Transfer agent leaders urge creative thinking

Nov 29, 2018
Industry faces challenges from trends in share ownership

Transfer agents must respond to a shrinking shareholder base by looking for new ways to offer services and boost contacts, industry leaders have warned.

Speaking at a recent Shareholder Services Association (SSA) event, panelists noted that in recent years there has been a declining pool of shareholders in the listed public markets and many more private issuers than in the past. Dorothy Flynn, president with Broadridge Corporate Issuer Solutions, told the audience that looking at younger generations and how they invest in companies ‘only paints a bleaker picture.’

It is therefore incumbent on the industry to figure out all the ways to connect with those remaining shareholders and ‘to be as creative as we can’ to keep them engaged and to get them to vote, Flynn said, adding that this would be a difficult challenge.

Fellow panelist Steve Nelson, chair and president of Continental Stock Transfer & Trust, agreed that the macro overview is not favorable in terms of broad shareholder ownership. Although firms such as Continental that deal primarily with smaller and mid-cap companies are less exposed by the trend, they still need to be careful about offering the right services, such as those related to M&A transactions, he told attendees.

Marty Flanigan, CEO of American Stock Transfer & Trust, described his firm as being in a similar situation in terms of its focus on small and mid-caps, and therefore facing less of a squeeze. Despite this, he said, the changes in share ownership ‘force us to be operationally efficient.’

For example, the firm needs to use the latest technology to process transactions as quickly, seamlessly and cost-effectively as possible, he said, adding that the pressure ‘keeps us on our toes.’ The firm has also made sure to diversify the products it offers.

Todd May, CEO of EQ, echoed the point that transfer agents need to have the correct technology in order to focus on clients’ needs.

The panel was also skeptical about the extent of the influence transfer agents can have on boosting voting at shareholder meetings. Nelson pointed out that major issuers tend to approach proxy solicitors, rather than transfer agents, to increase participation.

The speakers agreed, however, that transfer agents can take steps to increase voting levels around the margins. Nelson told attendees that the best course of action for transfer agents is to work hand in glove with solicitors so that there is a seamless way in which issuers can reach out to their core shareholders. Other actions agents might take include fashioning proxy cards, sending follow-up mailings, reaching out proactively to shareholders and helping prepare for the meeting where the vote will take place, he added.

Flanigan said his firm’s proxy solicitation business has tried numerous strategies over the years to increase engagement by shareholders, but that many shareholders continue to be complacent. They don’t respond to numerous mailings, even when they are being informed about a non-routine contested issue one would expect them to have an interest in, he continued: ‘It’s always proven challenging to crack the code on that one.’

Flynn underlined the importance of getting out the retail vote, noting that in a few cases over the past two years the registered retail base was important to the outcome, and that such shareholders tend to support management. It is important not to ignore social media as a tool, given that many shareholders are on such platforms, she said. But the tactics used to boost voting should ultimately come from which strategy the issuer wants to pursue, she added.

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