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Online Investor Relations - Transparency and Credibility are Key
Online investor relations has a mandate to be transparent and credible; it is a mandate that is being imposed by both legal considerations and a discerning public. And frankly, it is good business.
Online investor relations has a mandate to be transparent and
credible; it is a mandate that is being imposed by both legal
considerations and a discerning public. And frankly, it is good
business.
In the aftermath of Worldcom and Enron, legislation like the U.S.
Sarbanes-Oxley Act – which has global implications, and the Ontario
Securities Commission rulings, companies will have to be transparent in
their dealings or else. This is a good opportunity for some companies
to regain their credibility.
It’s a fact: stockholders (and potential stockholders) and media
search websites for investor information. As such, your corporate
website should ‘own’ that information in the form of a dedicated and
detailed investor section or “room”...
Who
Create a contacts page
The number one priority for users seeking investor information -
contact information. Key contacts or people and their respective
contact information (especially phone number AND email) are extremely
important to the media and to institutional investors in
particular.
According to IR Web Report “fewer than 20 per cent of companies
are providing credible IR contact information on their websites.” It
may be available in the global navigation banner in the form of
“Contact Us” but it should also be repeated right on the Investor
Relations home page.
Who is using investor relations
information…
-
56% of investment professionals used company websites at least monthly, with 28% using them weekly.
- the Chartered Financial Analyst Institute member technology usage survey, 2000 -
89% of investment professionals were using company sites at least monthly, with 75% using sites at least weekly
- a survey by Rivel Research Group, 2003 -
74% of retail investors spent some time online doing investment-related activities - According to the Voice of the American Shareholder study by the National Association of Investors Corporation (NAIC) 2003.
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90% of retail investors who use the Web use company websites to confirm investment ideas and decisions.
Source: 09 June 2004, How credible is your IR website? ByDominic Jones
What
Publicly traded companies must:
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Be transparent
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Release both positive and negative news, through: advertising, public meetings, regular news releases and a proactive website
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Have performance-based reporting (e.g. scorecards)
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Satisfy investor needs
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Have strong corporate governance
Therefore, a formal approach is required for your investor
relations room which should also contain a corporate governance
section.
Corporate Governance
An optimal corporate Governance section on your site would
include:
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Strategy and vision statements
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Company history, products/services, geographical reach, sector
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Company markets and future trends
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Competitor profile, sector challenges
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List of directors and committees
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Biographies of directors, date of appointment, policies of appointments, remuneration etc
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Terms of reference for nominations, remuneration & audit committees, their role and authority
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Performance evaluations
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Non-audit fees paid to the auditors and tendering process where non-audit fees exceed audit fees
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Detail of proxy votes and abstentions
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Any pending litigation
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Company policies
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Executive Compensation
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Fiduciary/Oversight Duties
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Affiliate Transactions
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Shareholder Voting Issues
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Proxy Statement
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Compliance with Disclosure Laws
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Internal Control Policies and Procedures
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Whistleblower Policies
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Drafting and Reviewing Committee Charters
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Audit Committee Responsibilities
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Insider Trading Programs
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Stock Plans
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Letter from the Spokesperson
In addition to the above, your investor relations room should contain:
- Contact details – investor relations email, phone; analysts and advisors
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About us (or links to it) – including company activities and fact sheets
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Annual report, interim, quarterly and preliminary statements
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Archive of annual reports and financial data (for 5-10 years) including relevant shareholder circulars, revenue, operating profit, pre and post tax profit, EBITDA (earnings before interest taxation, depreciation and amortization), and dividend payments
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Shareholder documents relating to listings in other markets (if applicable)
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Extracts of financial highlights & summaries (indicated audited or not) from financial reports so information isn’t buried
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Company information – brochures and newsletters
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Calendar of events (AGM, dividend payouts, result announcements)
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FAQs
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Glossary of terms
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Credit ratings (S&P, Moody’s, Fitch)
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Press releases and archives (or link to your media room or to financial releases)
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Relevant news (good and bad)
Some Best Practices – how to have the best Investor
Relations Room:
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Recognizable URL, identifiable branding
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Company intangibles – brand and human capital
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Searchable, indexed
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Reports in multiple languages
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Translations of webcasts
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Financial data in more than one currency
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Multiple formats (e.g. for annual reports) – pdfs and html (financial reports in Excel); printable
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Virtual visits to company facilities
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Accessibility (visual, hearing, cognitive and motor impairments) www.w3.org/WAI/Resources; browser/os compatibility
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Quantitative and qualitative information
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Key financial ratios
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Return on Capital Employed (ROCE)
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Return on Net Assets (RONA)
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Total Shareholder Return (TSR)
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Cash Flow Per Share
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Discounted Cash Flow Per Share
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Earnings Per Share (EPS)
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Interest cover and gearing ratios
-
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Dividend and capital history including stock splits
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Capital gains tax information
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Tax information – mergers/acquisitions
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Financial presentations – available as webcasts and related slides; include Q&As; and archived
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Executive presentations, speeches, reports, articles
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Share price history as downloadable spreadsheet
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Access to electronic filings (e.g. US Securities & Exchange Commission using EDGAR system)
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Stock price (current) and Data
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Opportunity to purchase (e.g. how to contact a broker etc)
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Stock symbol and trading codes; stock exchanges where traded (links); relevant banking terms
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Shareholder information
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Analysis by size, type and geographical holding
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Percentage holdings and details by principal shareholders
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AGM details including votes for and against resolutions and abstentions
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Reasons for any resignations of directors
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Electronic proxies, forms, share registration facilities, etc.
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Shareholder information forms (change of address, stock transfers etc)
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Any dividend reinvestment plans, savings accounts, etc
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Share price, trading volumes etc
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Outstanding bond and note issuance with maturities, coupons, security rankings
-
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SEC Filings
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Reconciliations
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Investor Inquiries/FAQs – specific to finance
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Transfer Agents
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Dividend Reinvestment
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Dividend History
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Investment Clubs
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Splits & Dividends
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Analyst Coverage
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Analyst Estimates
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Historical price lookup
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Sales & Earnings
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Earning Estimates
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Tools:
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Investment Calculator – to assess value of shareholdings over time
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Events Calendar
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Investor Webcasts
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Email Alerts (subscribe)
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Interactive Stock Chart
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Email option for investor news, alerts
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Help and feedback options
-
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Related links:
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Industry, regulators, competitors
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Corporate Citizenship
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News
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Diversity Programs and Corporate culture
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Some websites that feature good IR practices include
Deutschebank and Carmanah
Technologies.
Why
The purpose behind making information available via the Internet
is directly related to who is using it and how it is being used.
According to Rivel Research...
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44% of U.S. portfolio managers said they had bought stock as a result of information they obtained on corporate websites.
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Company websites had a "substantial impact" on their attitudes toward a company and its stock, stated:
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48% of U.S. portfolio managers,
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43% of European portfolio managers, and
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43% of Canadian portfolio managers
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Source: Rivel Research, March 2003 report
Of course you need to provide information that your users require
but you also need to provide information to address legal issues and
perceptions.
Disclosure
“Times have changed. These days, an explosion of do-it-yourself
investing -- driven by Internet and cable news delivered up to the
second--is shaking up the marketplace. And securities regulators,
conscious of the growing importance of the retail investor, are
demanding disclosure be more equitable,” writes Kevin Liblin in “No
More Secrets” (Canadian Business, October 10, 2000).
To even the playing field for non-institutional investors, more
and more companies are making webcasts and conference calls available
to all investors.
There are differing opinions on the value of disclosure; there are
some benefits and some costs that can be attributed to it. What
companies need to keep in mind is that transparency means nothing to
hide – and if you don’t hide anything you become more credible. You’ll
have to do your own cost benefit analysis.
“When firms choose to submit to more onerous disclosure
requirements they experience an increase in stock prices, reduced
bid-ask spreads and greater share turnover,” says the Ontario
Securities Commission in a
Cost Benefit Analysis of Investor Confidence. “However, when
regulations are imposed, some firms may find the costs outweigh the
benefits.”
The Sarbanes-Oxley Act (SOX), also known as the Public Company
Accounting Reform and Investor Protection Act, is U.S. compliance
legislation covering governance issues, regulations for audit committee
responsibility and protection for whistleblowers. And while some
believe SOX is too much and too costly, the fact remains it is
law.
“It is now becoming fashionable to believe that corporate
behaviour should always be viewed with suspicion,” says Dominic
D’Alessandro, CEO of Manulife Financial, quoted in a May 6 Globe and
Mail article. “This is a very dangerous premise upon which to develop a
governance regime. I am afraid that by doing so we run the risk of
imposing onerous and impractical restraints that will stifle
entrepreneurial activity.” He estimates that it will cost Manulife up
to $30 million a year to comply with new regulation from both sides of
the border, particularly the Sarbanes-Oxley Act.
How
Transparency and credibility must start at the top. The CEO needs
to be committed to ensuring that information is available and that
there are resources to provide the information to investors and media.
The CEO, as chief spokesperson, also needs to stand behind that
commitment and be available to answer questions from the investment
community including media and analysts.
Setting up an investor relations room and maintaining it with
up-to-date information will require a commitment of time as well as
standards and processes to ensure that all information that you say
you’ll provided is posted in a timely fashion and in user-friendly
formats – such as financial reports in excel as well as PDF.
Conclusion
A valuable online investor relations site or section does require
a lot of work but it will be invaluable to investors and media, and
therefore to you. By providing as much information as you can and
keeping it current and accurate you move towards ‘transparency’ and
also to greater credibility.
Some might ask “can we afford to do it?”
If transparency and credibility are key goals for your investor
relations then the more appropriate question is “Can you afford not
to?”
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