Share registration in 2019 – and beyond
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Share Registration in 2019 – and Beyond

28 October 2019

The landscape may be challenging and the future unpredictable, but this year’s Share Registration Conference showed we can all go a long way by embracing intelligence and understanding.

During World War Two, the UK Government requisitioned the grand Victorian halls of London’s 8 Northumberland Avenue for military planning. And, as delegates filled the venue for this year’s Share Registration Conference, Equiniti’s Paul Matthews quipped that speakers would again be considering forms of ‘war strategy’.

Brexit, economic uncertainty, cyber-attacks, shareholder activism, the changing shape of corporate governance and rapid technological change pose a barrage of challenges for UK plc – and as a topical reminder, an Extinction Rebellion protest was taking place a few yards from the event. However, the day’s host, journalist and television presenter Steph McGovern, cheerfully urged delegates to be bold. “Don’t be scared of uncertainty,” she said. “Embrace it; become part of it.

If she was throwing down a gauntlet, the speakers picked it up – exploring themes of innovation and opportunity against a backdrop of political, economic and technological flux.

Very much to the fore on the innovation front was Grant Fuller from Irithmics who transfixed the audience with a presentation on using artificial intelligence (AI) to decode institutional investor behaviours.

“We’re not trying understand who owns shares,” he said.

What we're interested in is why people own the shares – that’s much more revealing. Why this matters significantly is that it helps provide insight into how warm and responsive the audience you’re about to speak to at your AGM, roadshow or any form of investor engagement are likely to be. And machines are able to help with this. They are relentless, they don’t stop.

Grant dazzled attendees with a series of AI visuals depicting shareholder behavioural data as neural networks. And he went on to demonstrate how AI analysis can generate an accurate ‘implied buy-side target price’ – in other words, gaining insights into whether potential buyers agree with the proposed valuation of a business. “Successful investing is anticipating the intentions of others,” he explained, quoting John Maynard Keynes.

Fund managers need to own this

Anticipation, as ever, was also a key theme of the Mastering Modern Shareholder Engagement panel session, featuring Andrew Tusa from Barclays Corporate Broking, Bernadette O’Donoghue from Glass Lewis, Charlie Walker from the London Stock Exchange, Nick Laugier from Boudicca and Richard Davies from RD:IR.

The argument that good governance makes good sense for investors is really hitting home,” said Andrew. Steph highlighted the push towards transparency and consistency – and the consequent challenges that can emerge as corporate governance becomes ever more complex. Bernadette encouraged companies to include as much information as they can about shareholder engagement activities in their annual reports, while Richard noted: “The challenge for the FRC is to line up stewardship codes with corporate governance – that’s going to take some time.

The panel also pinpointed the growing importance of ESG (environment, social and governance) funds. Andrew’s concern was that “given the proliferation of specific ESG policies from investors, there is a real need for a consensus about what good ESG reporting looks like” he said.

Steph wondered if the media hype around sustainability is matched in practical terms by public demand, while Nick pondered how far we are from achieving harmonised corporate governance policies across multiple countries. “There’s a long way to go in terms of something that will stretch across the market,” he observed.

Understand, steer and rally

Following Equiniti’s acquisition of investor relations consultancy RD:IR in September, Managing Director Richard Davies joined Sheryl Cuisia, Managing Director of proxy solicitation experts Boudicca (and another part of the Equiniti family) on stage to explain what they can offer together. Together with Equiniti’s company secretarial services provider Prism Cosec, Boudicca and RD:IR now provide one specialist governance advisory firm for clients – at a time when such combined specialisms have never been so important.

Sheryl then looked at key trends in shareholder engagement. “In 2019, we saw a lot of corporate governance developments, increased calls for stronger application of best practices and we’re seeing the usual themes of remuneration and director accountability,” she said. “We expect that in 2020 there will be more of this to come but it’s important also to note positive developments. It was announced last week that 30 per cent of FTSE 350 board positions are now taken by women. That’s a great achievement for this country.

And what advice does Sheryl have for clients navigating choppy waters? “Early preparation and ongoing preparedness are essential,” she said. “Understand, steer and rally are three important pillars. Understand your shareholder base and how they will view you. Steer your strategy by creating solutions to mitigate risk and identify opportunities. And rally shareholder support through long-term engagement and active proxy solicitation.

Security is a journey

Further Equiniti expertise was offered by Dr John Meakin, Equiniti’s Chief Information Security Officer, who stressed the importance of an organisation’s cyber security strategy being championed from the top.

Security is a journey not a project,” he said. “And that’s demonstrated by the data. It takes four or five years for an organisation to get to the point where they are comfortably managing the cyber security threat and understand their risk appetite. Success in securing your business therefore really is about shaping a long-term conversation at board level.

The lost property department

The afternoon’s remaining panel session looked at the latest developments in the Dormant Assets Scheme, and featured Robert Welch of Tesco, Adrian Smith of Reclaim Fund, Claire Etches of the Department for Culture, Media and Sport, and Steve Banfield from Equiniti.

The scheme, administered by Reclaim Fund, was launched in 2011 to track down the owners of dormant assets and reunite them with their money. And when finding them isn’t possible, the money is donated to good causes, with an emphasis on young people, social inclusion and low-income families. Sufficient funds are also retained to cover any shareholders who get in touch about their ‘lost property’.

At present, there are 30 participants in the scheme, which is currently only open to banks and building societies, but it has surpassed all expectations. Adrian revealed that the fund had hoped to gather around £400m in the first few years, but has now passed the £1.25bn mark.

To build on this potential, Claire is developing a strategy for the scheme to be extended to other business sectors, culminating in a report earlier this year by four industry champions (including Robert) called The Dormant Assets Scheme: A Blueprint For Expansion.

There are so many components to ensuring that such a diverse scheme can be set up and run effectively with consumer protection still at the heart of it,” said Claire. However, she is confident the extension will be supported. “There is so much potential money here that can be used to help the most vulnerable in society.

It was a sentiment that chimed neatly with many positive trends in corporate governance echoed across the Share Registration Conference agenda. Despite the venue’s history, maybe the event was less about war and more about intelligence and understanding.

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