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 pageThe 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
, 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.
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:
Be transparent
Release both positive and negative news, through: advertising, public meetings, regular news releases and a proactive website
Have performance-based reporting (e.g. scorecards)
Satisfy investor needs
Have strong corporate governance
Therefore, a formal approach is required for your investor relations room which should also contain a corporate governance section.
Corporate GovernanceAn optimal corporate Governance section on your site would include:
Strategy and vision statements
Company history, products/services, geographical reach, sector
Company markets and future trends
Competitor profile, sector challenges
List of directors and committees
Biographies of directors, date of appointment, policies of appointments, remuneration etc
Terms of reference for nominations, remuneration & audit committees, their role and authority
Performance evaluations
Non-audit fees paid to the auditors and tendering process where non-audit fees exceed audit fees
Detail of proxy votes and abstentions
Any pending litigation
Company policies
Executive Compensation
Fiduciary/Oversight Duties
Affiliate Transactions
Shareholder Voting Issues
Proxy Statement
Compliance with Disclosure Laws
Internal Control Policies and Procedures
Whistleblower Policies
Drafting and Reviewing Committee Charters
Audit Committee Responsibilities
Insider Trading Programs
Stock Plans
Letter from the Spokesperson
In addition to the above, your investor relations room should contain:
- Contact details – investor relations email, phone; analysts and advisors
About us (or links to it) – including company activities and fact sheets
Annual report, interim, quarterly and preliminary statements
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
Shareholder documents relating to listings in other markets (if applicable)
Extracts of financial highlights & summaries (indicated audited or not) from financial reports so information isn’t buried
Company information – brochures and newsletters
Calendar of events (AGM, dividend payouts, result announcements)
FAQs
Glossary of terms
Credit ratings (S&P, Moody’s, Fitch)
Press releases and archives (or link to your media room or to financial releases)
Relevant news (good and bad)
Recognizable URL, identifiable branding
Company intangibles – brand and human capital
Searchable, indexed
Reports in multiple languages
Translations of webcasts
Financial data in more than one currency
Multiple formats (e.g. for annual reports) – pdfs and html (financial reports in Excel); printable
Virtual visits to company facilities
Accessibility (visual, hearing, cognitive and motor impairments) www.w3.org/WAI/Resources; browser/os compatibility
Quantitative and qualitative information
Key financial ratios
Return on Capital Employed (ROCE)
Return on Net Assets (RONA)
Total Shareholder Return (TSR)
Cash Flow Per Share
Discounted Cash Flow Per Share
Earnings Per Share (EPS)
Interest cover and gearing ratios
Dividend and capital history including stock splits
Capital gains tax information
Tax information – mergers/acquisitions
Financial presentations – available as webcasts and related slides; include Q&As; and archived
Executive presentations, speeches, reports, articles
Share price history as downloadable spreadsheet
Access to electronic filings (e.g. US Securities & Exchange Commission using EDGAR system)
Stock price (current) and Data
Opportunity to purchase (e.g. how to contact a broker etc)
Stock symbol and trading codes; stock exchanges where traded (links); relevant banking terms
Shareholder information
Analysis by size, type and geographical holding
Percentage holdings and details by principal shareholders
AGM details including votes for and against resolutions and abstentions
Reasons for any resignations of directors
Electronic proxies, forms, share registration facilities, etc.
Shareholder information forms (change of address, stock transfers etc)
Any dividend reinvestment plans, savings accounts, etc
Share price, trading volumes etc
Outstanding bond and note issuance with maturities, coupons, security rankings
SEC Filings
Reconciliations
Investor Inquiries/FAQs – specific to finance
Transfer Agents
Dividend Reinvestment
Dividend History
Investment Clubs
Splits & Dividends
Analyst Coverage
Analyst Estimates
Historical price lookup
Sales & Earnings
Earning Estimates
Tools:
Investment Calculator – to assess value of shareholdings over time
Events Calendar
Investor Webcasts
Email Alerts (subscribe)
Interactive Stock Chart
Email option for investor news, alerts
Help and feedback options
Related links:
Industry, regulators, competitors
Corporate Citizenship
News
Diversity Programs and Corporate culture
Some websites that feature good IR practices include
Deutschebankand 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...
44% of U.S. portfolio managers said they had bought stock as a result of information they obtained on corporate websites.
Company websites had a "substantial impact" on their attitudes toward a company and its stock, stated:
48% of U.S. portfolio managers,
43% of European portfolio managers, and
43% of Canadian portfolio managers
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?”
Prescient Digital Media is a veteran web and intranet consulting firm with 10+ years of rich history. We provide strategic Internet and intranet consulting, planning and communications services to many Fortune 500 and big brand clients, as well as small and medium-sized leaders.