Stakeholder and Investor management: A guide for companies

All companies have stakeholders that impact their business, with a key group being shareholders and investors. To be successful, businesses need to be able to effectively manage their relationships with key stakeholders, and in this guide we will cover:

• What is the difference between shareholders, investors, and stakeholders?
• What is stakeholder & investor management?
• Benefits of engaged stakeholders and investors
• How to engage with stakeholders and investors- a stakeholder engagement plan
• Creating investor and stakeholder communications
• Investor management software

What is the difference between shareholders, investors and stakeholders?

Shareholders in a company own stock or shares in the company, and they can vote on issues affecting the company. They can include seed investors for young companies or venture capitalists for growth businesses. An investor can be a shareholder in a business, but can also lend money to a business without being a shareholder, potentially through debt instruments like convertible notes, or a simple agreement for future equity (SAFE).

Stakeholders are a broader group compared to shareholders or investors, as they have a wider interest in the company and include:

• employees of the company,
• customers who rely on the company to provide a particular good or service,
• suppliers and vendors who rely on sales to the company for a revenue stream.

Investors in companies can often sell their interests in a company at a relatively short notice, while other stakeholders may be bound to the company for a longer term and for different reasons such as employment or relying on regular sales to the company.

Taking the interests of all company stakeholders into consideration has increased with the rise of corporate social responsibility (CSR), where a company is accountable to itself, its stakeholders, and to the public. For example, companies might consider their impact on the local community or environment instead of making choices based solely upon the interests of shareholders.

What is stakeholder & investor management?

Stakeholder management is the process of identifying and understanding all the internal and external people, businesses, shareholders and other groups that are involved in, or affected by, the company. Stakeholder management involves understanding stakeholders’ concerns and priorities, giving them opportunities to provide feedback, and ensuring this feedback and their needs are considered in company decisions. The ultimate goal is to build trust and a good relationship which is beneficial to both the company and the stakeholder.

Investor management focuses on handling inquiries from shareholders and investors, and also identifying key investors to proactively communicate and engage with. The goal of this should be to foster closer, more constructive relationships between these investors, executive managers, and the company board. In larger companies this could be done by an investor relations manager, while in smaller companies the CEO and CFO generally take on a lead investor management role.

While investor management has a narrower focus than general stakeholder management, a similar process to developing a management plan can be followed, where companies identify the most important investors, engage with them to collect feedback, and include this feedback in key business decisions.

Stakeholder analysis and mapping

This process of analysing stakeholders is often referred to as mapping, where companies determine who their key stakeholders are, how much engagement or communication they need, and prioritise those requiring the most attention.

This can be done for key investors by scoring them based on their influence and the level of interest they have, as shown in the matrix diagram below.

Looking at each quadrant in the stakeholder mapping matrix:

High Interest/High Influence

These are key investors and they should be managed closely. They need to be kept happy as they can have a potentially large impact on the company, so companies should put the highest engagement efforts into this group.

Low Interest/High Influence

As this group is still influential, companies should keep them satisfied by meeting their information requirements. This group won’t require as much engagement as the high interest/high influence investors, but they still need to be covered well.

High Interest/Low Influence

This group should be kept fully informed and monitored closely. Talking with them is often helpful for feedback and can help identify areas that could be improved or may have been overlooked.

Low Interest/Low Influence

This group has little influence or interest and should be monitored with only limited engagement required, but companies shouldn’t ignore them. They should be given the essential information and then the occasional check done to determine whether any have moved into another group, so require different engagement.

Knowing which investors are in each category helps companies to understand how many resources are required to engage them and the way to engage with each group. This understanding is important for building a stakeholder and investor engagement plan.

Companies often have to engage and communicate with a wide range of stakeholder groups on business performance, including direct shareholders, other investors, and even employees with ownership options if they have an employee share ownership plan (ESOP) running. So all of these groups should be considered in the mapping process, and then the different levels of information they require can be detailed in the stakeholder engagement and communication plans.

Download our free Shareholder and Investor Report Template

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Benefits of engaged stakeholders and investors

There are a number of benefits to engaging stakeholders and specifically investors including:

• Gaining insights into any investor concerns, ideally before they become a major issue
• Investors will receive a fuller picture of the company they own a stake in, helping to build a good relationship and trust with them
• Investors are more receptive and likely to support the company when companies have engaged with them periodically over the course of the year. Increasing engagement has been reported to give a positive impact on shareholder voting and investing decisions.
• Investors are generally very knowledgeable about the industry or market so it may help the company to identify emerging trends, with the potential to act with a first mover advantage.

How to engage with stakeholders and investors- a stakeholder engagement plan

Once companies have identified, mapped and prioritised key stakeholders and investors, a clear stakeholder engagement plan is required to communicate with them effectively. This should cover:

Objectives: This details the result the company wants to see from each key stakeholder, particularly those with the highest influence and highest interest. Summarise their current status on how they think or act towards the company, as either an advocate, supporter, neutral or blocker. Then the company should note the status they would like to move them to, or what the company would specifically like them to say or do. This will guide how much engagement and communication each stakeholder will require.

Resources: What resources are required to meet the objectives including budget, time, and people?

Actions: What activities will be needed to engage and communicate with them?

Messaging: What key messages does the company need to communicate to each?

Evaluation: How will success of the engagement plan be evaluated, and how will the company achieve tracking against the objectives?

Investors need different levels of engagement and communication, so different plans are required.

Creating investor and stakeholder communications

There are a variety of tools which companies can leverage to support investor and stakeholder communications. These can be overlayed against the mapping analysis, as shown in the diagram below, to help develop specific activities or events for a communications plan.

For example, investors who have been mapped with low influence and low interest can be communicated with through email updates, website information and social media posts, while those scoring high on both influence and interest should be engaged with more directly.

Once companies have these communication activities defined for each investor, they can determine the required frequency of communications and create a calendar of activities covering those to communicate with, the channels to use, and the messaging to communicate through the channels.

Those investors identified as high interest and high influence will probably require some direct engagement such as a meeting in person or via video conference depending on their location and what is possible in the current Covid-19 environment. There are some common topics of discussion which are covered when companies meet with key investors including:

• Strategy oversight
• Board composition
• Executive compensation
• Capital allocation
• Management performance
• Shareholder proposals
• ESG (Environmental, Social, and Governance) factors
• Risk management oversight

Because investors’ time and resources are limited, meetings in person or over video conferencing should do more than regurgitate public information, so it is recommended to check with the investor in advance of the meetings on the key areas which they would like to cover, and tailor a meeting agenda and materials to meet their preferences.

Investor management software

To help with communication and engagement with investors and other stakeholders, online software can be utilised. A good system will manage the handling and reporting of share ownership including any changes, and also help to manage investor and stakeholder communications. These communications should be easy to develop and send to investors or other groups of stakeholders such as staff, depending on the information requirements. For example, participants in the company’s staff ESOP programme may not need to receive information going to other investors on future capital raising plans.

Additionally if the software can store documents in the company’s online account, then investors can be sent notifications to access important information directly such as quarterly company updates. Managing communications to shareholders in the same online platform as a company share register also means the company is meeting its obligations to keep all shareholder communications and emails for the legally required time period, which can be at least 7 years for countries like Australia and New Zealand.

Ideally, investors would be able to log-in at any time to the online software so that they can access their shareholding details and any relevant documents, helping them to feel engaged and up-to-date with the direction of the company.

An online equity management software platform like Orchestra offers an easy way to ensure equity management requirements are met, whilst also being a powerful platform to help manage investor and stakeholder communications.

Get a free demonstration of how you can effectively manage and engage your investors and stakeholders.

Related articles:

3 big mistakes companies make with share registers and stakeholder engagement

The value of an engaged stakeholder

Shareholder and Investor Report Template

What is a cap table and why does your company need one?

DISCLAIMER: This article is for informational purposes only, and contains general information only. Orchestra is not, by means of this information, rendering accounting, business, financial, investment, legal, tax, or other professional advice or services. This publication is not a substitute for such professional advice or services nor should it be used as a basis for any decision or action that may affect your business or interests. Before making any decision or taking any action that may affect your business or interests, you should consult a qualified professional advisor. This information is not intended as a recommendation, offer or solicitation for the purchase or sale of any options or shares.

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