BROADRIDGE Financial Solutions Inc. (NYSE: BR), the giant investor communications and brokerage outsourcing firm, plans to connect every US company and every shareholder in a massive social network that could rival Facebook in terms of members.
CEO Rich Daly said his company’s investor network will be unique in that it will validate members as real shareholders through its access to more than 90 million shareowner accounts at over 850 banks and brokerages. By contrast, the popular Facebook social network has about 80 million active members worldwide, according to Wikipedia
Daly, who has discussed the network with Securities and Exchange Commission (SEC) Chairman Christopher Cox, said in a conference call with analysts yesterday that by validating shareholders his company’s product will be “a place where serious people could have serious conversations about their investments.”
Some of the outside experts the company is working with on the new website “eyes bulge open and say, wow, this could really be a game changer,” he added.
SEC encouraging online dialogue
The move by Broadridge comes after the SEC adopted changes to its rules in February designed to encourage the use of electronic shareholder forums by public companies and their shareholders. The SEC sees online forums as a way to improve communication between shareholders and companies and cut the number of shareholder proposals submitted for inclusion in annual meeting proxy statements.
The agency devotes extensive resources to adjudicating requests from companies that want to exclude shareholder proposals from their proxy statements. This year alone, the agency received 400 requests from companies seeking to exclude shareholder proposals on procedural or legal grounds.
In a roundtable last year, investors and governance experts, including the giant Calpers pension fund, expressed support for a shareholder forum concept that is similar to Broadridge’s, but only if it was a supplement to the SEC’s existing process and did not replace any of their current rights.
Open to both small and large investors
Broadridge’s shareholder social network is not the first forum for “validated” investors and public company directors and management, but it is the first that will be open to all investors rather than just big pension funds and mutual funds.
In June, RiskMetrics Group Inc. (NYSE: RMG), a provider of risk management and corporate governance products, launched Governance Exchange, an online forum designed to ensure “high quality dialogue” by restricting membership to board members, corporate executives and institutional investors. Retail investors are not permitted, raising questions about fairness and increasing selective disclosure and reputation risks for directors and executives who participate.
However, with its social network Broadridge, which supports approximately 13,000 shareowner meetings each year in North America, plans to leverage its near-monopoly access to brokerage clients to offer an open forum to valid individual as well as institutional investors.
Alluding to the fairness issues around forums that exclude retail investors, Daly said: “The activity here is really going to be driven by, is the SEC going to deem that this is something that shareholders need to have the right to. And if that was the case, then I can’t imagine it getting done any other way than through the plumbing we have in place, and again that’s a chasm between us and any one else. No one else is close to connecting every investor to every public company.”
Advertising and fee supported
Broadridge says its monetization options will depend on possible regulatory action from the SEC. Daly said if the SEC says shareholders have a right to access a forum, then revenues will come from a combination of fees and advertising and sponsorships. Failing that, Broadridge will rely on advertising revenues.
Daly said Broadridge will be meeting with “many new entities” to promote its new social network and has “a significant number of people internally and externally” working on the project.
“It’s really unusual for us to be talking about something so early in its development, but the range of this opportunity could be anything from negligible to a unique and meaningful financial social network which could be really big,” he said.
Broadridge has not included revenues from the investor network in its guidance for 2009.
Full disclosure: I own stock in Broadridge.
An open and transparent dialog via an online community is a great way to improve those communications between shareholders and companies. I look forward to participating and sharing my views/opinions to the masses.
Dominic: I think this combines the two greatest concerns issuers have: a platform for shareholders with agendas to “hijack the conversation” and having Broadridge use every company’s own shareholder data to monopolize yet another communication mechanism. I wonder if theSEC will DEEM THAT COMPANIES HAVE THE RIGHT to their own shareholder lists and “validation mechanism” so that Broadridge can’t hold them hostage yet again when they need to communicate with their investors.
Dominic
My point was that if the SEC allows Broadridge to help themselves to this shareholder data in order to create yet another monopoly by erecting a barrier around 90 million shareholders, you can bet they’ll make issuers pay through the nose to communicate with them just like they have in the proxy process. I know you’re a Broadridge shareholder but if you ask any Corporate Secretary to tell you about Broadridge’s inexplicable and ever rising fees and you’ll get an earful.
I think there needs to be some kind of utility for “direct communication” but it doesn’t need to be automatically be given to Broadridge. It would be interesting to have some issuers weigh in on the subject.
Don,
There are options available now for companies who wish to set up a company sponsored electronic shareholder forum. My company announced eShareholderForum in early June (http://www.eshareholderforum.com), a turnkey forum solution that combines a message board (for shareholders to engage in dialogue with management and each other), blog (for the company to blog), Q&A (for shareholders to ask questions and the company can then post their answers) and polling (so the company can get a pulse on what shareholders are thinking on various topics). A key component, however, is that the company can maintain control over the dialogue on the forum, so it does not deteriorate into the type of useless chatter you often find on a third-party message board. An effective forum that is company sponsored should help a company 1) utilize “Web 2.0″ technology to engage in a dialogue with shareholders, and 2) drive traffic to their IR sites because that is where the company sponsored forum is hosted. We already have our first company signed up (an OTC-listed company in CA), and have contracts being reviewed by a CA-based Amex listed company, a NJ-based Nasdaq listed company, and a NYSE-based NYSE listed company. There is widespread interest and it is accelerating. And it’s available now.
[...] caters to a potential audience of up to 90 million investors in the United States and Canada, were first revealed in August by Broadridge’s CEO Rich Daly, who said he had discussed the concept with US Securities and [...]