In an age when the interactions between listed companies and their shareholders are increasingly automated and carried out electronically, the relatively low tech practice of soliciting votes still has a decisive role to play when companies need to win support from investors.
The two strike rule at annual general meetings, increasingly bold activist investors and the 5 per cent rule for calling a General Meeting mean more companies will find themselves facing a sudden death playoff for the future of the firm, or the jobs of those who run it.
When a company’s Board needs to win support for a capital raising, fend off a takeover attempt, defend itself at a requisitioned meeting or get approval for its remuneration report at the AGM, it can prosecute its case in a number of ways: it will meet directly with its largest investors and write to the smaller ones, it will try to get the support from the professional proxy advisers who are influential in recommending how super funds and others vote and it will try to push its case through the media.
All of these strategies are important, but sometimes the vote comes down to a few percentage points either way and will be decided by a handful of retail shareholders. Yet many smaller shareholders, enough to make the difference to the final result, are disengaged and won’t read an email or open a letter, assuming the share registry even has their correct address. Also, an increasing number of investors are overseas and harder to reach or the shares are held by DIY super funds and some digging is required to find out exactly who the company should be talking to.
In votes like this, particularly where the issue they are voting on is complex or highly contested, there is no substitute for talking to shareholders directly, on the phone, which is why direct solicitation is still an important vote gathering tool.
Solicitation sounds simple – teams of people on the phone calling shareholders listed on the register and explaining to them what the vote is about and trying to encourage them to exercise their vote.
However, it has to be done right the first time. If you are going to spend the money calling 10,000 shareholders, you don’t want to waste the opportunity each and every call presents to make your case as effectively as possible and understand through their feedback what shareholders are thinking.