Achieving Shareholder Transparency through Digital Investment Management
CEO and Co-Founder, Floris Van Hoogenhuyze joins the X-Collective to discuss creating shareholder transparency and financial inclusiveness for scale-ups by digitising investment management.
The Need for Shareholder Transparency & The Making of WE.VESTR
Since the Shareholder Rights Directive II (SRDII) came into full force in 2019, there has been a demand for a more inclusive and transparent shareholder management process to promote shareholder responsibility and the stability of EU companies.
Floris van Hoogenhuyze has been an online entrepreneur since building his first two PropTech companies in 2012 and in 2014, Floris founded the leading boat rental company, Barqo (recently acquired by Burrow a Boat). By this point, Floris had already entered the world of digital investment management, having had first-hand experience with the challenges a scaleup faces in seamless equity management and shareholder transparency. Floris’ ambition was to create a centralised platform to solve ecosystem and shareholder management and to provide more financial inclusivity for scaleups.
The issues that Floris had (and that many other scaleups face) were around the management of shareholders and doing so outside of isolated solutions. The prominence of physical documents that lack cohesion defeats any hope of transparency, with more time spent on the administration of documents than on managing the equity portfolio.
WE.VESTR has been developed to provide a centralised platform that facilitates the ease of management and provides a clear overview to all stakeholders, whether that be investors or employees. This includes everything from Cap Table management, to both legal and financial documents, together with performance KPIs.
How to Achieve True Shareholder Transparency
The EU directive contains the following requirements:
- Institutional investors and asset manager transparency - Both the asset manager and the institutional investor should make a policy on shareholder engagement and make public the policy, an annual report on how to policy has been implemented and how they have voted
- Clear remuneration policy and report - companies must publish a remuneration policy which must be put to a shareholder vote (either binding or advisory), and all remuneration must be in accordance with the policy. The annual remuneration report must detail share options, the decision-making process, the total remuneration (whether fixed or variable) and the result of the shareholder vote. The remuneration report must be published on the company website for at least 10 years and, in accordance with the Data Protection Act, cannot include any personally identifiable information.
- As a company, you are entitled to request the identity of shareholders from intermediaries (any person or organisation who provides a service involving the administration, safekeeping or security maintenance of shares on behalf of shareholders) to improve communication between companies and shareholders. Shareholders with a stake of less than 0.5% are excluded. To ensure that this is facilitated, intermediaries must offer companies the right to have their shareholders identified and offer efficient communications between the company and shareholders, as well as publishing any applicable charges for this service.
- Proxy advisors (a person or organisation who advises shareholders on how to vote in a shareholder meeting) must disclose any potential conflicts of interest and provide any code that they comply with, any deviations from it and an explanation if they failed to meet that code. A proxy advisor must also ensure they publish their research findings and advice given at least once a year.
- Material Party Transactions (a transaction where there is a personal relationship between a stakeholder within the company and the company the transaction is with) must be publicly announced when concluded.
The requirements SRDII is designed to create an open and honest environment for all shareholders but how do you achieve this in practice?
Communicating with your shareholders is a vital part of building solid relationships that leads the way to the possibility of further funding and the ability to attract more investors.
Preparing an effective communication plan should be an integral part of your scaleup strategy. The following are points of consideration when developing that plan:
- A culture of full disclosure - All companies strive to increase accountability and transparency; having shareholders that trust your company and share your vision can make or break your scaleup. Ensuring that your shareholders have a centralised depository of all information about your company that pints the whole picture is vital to achieving this transparency.
- Prioritising information - Full disclosure is great and necessary but making sure that you are providing your shareholders with the right information at the right time will prove invaluable. Don’t drown them in paperwork but show them you are doing your research, forecasts and how you are performing against your corporate targets.
- Shareholder KPIs - Develop KPIs that tie in with what the shareholder is getting from their investment and always explain if your company isn’t meeting those KPIs due to external factors; bring research and data to the table that demonstrates why and how your company will achieve these targets going forward.
- Your shareholders are your network - Shareholders are the key to a global investment network. How you communicate and perform as a company will directly reflect on any introductions to potential investors and partners.
- The crisis plan - What happens when things go wrong? It could be a natural disaster or fatal injury but your shareholders will want to know. Create a crisis communication plan with a detailed dialogue for each eventuality.