very specific populations with reminder communications.

  • Measure shareholder response to reminder communications.

  • Build a foundation for capturing data patterns and trends specific to shareholders’ proxy voting behavior year over year.

Make Voting Easier
“As we continue to dig into this,” says Schifellite, “some of the things we’re thinking about are whether there are different voting trends depending on your level of share ownership. Are there differences in voting behavior between genders? Do investors react differently based on what information is provided and how that information is delivered?”

When Broadridge surveyed investors in the past, it has asked, “What do you look at—the full proxy versus the annual report?” As it turns out, the “eyeball count” is high for specific parts of the reports. Investors are most likely to look at the letters of the chairman and the CEO, and they look at the Compensation Disclosure and Analysis (CD&A) and the Management Disclosure and Analysis (MD&A).

Management and boards can be more proactive about using technology to engage shareholders, leveraging the same kind of care and communications techniques for shareholders as they do for their customers, Schifellite believes. “Thinking about shareholders as a constituency comparable to your customers is the wave of the future,” he notes. Using technology to make it easier to vote—on smartphones and iPads, for instance—is an important component.

Two proxy seasons ago, mobile voting was allowed for the first time. “Voting on mobile devices may, by next proxy season, usurp [landline] telephone voting—it continues to grow at a rapid pace every year,” Schifellite says. Moreover, one-third of the investors who voted using their mobile phones were voting for the first time.

“That’s powerful,” Callan says. Demographic analysis of voting shows that older investors with larger stakes are less likely to vote via mobile. “We need to bring this generation of voters into the fold and go to where they are with mobility, while at the same time creating good habits in their rights of owners. We’re asking ourselves if the investing habits of 20-somethings differ from the investing habits of 60-somethings.”

Another cut on shareholders is the duration of their ownership. Investors who have been owners for 10-plus years have shown some disdain for new technologies. Other questions explore the correlation of data and sentiment: How does the appreciation of stock price play into voting habits? When earnings are announced, does it help or hurt voting? How are investors reacting? What prompts them to buy more stock?

Broadridge has also found that people in a specific ZIP code are more likely to vote at a certain time. “If men and women of a certain age are more likely to vote on a Saturday morning, for instance, doesn’t it make sense to communicate to them on Friday night or even earlier on that Saturday morning? It’s all about getting more inclusion and more input for boards,” Schifellite maintains.

Developing fluency for multichannel marketing—putting information such as proxies and 10-Ks where people now go—is a growing imperative. Drawing investors to a specific website to download information is a challenge. Yet posting a proxy on social media or a newsstand accessible by an Apple or Kindle device or through Amazon where people are shopping may be a more efficient way to reach them. Says Schifellite: “Would you be more apt to click on and read a letter if it showed up on your Kindle? Technology has greatly reduced the cost of outreach. Ten or 15 years ago, a communication to shareholders from the CEO once a year might have sufficed, but today the cost of that communication is so much lower. With big data, we are developing the tools and insights to better engage all investors in the governance process.”


© 2012 National Association of Corporate Directors.


This Forum program was open, free of charge, to anyone concerned with investor interests in the development of marketplace standards for expanded access to information for securities valuation and shareholder voting decisions. As stated in the posted Conditions of Participation, the purpose of this public Forum's program was to provide decision-makers with access to information and a free exchange of views on the issues presented in the program's Forum Summary. Each participant was expected to make independent use of information obtained through the Forum, subject to the privacy rights of other participants.  It is a Forum rule that participants will not be identified or quoted without their explicit permission.

This Forum program was initiated in 2012 in collaboration with The Conference Board and with Thomson Reuters support of communication technologies to address issues and objectives defined by participants in the 2010 "E-Meetings" program relevant to broad public interests in marketplace practices. The website is being maintained to provide continuing reports of the issues addressed in the program, as summarized in the January 5, 2015 Forum Report of Conclusions.

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Shareholder Forum™ is a trademark owned by The Shareholder Forum, Inc., for the programs conducted since 1999 to support investor access to decision-making information. It should be noted that we have no responsibility for the services that Broadridge Financial Solutions, Inc., introduced for review in the Forum's 2010 "E-Meetings" program and has since been offering with the “Shareholder Forum” name, and we have asked Broadridge to use a different name that does not suggest our support or endorsement.