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

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.

• 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.

• 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.

An 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

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...

• 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?”