Shareholder participation is on the rise

Shareholder participation ties ownership to engagement. 

High levels of participation mean shareholders want to be actively involved in the company they co-own. 

Low levels mean the opposite, but is it a sign of confidence in or apathy towards the board and management? That’s a matter of context. 

Nevertheless, recent data from the United Kingdom show that shareholder participation has increased in the last twelve months. Can we expect more of the same this year?

One way of measuring participation is by the number of votes processed in a given year. 

In Britain, this figure went from 162,673 in 2021 to 210,801 in 2022, according to the digital investment firm Interactive Investor (II), which handles almost £60 billion (€67 billion) in assets as of 2022. 

It’s the peak of a striking upward trend over the last four years. In 2019, for example, the number of votes processed was just 43,753.

II attributes this “significant progress” to one change: communication preferences. 

Before 2022, II-affiliated shareholders were contacted on an opt-in basis, meaning they had to specifically ask for updates on activity that, as shareholders, they have an automatic right to participate in. This list includes governance, meetings, and votes. 

Now, communication is on an opt-out basis, meaning shareholders will automatically be contacted about these things unless they specifically ask not to be.

• There was an increase of 48,128 votes processed between 2021-2022. But that increase was 83,687 the year prior (before the communications change).
• The percentage of votes used nearly halved in 2022. II put this down to the fact that the communications change had enrolled people on the voting register who were never likely to use their votes.

Beyond II’s figures is a broader trend of shareholder encouragement. In other words, doing everything possible to motivate shareholders to use the powers are their disposal. 

Changing communication preferences is one way of doing this. Another is a concerted effort to remove red tape from voting, making the process as easy as possible. 

It falls under the principle that shareholders deserve the most accessible pathways toward playing an active role in corporate governance. If they choose not to follow that path, that’s their prerogative, but at least the path is open.

It certainly looks like that’s where it’s heading. Some governing bodies like the European Commission have already implemented measures to clear the shareholder engagement path. 

Meanwhile, in the US, corporate investors like BlackRock and Robinhood have voiced clear support for increased shareholder engagement in countries like the US. The companies command billions of dollars in assets and are a considerable voice in the investment world.

While the noise and opinions might increase, this doesn’t have to be a bad thing. 

Recorded and addressed correctly, noise and opinions can lead to positive change, enabling a company to tap into previously ignored areas. 

At its heart, high shareholder participation is an example of good communication. It feeds truthful, relevant information to the board and management and assists them in shaping business strategy. 

While good communication is not the only factor that makes a company, bad communication can break a company during times of crisis.