Hanging ten on the technology wave of communication

Bob Dylan famously sang – some would argue barked – about ‘the times they are a’ changing’ and that’s pretty much the anthem boards need to adopt when it comes to communicating with their shareholders.

Quite simply, the traditional way is no longer the way.  It’s not cutting the mustard, the technology has moved ahead and research trends tell us all we need to know about the appeal of the time-honoured Annual General Meeting (AGM).

So why do we find most boards still holding the traditional annual gig for shareholders in a traditional way?

Before l answer that question, let’s take a look at the situation today. Boards, of course, are the agents of shareholders, representing their interests. And that’s something they need to take very seriously and never forget.

It’s an important relationship that demands effective communication between the parties. In small companies, it’s pretty straight-forward as the shareholders are often the executives and nominally the board.  And if they’re struggling with communication, I suggest there’s a disaster waiting to happen.

At the other end of the spectrum is the large publicly listed company with hundreds of thousands of shareholders. Here, the AGM has long been the pre-eminent communication channel.  Indeed, the AGM was created to put the board in front of the shareholders every 52 weeks, to justify their existence, to update the troops on developments and plans and to do the legislative things that shareholders are required to do.

But the AGM as we know it is now oh so formulaic, to the point where its lofty standing as the true means of shareholder communication is nothing short of an anathema. That’s not just me on a hobby-horse; rather it’s loads of research that suggests that AGM attendance figures have tumbled in recent years, with as few as 0.2 per cent of shareholders actually attending an AGM.

Then there’s the findings of the ‘Director Sentiment Index’ telling us that over one-third of directors canvassed consider the AGM dysfunctional.

It’s not about to experience a resurrection of the Lazarus kind either. There’s a technology tsunami rolling in and no-one, least of all the boards standing still, hiring a venue each year, arranging the teas and cookies and waiting for the faithful to turn up, can stop it.

The road ahead tells us that boards need to use the most effective tools to communicate with shareholders to retain and protect their integrity and transparency.

Yes, some have been known to argue that one-on-one communication, with all shareholders having all directors’ contact details and easy access to them 24/7 is the only true solution but that’s unwieldy and impractical and, quite frankly, in this technological age, a little silly.

Rather, the solution lies in being clever, using mobile device technology such as live streaming and app-based voting.

Oh, I almost forgot to provide the answer to the ‘why’ question…

Well, it’s because many board members are of a generation that way preceded the technological wave. I’m not having a go at older directors as I’m one myself. But what I’m saying is that we all need to get with it if we’re to satisfy the vitally important element of best practice governance – and that’s communicating effectively and openly.

Until next time,

Kate.

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