Leveling the Playing Field of Corporate and Shareholder Transparency – Interview with Optimizer Magazine

A Call to Action from Joseph Caruso, CEO, 成人视频 

JOE CARUSO: Over the past few years, there’s been a growing call for greater corporate transparency, especially from government agencies, institutional investors, and proxy advisory firms. But are we really creating a level playing field when it comes to shareholder transparency? 

OPTIMIZER: It seems that we’re still far from that. You’ve highlighted a key issue: not all shareholders are playing by the same rules of transparency, particularly when it comes to the OBO classification. Can you explain what that is and why it’s a problem? 

JOE: Absolutely. First, let’s understand what an OBO is. Shareholders can hold their shares in one of two ways: directly with a company, making them “registered” or “record” holders, or indirectly through a brokerage or custodian—these are called “beneficial owners” or “street name shareholders.” The SEC established a framework in the 1980s to classify beneficial owners into two groups: Objecting Beneficial Owners (OBOs) and Non-Objecting Beneficial Owners (NOBOs). OBOs are shareholders who do not want their identity, share position, or contact information disclosed to the company. On the other hand, NOBOs agree to share that information. This classification system gives OBOs a distinct advantage—they can hold a meaningful number of shares without the company knowing who they are or being able to communicate with them directly. This creates an uneven playing field and undermines the transparency we’re striving for.  

OPTIMIZER: That’s a huge problem, especially when companies are striving for more transparency and open communication with their shareholders. Can you give us an example of how OBOs disrupt shareholder engagement?

JOE: Sure. Let’s say a hedge fund or large individual investor owns 100,000 shares in a company as an OBO. Typically, higher net worth investors or institutional investors hold larger positions in OBO form than average beneficial NOBO holders. These investors hold sizable positions per account, but because the company can’t directly engage with these holders, management is forced to reach out to potentially hundreds or even thousands of smaller shareholders who own fewer shares to make up the difference. This outreach process is inefficient, time-consuming, and expensive. If management knew who owned those 100,000 shares, they could contact the OBO holder directly, streamlining the process and saving significant resources.  

OPTIMIZER: So, it’s not just an issue for large companies, but for smaller issuers as well. Could you elaborate on the impact OBOs have on small companies?  

JOE: Exactly. Smaller companies, often majority-owned by individual retail investors, bear much of the cost of shareholder outreach. Retail investors tend to vote less frequently than institutional investors, which means smaller companies often must spend much more to ensure they get the votes they need to pass key proposals. In some cases, a sizable OBO population can prevent these companies from reaching quorum or securing a vital vote, such as for a financing or bylaw amendment. The impact is even more pronounced in the mutual fund and ETF industry. These funds are mostly held by retail investors, and the costs associated with soliciting proxies from OBOs can run into the millions. In fact, the Investment Company Institute has advocated for lower quorum requirements for mutual fund meetings to address this. But, in my opinion, that’s just a band-aid solution—it doesn’t address the root problem. 

OPTIMIZER: It sounds like the costs associated with OBOs are not just a nuisance—they’re a significant barrier to shareholder democracy and engagement. What’s the solution? 

JOE: The solution is simple: eliminate the OBO classification. If management could communicate directly with all beneficial owners, whether they’re OBOs or NOBOs, the entire shareholder engagement process would be more transparent, efficient, and cost-effective. The SEC’s current shareholder communication framework, which hasn’t been updated in more than four decades, simply doesn’t reflect the modern business environment. By eliminating OBOs, companies could drastically reduce costs related to proxy solicitations, reach shareholders more directly and efficiently, and enhance overall transparency. This would be a win-win for both companies and their shareholders.  

OPTIMIZER: You’ve mentioned 成人视频’ work in handling shareholder meetings. How has the OBO problem affected your day-to-day work?  

JOE: At 成人视频, we manage over 750 shareholder meetings annually, and we see firsthand how disruptive and costly the OBO classification can be. In many cases, it forces companies to spend more time and money trying to engage with shareholders who are effectively “hidden” from them. We’ve had situations where, due to the large percentage of shares held by OBO holders, companies didn’t pursue a shareholder vote on a critical measure for fear they couldn’t get the necessary votes or absorb the potential cost of achieving success. This dissuades management and can potentially harm the company and its investors. That’s why we formed the Shareholder Ownership Transparency Alliance (SOTA). SOTA’s sole mission is to eliminate the OBO classification and give companies equal access to all their shareholders. We’re asking executives of publicly traded companies, mutual funds, and their respective industry trade groups to support our petition, which we’ll eventually present to Congress and the SEC.  

OPTIMIZER: That’s a major initiative! What’s next for SOTA?  

JOE: We’re working to gather as many signatures as possible from executives and industry groups who understand the need for change. We believe that when we present a united front with enough support, Congress and the SEC will have no choice but to act. We’re not asking for money—just for people to sign the petition and show their support for leveling the playing field. Once we feel we have the necessary backing, we’ll bring this issue to policymakers in Washington and push for the elimination of the OBO classification. 

OPTIMIZER: So, eliminating the OBO classification is about more than just reducing costs—it’s about restoring fairness and shareholder democracy, right? 

JOE: Exactly. The current system is outdated and creates an unfair advantage for certain shareholders, at the expense of others. Transparency is supposed to be a two-way street—companies need to be able to communicate directly with all their shareholders, and shareholders deserve to have their voices heard. Eliminating the OBO rule would restore balance and ensure that companies and their shareholders are all playing by the same rules. This is a common-sense solution that’s long overdue.  

OPTIMIZER: Joe, what else should we know about leveling the playing field with beneficial ownership disclosure?  

JOE: Back in 2021, Congress passed the bipartisan Corporate Transparency Act (CTA) to combat illicit activities such as tax fraud, tax fraud, money laundering, and terrorism financing. The goal was to get more transparency on who owns U.S. private companies, LLCs, and S corporations that operate in or have access to the U.S. market. This law doesn’t apply to public companies, though. 

By eliminating OBOs, companies could drastically reduce costs related to proxy solicitations, reach shareholders more directly and efficiently, and enhance overall transparency. This would be a win-win for both companies and their shareholders. 

Under the CTA, most businesses now have to file a Beneficial Ownership Information (BOI) Report with the U.S. Department of Treasury’s FinCEN, which lists the individuals behind the company. The idea is to stop people with malicious intentions from hiding their ownership in U.S. companies to run illegal operations—something that threatens national security and the economy. As a result, banks and brokers must know their customers and private companies must report their beneficial owners to FinCEN. However, the largest companies in the world are still not permitted to know who their actual owners are. We believe it’s time for this to change. 

OPTIMIZER: Yes, it certainly sounds like it’s time for a change. How can people get involved?  

JOE: People can get involved by visiting our website and signing the petition at Sotanow.org. We need as much support as possible to make this happen. The more people we have backing this effort, the stronger our case will be when we present it to Congress and the SEC.  

OPTIMIZER: Thank you, Joe. It’s clear that eliminating the OBO classification would benefit both companies and shareholders, and we’re excited to see how SOTA moves this important issue forward.  

JOE: Thank you! It’s time to level the playing field and ensure that transparency is truly a two-way street for everyone involved. 

 

Scan here to sign the petition:

Retail investors play a major role in stock markets today, propelled by a surge in investor activity that has continued to accelerate in a post-pandemic market. For public companies, this constituency group is a powerful, and necessary, force to harness.

According to data from the World Economic Forum, retail investors accounted for 52% of all global investments in 2021, which is expected to grow to over 61% by 2030. Further data from Visual Capitalist revealed that peak net retail flows in 2023 were 84% higher than in 2019, and the highest in-flow of retail capital in history on a single day exceeded $1.5 billion in the United States.

Retail investors not only affect stock prices due to their massive buying powers but also have become a major force in the outcome of many key corporate votes, especially proxy battles. Public companies, especially large public companies, that know how to engage and communicate with retail investors effectively can mean the difference between gaining the votes necessary to support their corporate agendas or losing a critical battle.

What’s important for public companies to realize is that there are a wide variety of retail investor groups, each with their own investment goals and interests. Messaging that appeals to one constituency might not appeal to another. This speaks to how critical it is to tailor engagement with each investor group appropriately, depending upon the company’s agenda or type of industry.

The first step, then, toward successfully communicating and engaging with retail investors begins with understanding their unique profiles, identifying under which constituency group the company or industry’s retail investors fall, and then catering to that constituency group’s specific investment goals and interests.

Communication channels.

In the digital age, communication channels also have changed, including ways of engaging with shareholders. The traditional route of the chairman or CEO writing a lengthy “to our shareholders” letter to investors to remind them to vote has little to no impact anymore. It’s akin to burning money in the trash can, where these letters often go.

Oftentimes, letters to shareholders fail because they contain the same boilerplate language sent to all investors. There is no customization.

One of the best ways for a public company to effectively get its message across to compel retail investors to act is to better understand the demographics of its shareholder base by obtaining and researching shareholder lists periodically. This is quite important, as it allows management to formulate the necessary public relations strategy in advance of a possible proxy campaign and even possibly predict the voting outcome of their retail base.

Another effective way to appeal to retail investors is to approach it much like a political campaign by seeking to more clearly understand which constituencies the company seeks to target, how this targeting campaign needs to happen, and what key messages the company is looking to get across.

It’s also very important that public companies get very creative with the messaging channels they use to reach out to these constituency groups. To effectively engage with today’s retail investors, it’s important to utilize communication channels like social media, email and text messaging.

Lastly, because large-scale retail engagement campaigns are costly, especially to retail investors imbedded in “street” name, performing a cost-benefit analysis and tracking the outcome is another important step. Gone are the days of just dropping a drab message to “street” name shareholders, its simply too expensive and produces no measurable result
Keep in mind that the biggest issue many public companies face isn’t “against” votes by shareholders, but that many often do not vote at all. Public companies often will not even pull shareholder lists until they need a vote. Ongoing communication with shareholders is severely lacking, and there is no real call to action. This is a missed opportunity.

Companies should not fear communicating with retail investors but rather think critically and deliberately about how to harness the power of this silent majority.

JOE, IT’S BEEN A FEW YEARS SINCE OUR LAST INTERVIEW WITH YOU. CAN YOU GIVE US AN UPDATE ON HOW THINGS ARE GOING AT ALLIANCE ADVISORS?

Best-in-class customer service and product innovation have always been the hallmark of the 成人视频’ customer experience since we started as a business in 2010.

The company is doing especially well as we focus on new and better products and a commitment to improve our services to our new and existing clients. Our new company slogan – “Going Beyond To Achieve Your Goals” – encapsulates our focus on bringing meticulous customer service to clients and the unwavering pursuit of product innovation 成人视频 now offers clients the most comprehensive and user-friendly 360-degree approach to shareholder engagement of any company in the market…. and our recent client growth reflects this.

TALK ABOUT ALLIANCE ADVISOR’S CUSTOMER GROWTH AND EXPANSION OVER THE PAST SEVERAL YEARS.

In 2022, we served nearly 900 US and multi-national companies and in 2023 we worked with over 1,200 companies. We are predicting to have over 1,400 clients in 2024, so you can see that our growth trajectory is among the best in the industry.

Our client growth reflects our focus on our geographical expansion. We now have offices and ‘boots on the ground’ in six markets including the United States, Canada, London, Hong Kong, Taipei, and Korea, with plans to open an office in Tel Aviv in the near future. We completed 120 international assignments across 14 countries in 2023.

We also have a state-of-the art virtual call center that allows for limitless expansion and shareholder contact.

Because of our focus on expansion, we engaged with over 4 million retail investors in the past 12 months through various communication methods including phone calls, text messaging, social media engagement and a unique direct mail operation.

One of the things I am most proud of is that nearly 50% of our new customers come to 成人视频 through referrals. That, coupled with our 99.9% customer retention rate, illustrates our clients’ belief in our service – which is second to none.

What differentiates 成人视频 from others in the industry is the quality and reliability of the data we provide to our clients, our 24/7 customer service model and our proactive customer communication approach.

WHAT ARE THE CORE SERVICES THAT ALLIANCE ADVISORS PROVIDES TO CLIENTS?

成人视频 continues to be a leader in offering Shareholder Meeting Advisory, off season Shareholder Engagement, Compensation, Governance & ESG advisory, Stock ID and Proxy Logistics.

成人视频 has a leading compensation consultancy team that works closely with outside compensation consultants, company CFOs and management, which underscores our comprehensive approach to meeting each client’s unique needs. Compensation plans are now heavily influenced by ESG scores and we provide gap analysis between company actions and investor expectations, while focusing on execution of the plan to get the vote.

On the ESG front, our experts are fully up-to-date on the ever-changing disclosure requirements and we work with each of our customers on a very granular level to identify the policies that apply to their business – and those that don’t – and how best to disclose them in the proxy statement.

TELL US ABOUT ALLIANCE ADVISORS’ RECENT ACQUISITION OF LHA ADVISORS AND WHAT THIS MEANS TO CLIENTS.

成人视频 entered the investor relations business in a major way with the acquisition of New York-based LHA Advisors in Q3 of 2023. This important addition complements our existing services and provides a 360-degree view of shareholder engagement, particularly when engaging with portfolio managers and the buy side… versus folks on the stewardship side. There has always been a major gap for most companies trying to engage with their unique shareholder bases; the acquisition of LHA makes Alliance the only company offering this fully integrated service to close that gap.

WHAT ARE THE BENEFITS OF THIS IR COMPONENT FOR CLIENTS AND HOW ARE YOU DELIVERING THIS SERVICE?

Our proprietary Invictus platform was developed in-house at 成人视频 to allow clients to access a single platform to see the full results of their investor relations engagement efforts in real-time.

No other firm except 成人视频 can provide clients with data to measure if IR shareholder engagement is actually working. This is where the “rubber meets the road.” The Invictus platform provides companies with a real-time scorecard on the efficacy of their IR effort. You will know within two weeks if the IR campaign is working – or not – and we work with our clients to re-adjust their campaigns accordingly.

Invictus was introduced as the only comprehensive system that interconnects the shareholder ecosystem, providing clients with access to data on roadshow results, stock buying and selling, and voting information. This is a real game-changer.

HOW DOES THIS PLATFORM WORK?

Invictus was developed in-house by 成人视频 to “Smash the Black Box” around proxy solicitation management and shareholder ownership insights. Through a customized digital portal, Invictus brings our clients inside the action by providing on-demand access to:

• Deep Ownership Insight & Peer Group Analysis
• Complete Digital Management of your Annual/ Special Meetings
• Comprehensive, Real-time Vote Reporting
• Historical Voting Actions and Outcomes.

Share ownership movement and proxy solicitation functions have been opaque for too long. Invictus changes the game by providing full transparency of critical shareholder data in a modern digital framework. With three distinct customer modules, Invictus simplifies access to institutional investor activity, facilitates intelligent IR decision-making, and streamlines the management of Annual and Special meetings.

JOE, THE FUTURE SEEMS VERY BRIGHT FOR ALLIANCE ADVISORS – DO YOU HAVE ANY FINAL COMMENTS?

There has been a serious lack of innovation in the proxy solicitation and corporate consulting industries for decades.

One of our top priorities at 成人视频 is to bring meaningful innovation to the industry; innovation that helps our clients get a deeper understanding of their investors and the issues that the corporations face. Ultimately, we are in the problem-solving business – and we want to be the best at what we do – and I believe we are.

With our pursuit of innovation, coupled with our ongoing commitment to customer service, dedicated market expansion, strategic customer acquisition and product development, 成人视频 is well-positioned for continued market share growth as we bring our innovative solutions to market to better serve our clients.

We welcome you to reach out to our team for a demonstration of the Invictus platform and to learn more about how 成人视频 can save you time and money and improve your shareholder engagement efforts.