Clear communication is essential if you are to build and maintain healthy relationships with your investors and shareholders.
As an executive, communication with your shareholders and investors is vital to making your company vision a reality. Clear communication is essential if you are to build and maintain healthy relationships with your shareholders.
Without open and transparent communication, your shareholders have no way of knowing if you are fulfilling the promises you made to them when they first invested in your company. Keeping the lines of communication open is an important part of honoring shareholders' commitment to your company and vision, and it cements the relationships that will help you continue to grow.Many executives find themselves caught up in a swirl of planning and activity surrounding production, development, marketing, hiring, and other facets of building a business. Adding shareholder communications to that list helps pave the way to a successful future. In fact, good communication results in a 47% boost in ROI to shareholders. This comprehensive guide will take you through the most vital aspects of communicating with your shareholders, employees, and investors.
Table of Contents
Part 1: The Value of Communicating with Shareholders
Part 2: The Six Principles of Shareholder Communication
Part 3: Traditional Methods for Shareholder Communication
Part 4: Your Communication Style with Shareholders
Part 5: Introducing Nth Round
Keeping your shareholders and investors in the loop as you grow your company is invaluable. Strengthening the bond with your stakeholders creates tangible and intangible benefits that include stronger relationships, the ability to attract more funding, and opportunities to network with people in positions of influence. The following are among the most important benefits you can reap from keeping open lines of communication with your shareholders.
Corporate governance is of increasing interest to the public in general, so you can expect your shareholders to want to know what your board is doing as well. In fact, up to 74% of shareholders are ready to communicate with a company's board of directors, depending on the importance of the topic they're concerned about. While some of those shareholders are content speaking to management or your investor relations team, they're more likely wanting to speak to the board — so you'd better be ready. Clear communication is vital to helping your board and other corporate governance structures to thrive
Increasingly, shareholders are looking for transparency from companies and their boards of directors. There's a reason that 61% expect their boards to review their internal and external communication plans: their shareholders are demanding it. They may want to assure themselves regarding your diversity hiring, your political lobbying, your environmental sustainability, or they may be concerned about your allocation of capital. When shareholders feel they don't have the information they need about corporate governance, they're more likely to divest or to become vocal in ways that could derail your plans for growth.
Check your shareholders' agreement to make sure you're abiding by all reporting requirements, including those involving various types of transactions. Even if, as a private company, you don't have to report to shareholders regularly, doing so will strengthen your commitment to them.
Transparency reduces risk. When your communications with shareholders are frequent, honest, and clear, your shareholders feel confident that they aren't going to be caught by surprise by unexpected bad news.
Effective communication regarding your business strategies and results helps investors and shareholders understand the value of their investment in your company. If you don't communicate (or don't do so well), your shareholders may consider that their ROI isn't worth the perceived risk.
Without frequent communication, your shareholders don't have many ways to respond to what's going on at your company. They can withhold votes from directors, if they have a say, or they can take activist positions, including going to the press, to make their views known. Proxy advisor services company Glass Lewis finds that when 25% of shareholders vote in opposition to management, the company has a problem that must be addressed. By opening the lines of communication, you can stave off these moments, since your shareholders have a venue for letting you know their thoughts, and are less likely to take negative actions.
When you communicate clearly with your shareholders, you help direct their focus. Regular disclosures and communication keep shareholders from obsessing about the short term, questioning whether you know what you're doing, and raising concerns about oversight. The following guidelines and principles should govern all your shareholder communications
Your shareholders want to feel confident that you have a plan in place for whatever happens. When you spell out your business strategy in shareholder communications, your investors can relax a bit. They know their present (and potential future) investments are safe because you have strategic plans to meet your business goals and keep growing.
Send your shareholders the information they need to know when they need to know it. If you send too many emails or other communications to your shareholders, they're likely to be light on the valuable information, and they may come to view them as irrelevant. Instead, make sure your emails are appropriately timed and contain information such as:
It's tempting to offer your shareholders the rosiest of outlooks in your communications, but this strategy can easily backfire if your hopes are revealed to be wishful thinking. Never tout news that's too good to be true, because your shareholders will recognize it as such. Yes, it's difficult to share negative news, but you must acknowledge it. However, you control the framework for any negative information you have to share. Take the opportunity to show how you plan to provide the leadership needed to overcome moments of adversity and get the company back on a positive path.Your shareholders are likely to respond with renewed trust when they see your commitment to transparency.
One way to make sure your shareholder communications remain relevant is to focus on company and performance religiously. Demonstrate to your shareholders how your business strategies and goals are resulting in price performance, and explain how you expect to hold the company accountable for reaching goals. Providing measurable data that's realistic and clear is paramount. Take the time needed to reflect on your company's current plans, practices, and performance, and make sure you convey your reflections adequately in your communications.Your shareholder communications should regularly include:
Your shareholder communications are a crucial way to build relationships with people who have a vital interest in your business. By personalizing communications with them, you can fortify your relationships. This task becomes easier and less time-consuming when you segment your shareholders according to volume and type, as well as their specific relationship to the company (employees, investors, etc.). Segmenting allows you to prioritize different groups as needed and makes it easy to send out customized updates to shareholders with specific interests.
Your business can unexpectedly be rocked by all sorts of events over which you have little to no control. Whether you face a dramatic shift in the market, unfortunate personnel issues, or a disruption to the global economy, you need a plan. This seems like a no-brainer — but 49% of companies have no crisis playbook in place, and of those companies that do, only 41% have specific plans in place regarding communication during a crisis.
Of course, you probably already have a crisis plan in place to respond to negative events — but you also need a crisis communication plan. This plan allows executives and officers in your business to speak publicly and to shareholders with the same voice, conveying the same message. Your crisis communication plan squelches negative speculation and makes sure that you're getting your side of any story out to the people who need to hear it.
Deciding to open the doors to shareholder communication and to provide the transparency they're hoping for is just the first step. Now you have to decide what forms those communications should take. The answer to that question varies depending on what you have to say since each means of communication carries with it a unique set of pros and cons
Email is unquestionably an efficient means of communication with your shareholders. It reaches around the world with no respect for time zones, and it's always available. Moreover, it's effective in reaching your shareholders, since95% of today's shareholders are comfortable with online communications. Take a look at other pros of communication with shareholders via email.
Pro's of communicating by email
Cons of Communicating by Email
You have a responsibility to send an annual letter to your shareholders, so you should take advantage of the opportunity to communicate your vision regarding long-term goals and plans, as well as the milestones you achieved in the previous year.
Pros of Communicating Through an Annual Letter to Shareholders
Cons of Communicating Through the Annual Shareholders Letter
While phone communications with shareholders are direct and personal, they are also often time-consuming, and you're not able to communicate with everyone at the same time. Take a look at other pros and cons of staying in touch with your shareholders by phone.
Pros of Communicating by Phone
Cons of Communicating by Phone
Each method of communication shines for certain purposes. When you need to work through an issue on a personal basis with one of your key shareholders, a phone call makes more sense than the back-and-forth of email. When you're conveying official information that all shareholders should receive simultaneously, though, email is often the better choice. Match what you need to communicate with the best means of communication to make sure you're heard clearly.
Your relationships with your shareholders are determined by the communication style you adopt. These guidelines will help you shape and sharpen your style to effectively connect with shareholders.
Nth Round is here to help you navigate the sometimes tricky landscape of shareholder relations. Think of us as your partner in business growth and delighting shareholders.
With Nth Round, you can take advantage of a secure platform for shareholder communication, making engagement easy and straightforward. Now you can manage and track your investor communications with the ability to filter, tag, and sort your shareholders. Our robust security means your team and your shareholders always feel safe, no matter what you have to communicate.
Posting company updates and distributing documents also becomes quick and straightforward, whether you want to reach out to individual shareholders or select groups. With Nth Round, speedy communication is a given, so you reduce shareholder stress (and your own)during moments of uncertainty. And because you can post updates from your mobile device, you're never caught unaware with no way to communicate quickly with shareholders.
The results of working with Nth Round? Your shareholders are happier because Nth Round's integrated, streamlined platform gives them easy access to the information they want. Your equity management efforts become stress-free, and you reap excellent ROI as a result.
Shareholder relations are a vital element of your company's infrastructure, no matter the size of your business. Small to medium-sized enterprises that may not have this infrastructure in place internally must develop it to be able to grow.Nth Round provides the expertise and the tools you need to engage with shareholders productively and positively.Learn how you can delight shareholders, save time and expense, and achieve your business goals with our turnkey communication and equity management platform. Contact us today to schedule a demo of the Nth Round platform, and get ready to put the relationships back into investor relations.