Damage to a company's brand is a real risk if boards put retail investors off-side.

Shareholders can be the biggest promoters of their company's products and services if they are treated well and their rights are respected. The corollary is also true. In particular, Australia's financial services sector must be sensitive to the way its brand is affected by governance failings.

The big demutualisations, including AMP and National Mutual, have resulted in millions of shareholders who are also customers. In addition, retail investors have employed a successful strategy of investing in Australia's large banks. Otherwise known as if you can't beat 'em, join 'em, this strategy has resulted in huge shareholder registers in this industry.

Again, many shareholders are also customers. So when Commonwealth Bank was slapped with a $100,000 fine by the Australian Securities & Investments Commission, the monetary aspect ought to be the least of its concerns.

Shareholder-customers, who smell an unpleasant aroma coming from the bank's response to the fine, can clearly attest to the brand damage that was done. It is hard enough to understand that information selectively released to institutional shareholders could have a dramatic impact on the pricing of a capital raising, yet not be considered by CBA to be market sensitive and therefore not disclosed to everyone else.

Similarly, despite National Australia Bank chairman Michael Chaney's best efforts, shareholders remain unsettled over its capital raising practices. NAB is not alone here -- many companies have raised capital inequitably in recent times, and rubbed salt into the wounds by holding retail investors' application funds interest-free for weeks.

However, NAB has a huge number of shareholder-customers, so it copped the brunt of negative publicity and undoubted brand damage. No doubt it will look more closely at fairer ways of raising capital.

On Monday, CSR, having learned from others' mistakes, announced that it would be using such an approach to raise equity. Alternatively, a simple renounceable rights issue would do the trick if companies had sufficient forethought.

With the marketing strategy it has employed, Coles will have to be well attuned to this issue as well.

Particularly in the retail sector, retail investors have trouble differentiating their experience. The way they are treated, both in store and as an owner, melds to create a hybrid view of the company, its brand and reputation.

Similarly, the valid criticisms were made of Qantas at last week's annual general meeting by retail shareholders. The comments made by shareholders at the meeting were both insightful and critical, and the massive backlash on the remuneration report for the second time in a row should have been avoided.

Boards of Australia's listed companies might be inclined to spend less time on retail shareholders, instead focusing on the bigger, more easily reached institutional shareholders.

This is a mistake for many reasons, including the damage that can be done to brand and reputation by upsetting these shareholders who are also likely to be consumers and some of a company's best ambassadors.

This article by Stuart Wilson, Chief Executive Officer of the Australian Shareholders' Association featured in his weekly Shareholder Opinion column in The Australian on Wednesday, 28 October 2009.