Can You Improve Shareholder Behavior? (Part Three)

As a preamble to Part One of this series of articles we defined “improving behavior” as having shareholders engage in the following activities:

  1. Buy more stock in the company
  2. Not sell stock in the company (unless an “odd-lot” holder – see below)
  3. Understand and support the company’s proxy proposals by voting with management
  4. Opt for electronic delivery (“eDelivery”) of proxy and other company communications, to simplify the distribution and response process and lower its cost
  5. Utilize Interactive Voice Response and other electronic media when contacting the transfer agent with a question because, all things being equal, speaking with a live person is more expensive to the company
  6. Have a good attitude when speaking to a customer service representative on the phone, to speed up resolution of the inquiry and be less inclined to complain
  7. Opt for electronic payment of dividends directly into the shareholder’s bank account, to save cost to the company and avoid the possibility of the shareholder losing or never receiving a check
  8. Report address changes promptly
  9. Participate in a program geared to reduce those “odd-lot” holders who have no intention to grow their investment
  10. Become an “investomer” — that is, buy more company products and services as a stakeholder who is already an investor, or buy more stock in the company as a stakeholder who already uses its products and services

In Parts One and Two of our series we addressed the first five items above, which comments can still be accessed in Resources on this web site.   Now, in Part Three, we will discuss numbers 6 and 7.   Treatment of the remaining items will follow as regular updates to the site.

Shareholders Having a Good Attitude When Talking to the Transfer Agent

This is an interesting but challenging concept.   Very simply, corporations and transfer agents should want shareholders to have no expectation of a negative experience when contacting the transfer agent.   How many times has your phone or cable service gone out and you have imagined the voicemail and hold-time nightmare you are about to experience to get the problem solved?   You are pre-disposed to being treated like a nuisance, in a queue of other nuisances.   You are not happy.   You expect the worst, maybe 30 minutes of hold time and an unsatisfying result.

If that is the attitude of a shareholder calling your transfer agent, then you have a problem…   and so does your transfer agent.   And the only way to fix the problem is by creating a track record of especially good customer/shareholder service.

There is no magic with this.   It involves…

  • A painstakingly well-crafted interactive voice response system, with not too many menu options and a clear and prompt opportunity to speak with a live person
  • Well-trained customer service representatives at the end of the 800# line, if opted for by the caller
  • Reps with compassion for the caller’s problem, as well as the necessary knowledge to resolve the matter
  • Patience, patience, patience
  • Clearly understandable English
  • Willingness to elevate the matter to a supervisor if the caller insists on this
  • The availability of a web site that quickly, intelligently and convincingly screens the person for his/her identity
  • A site that lays out all the options for self-service through a robust menu, or list of “frequently asked questions”…   with clear answers
  • A site that facilitates the acceptance of choices in terms of buttons to be pushed and clearly-marked spaces for information to be typed
  • Performance as a result of the call or web site interface as promised; i.e., the address in fact is changed, the prospectus for the DRIP plan is in fact delivered (promptly), the form requested is in fact mailed if the caller has no internet/printer access

Like any consumers, shareholders are not stupid.   In fact, it is arguable shareholders are some of the smartest consumers out there!   They definitely know when they are being treated like people, and when they are being treated like cattle.   The message in this article is: if you want to improve shareholder behavior, start by improving how you treat them when they contact you or your transfer agent.

Choosing Electronic Payment of Dividends Over Paper Checks

This is a preferable payment medium for a variety of reasons, some obvious and some less so.   Clearly, dividend payment via automatic credit into a shareholder’s bank account (aka “ACH” payment, for the Automated Clearing House) takes away the…

  • Cost to the issuer of producing the check
  • Cost to the issuer of mailing the check
  • Time the check travels through the mail to the shareholder
  • Time the shareholder stands in a teller line to deposit or cash the check
  • Risk the check will be lost in transit to the shareholder, or on the way to the bank

Less obvious benefits to the issuer and the shareholder are…

  • No replacement charge for a lost check, which can range from $10.00 to $25.00
  • Less pre-funding of the dividend by the issuer, keeping more interest-bearing money in the company’s hands longer
  • Less eventual escheatment activity for “lost” money
  • Less work by the transfer agent (handling the “paper,” re-mailing first-time rejects, check reconcilement, etc.) which should in the long run translate into less cost for the issuer

Convincing shareholders to opt for this medium requires some work, but is not rocket science.   Issuers should…

  • Consult with their transfer agent (not just the day to day contact, but a “product specialist”)
  • Negotiate a cost for this service that is essentially zero, on the theory ACH is an easier process than what the transfer agent currently has to do with dividend checks (which is already included in the issuer’s stock transfer fees)
  • Call a few contacts in the corporate community known to actively offer and promote electronic dividend payments, for ideas on how best to market it and monitor results
  • Glean the best marketing messages and include them in the issuer’s own correspondence to shareholders, via hard-copy brochures and web site language
  • Use tools that resonate with shareholders’ environmental “bent”; e.g., offer to plant a tree or donate a dollar to charity for an “eDividend” election (which the transfer agent should be able to manage or subcontract as a process)
  • Continuously educate shareholders about the availability of ACH via built-in “Did you know…” messages in all shareholder mailings, the annual report and on the web site (including in FAQs)

Shareholder behavior can be improved by a company and its transfer agent if the opportunities are acknowledged and the two parties work together.   A consultant like Shareholder Service Solutions® can help optimize this synergy, and the resultant benefits.

Stay tuned for more updates, right here, in this series of discussions on improving shareholder behavior.