agency relationship between shareholders and managers. The capitalist system . The social responsibility of business is to increase its profits. New York Times .. companies in the United States, Enron was considered the. The relationship between a company and its shareholders is rooted in a the history of the corporation-shareholder relationship in the United States . here to stay, with 39% of directors believing that there will be an increase. For this reason, a stronger link between ethics and governance has to contribute to The corporate landscape of the United States was rocked by a number of .. useful way to build up trust in the relationship between firms and shareholders.
However, one of the biggest challenges facing corporations and their shareholders, their employees and consumers, and our economy as a whole, is cybersecurity.
How Does a Company Strengthen Its Relationship With Stockholders?
Unfortunately, corporate disclosures are far from robust and largely consist of boilerplate language that fails to provide meaningful information for investors.
Companies and their intermediaries tend to view cyberthreats as a technology problem instead of, more appropriately, a business risk. As we have seen time and time again, cybersecurity, and the related threats of unintentional loss of data, is a governance challenge for all of us, and it requires a change in culture and approach. Many shareholders seem to understand this and have been urging, and continue to urge, companies to engage. Regulators are certainly not immune from facing these challenges.
Once he was informed, Chairman Clayton immediately launched an investigation into the breach and has focused the Commission and the staff on improving our risk management framework.
Companies, their managers, their boards, as well as their regulators, all need to do a better job in recognizing and addressing the significant risks that can result from the loss of data. Breaches of security measures can result in theft, reputational harm, or the loss of intellectual property.
Simply put, the unintentional loss of data may have material effects on companies. Slowly, regulators around the globe are stepping up to the challenge of issuing data protection laws and regulations. The approach to these issues continues to evolve with the changing landscape.
To be sure, some companies are focused on cyberthreats and recognize their potential economic threat. But companies need to do more than simply recognize the problem. They need to heed the calls of their shareholders and treat cyberthreats as a business risk. Corporations and shareholders will both benefit from greater transparency and focus on the risks related to unintended data loss and the collateral consequences. Board Composition The composition of corporate boards provides another example of how the concept of mutualism is informative.
Boards can and should be a bridge to investors, but too often they are a wall. Board composition is vitally important as directors play a meaningful role in helping companies make productive investments and good decisions going forward.
How Does a Company Strengthen Its Relationship With Stockholders? | promovare-site.info
Gender diversity on boards provides a notable example. This is not about making people feel good—it is about dollars and cents. Studies suggest that women may be better monitors of executives, a central function of boards of directors.
Shareholders, too, expect the companies they own to have diverse board membership.
For example, State Street Global Advisors  and BlackRock  have adopted policies or guidance with respect to increasing gender diversity on boards, and indicated their willingness to use their voting power to effect change, if necessary.
Yet, despite the documented benefit of diverse boards, many board members do not believe that board diversity enhances company performance. Although we have come a long way since the 18th Century, we still have a long way to go.
How can technology help this process? Can it be used to better connect a company and its board with its shareholders? How can a corporation capitalize on mutualism and benefit from the best ideas of its shareholders for the benefit of all?
As owners of a company, shareholders actually care about corporate practices of all types and how they affect the bottom line—from strategic plans to employee relations to executive compensation, and much more. Though the decision to engage institutional shareholders may simply be a matter of numbers, what are the long-term effects on the company of this sort of narrow shareholder engagement?
Could it result in a company putting on blinders that can affect its long-term bottom line? I believe that we need to get back to a more mutualistic relationship in order to properly answer that question.
Dual-Class Capital Structures Another place where the concept of mutualism needs to be considered is in regard to dual-class capital structures, where certain shareholders are starting to be disenfranchised by design.
As you know, in typical dual-class capital structures, corporate insiders receive common stock with multiple votes per share while public shareholders receive shares with one vote per share. And we all have heard about Snap and its IPO of non-voting shares in Where is the symbiosis?
Can investors afford not to invest in another Google, even if they do not agree with the share structure? What leverage do they have? While some say dual-class capital structures are designed to prevent a takeover or shareholder activism, they also may provide a means to evade management and board accountability.
Structures where a minority of insiders lock out the interests and rights of the majority may also have collateral effects on our capital markets. They may be harmful not just for those companies, their shareholders, and their employees, but for the economy as a whole. Dual-class capital structures, in effect, turn the mutualism underlying the corporation-shareholder relationship on its head.
How can we restore the mutualism that serves as the foundation for the corporation-shareholder relationship, and that has benefited companies, their shareholders, and the economy as whole since the s? Shareholder empowerment is key. As I have discussed tonight, the benefits of shareholder involvement are not abstract.
Shareholders often fight for corporate values—such as diverse boards—that empirically have positive, direct effects on the corporate bottom line. They often do this well before managers or boards are willing to consider or implement such changes.
Despite this, corporations appear to be searching for ways to ignore shareholders, even on a structural level. Shareholder engagement is, I believe, a good first step in enhancing the corporation-shareholder relationship for the benefit of both. Despite the trends toward a less mutualistic relationship, there are some positive signs. For example, companies and their shareholders are increasingly sitting down at the same table these days. Many companies are also utilizing technology to better facilitate engagement with their shareholders.
From hosting virtual or live webcasts of their shareholder meetings, to using social media and mobile technology, companies are searching for new and better ways to actively engage their shareholders. Companies can also benefit from the engagement of retail investors.
And, as I have said before, technology can also serve this purpose. After all, more Americans are technology-literate than ever before. Perhaps, shareholders should be allowed to vote through social media or a mobile phone application, like in Estonia. Companies might be able to use distributed ledger or blockchain technology to identify and reach their shareholder bases more effectively. This means that, in some cases, companies do not actually know who their shareholders are. While this complex construct may have been necessary in the s, current technology could enable companies to directly communicate with shareholders without the need for intermediaries.
Concentrate on doing well instead of sounding good, and the facts will speak loudly to shareholders. The bulk of your efforts should be spent on increasing revenues, decreasing costs and building your business in a positive direction.How to create a great brand name - Jonathan Bell
Meet with individual shareholders to discuss concerns they may have. Also, meet with an individual shareholder when you have no issues to discuss, just to keep relations congenial. Dividend Increases If you foresee increasing profits, institute a progressive dividend payment for shareholders. By setting percentage targets, you will let shareholders know of your intentions to consistently increase profits and payouts.
This will foster strong relations. Consistent Communications Put out shareholder news on a constant and consistent basis. Shareholders will consider any report preferable to silence. If your business is maintaining steady operations, communicate that. Silence can cause suspicions and mistrust.