Short and long-term goals and objectives can include identifying investors who are interested in your sector and/or known to have invested in your peers to meet with over the course of the year. (Although making sure you also meet with your current investors should also be a priority).

Okay, so you (the IRO) have your targeted list of investors, now what? What follows are some thoughts to help you and your management team make the most out of the one-on-one meeting.  I’d like to thank Rivel Research Group as these ideas are derived from their best practice reports based on topics of interest from members of the Rivel Intelligence Council (comprised of senior level investor communications executives) and assessed by buy-side investment professionals in both the US and Europe.

Adequately preparing the management team is essential. It may seem obvious, but having a discussion about Reg FD is important – as this meeting should not be used to divulge new information.

Another effective way to prepare management is compiling a list of questions and conducting a mock Q&A. As the IRO, you should work with management to come up with a list. It can also be useful to go through transcripts from previous events such as an earnings call to ensure a good sampling.

Be sure to include tough questions and how you will handle them if asked.  It is important that management not get defensive if asked difficult questions and be conscious of not sounding too rehearsed. As a one-on-one may do more harm than good if management comes across as overconfident, hard selling or as setting overly aggressive goals.

You should also take into consideration who you are meeting with and tailor the information accordingly.  For example, if this is a new investor, you may want to give a bit more detail around certain areas than you would for someone you have met with before. That said, don’t get caught up in too many details – stay focused on high-level details such as the ‘how’ behind the strategy.

Insight and transparency into growth drivers and key business goals are preferred over a regurgitation of previously disclosed information shared via press releases and on earnings calls.

A decision should also be made as to whether using a powerpoint presentation to supplement the discussion will be useful.  If you do decide to use a presentation, make sure the slides have minimal text and instead whenever possible, use visuals. Doing so, will help alleviate the temptation to read directly from the slides.

If it’s possible, having an Internet connection will allow management to access the company’s website to show a video or other asset that is housed on there on the fly.

Bear in mind, that whatever additional materials you choose, that they are helpful and relevant to the discussion. Also have a few printed copies and/or a softcopy on a usb key to leave behind – just in case.

Lastly, if there is anything that comes out of the discussion that needs to be followed up on, do so.  For example, providing supplemental material to help address an unanswered question. It also doesn’t hurt to send a follow up note to thank them for the meeting.

The buy-side values one-on-one meetings as it gives them the opportunity to have direct interaction with senior management.  Companies can maximize this experience by considering some of the ideas presented above.

Related posts:

1. New Rivel Research: Buy-side Perspectives on Best Practice IR Websites Rivel Research is well-known for their ability to gather, analyze...
2. Rivel Research: Transparency Key Factor in Buy-side Definition of Superb IR Earlier this year, I wrote a blog post that recounted...
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Every year, we, at Q4 look forward to networking and the amazing show put on by @irmagazine.

We’d like to take this opportunity to congratulate our clients who have been nominated:

Grand prix for best overall investor relations – large cap (C$10 bn and over)

Goldcorp

Best investor relations officer – large cap

Goldcorp

Best IR by a CEO – large-cap

Goldcorp

Best IR by a CEO – mid-cap

Intact Financial

Best financial reporting

Goldcorp

Best investment community meetings

Goldcorp

Best use of technology

Agnico-Eagle

Best Practice of corporate social responsibility

Barrick Gold

Best Crisis Management

Agnico-Eagle

Best IR by a Canadian company in the US Market

First Quantum Minerals

SECTOR AWARDS

Materials
Agnico-Eagle
Barrick Gold
Goldcorp

Real Estate
Riocan

Congratulations and good luck!

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Social network popularity around the world in 2011: http://bit.ly/sTfqkK

US Trails China in almost every mobile usage trend: http://rww.to/tTPwZG

Netflix lost 800,000 U.S. subscribers in third quarter: http://bit.ly/uJHlWg

Building a Community Around Your Blog From Scratch – Ten Steps: http://ow.ly/78jaC

5 Deadly Twitter Sins to Avoid: http://ow.ly/78oik

Time for Investor Relations Departments to go Social: http://ow.ly/78H0o

Although the Markets have turned hostile to IPOs, Now is the right time for companies to prepare for a Stock Market Listing: http://bit.ly/vggw92

Company Directors See Pay Skyrocket: http://bit.ly/s5XY72

12 Most Successful Corporate Blogs: http://awe.sm/5Y3uQ

Canadian Supreme Court nears national regulator ruling: http://bit.ly/u4xSfB

IR Tools Are Only as Strong as the Message They Deliver: http://bit.ly/uOWWiA

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Recently I interviewed Tim Herrod, Director, Treasury (C.A.) and former Manager, Investor Relations with PotashCorp, who was instrumental in helping to plan both the award-winning former site and current redesign, which was launched in January of 2010.

Having had 18 months since the re-launch to gather feedback and metrics as well as surviving the high-profile hostile takeover by BHP Bilton, I caught up with Tim to find out more about their approach to web communications and the impact this has had on their IR program.

I have excerpted segments of our interview in a two-part series, beginning today:

C: When I heard you speak a few years ago at a CIRI conference, you said, “Potash views its website as being its primary communications channel. How did you come to that conclusion and why do you view the website as being so important?”

T: Very simply, the web is how people get information. We have a large institutional following, but investors are not institutions – they are individuals within the institutions. These individuals may be at very different points in the investor life-cycle and as such, may have very different information requirements. Whether it’s up front where they have to spend a tremendous amount of time modeling, learning the business, learning about the management team and asking questions – everything that’s involved in making that first ‘invest or not’ decision – those investors have to be covered off at that particular stage of their life-cycle.

Once they have that base knowledge established, they then go into another stage of the life-cycle, which is ‘keeping up’. At this stage, they need certain types of information to help them maintain their view and understand the things that are happening at the company – things that are driving our business, our earnings and therefore, the value of the company.

We have to consider that everywhere around the world, we have individuals who are at different stages in this life-cycle. And we have to be prepared to address their information requirements, wherever they are and whenever they need it. The web allows you to do this 24/7.

There is a place for various forms of communication: speaking at conferences, producing an annual report once a year etc., but when you look at how people are getting information today, it’s clear that the web can consistently deliver what they need, when they need it and in a very dynamic way. This makes for a simple value proposition to take to management to say that we need to build out this channel. And that’s what we did. It was a no-brainer.

PotashCorp Communicates transparency right from the homepage (as shown below) where site visitors are invited to ask the COO a question:

C: When you set out to redesign your new site, what were your top objectives?

T: We did a creative brief and set our goals upfront. They were:

1.   To align the site with our organizational goals and key messages. We have a broader communications program – the web is just one part of that, although it certainly is the main component for our investor stakeholders. From a consistency standpoint – so that users understand our organizational goals across all our communications – we wanted to make sure that the website was aligned with everything else.
2.  To update the technology of the site to align with current best practices and better prepare us to evolve with advances in technology. Although nobody knows where technology is going to take us over the next few years, we didn’t want to be held back, as we were with the old site. We are now better prepared for evolution than we were before.
3.  To update the design on a number of levels. We reduced the number of sections to better relate to our primary users. For example, we felt that corporate governance and sustainability were core values “about” PotashCorp and relevant/critical to all our stakeholders, not stand alone main navigational items, so we moved these into the ‘About’ section. We also wanted to make sure that the application of the brand and the look and feel was consistent across the site. The former site had sections that were bolted on and so the user experience was inconsistent as they moved through the site. We wanted to improve that experience across the site and ensure consistency of the brand. Although the IR department drives the site at Potash, we involved other groups in the project, such as HR, and this really helped to build out the content and ensure a good experience for all users.
4.  To simplify the stakeholder experience by eliminating repetition, tightening up the navigation and making it easy for users to access content (without having to think). We accomplished this through things like relational links, the library, the data tool etc. To prepare for our redesign we did a user survey on the old site, where we asked a concise set of questions such as: why they came to the site and what they were looking for – this helped guide our planning. Another key aspect of the simplification was writing specifically for the web, which is something we hadn’t done before. Previously we were copying and pasting from other documents. Writing for the web causes you to think about how you’re going to layer content to take advantage of web tools and make your information more accessible and interactive.
5.  And finally, we wanted to respond to stakeholder needs to provide more relevant and frequent updates. If you look at the ‘News’ section on our site in comparison to other sites, we have it organized by topic, by keyword, by date. And it’s not just for investors – it addresses all our stakeholders. We have industry information, career, community and financial news. Being successful with this approach is about having tentacles that reach out to all areas within the company and saying, “What’s going on?” and then having a content development process for this information. People across the company are constantly thinking ‘this information might be something that our stakeholders would be interested in’ and then the technology has been set up to accommodate the flow of information.

PotashCorp integrates news for all stakeholders and allows information to be accessed by date, topic or searched by keywords (as shown in the image below):

Another example of how we responded to stakeholder needs is in the creation of our financial data tool. We went from having 7 analysts in 2006 to having 32 analysts now. This is just on the sell-side, and if you think of the buy-side and the people around the world who are building their own models, that’s a lot of effort going into something that you could make easier for them. Instead of leaving them to do that work, we built a data tool and populated it with the information that people are looking for. Then we can say, “Go to the website.”

C: Your site has already won some prestigious awards. What kind of feedback have you received from your stakeholders?

T: The feedback we get from investors is very positive in terms of how well we address their needs.  The bankers tell us that when people have questions about the company or the industry… they say, “Go to the Potash website – it’s the best website in the world.” You know you’ve hit the mark if you get feedback that the early stage investors get the information they need.

C: I think that if you design a website properly – and by design I mean look & feel, structure, navigation, content – it almost acts like a conversation.

T: Yes, and if you put a face to it, then you know who the conversation is occurring with. That’s why you see so many photographs on our site of our people and management team. You can’t meet with all people face-to-face but our approach shows that we are trying to connect with people – we are trying to let them see the whites of our eyes.

You can’t just focus on the actual content – the words only – because how it’s presented is so much more important. If you can’t deliver it successfully, the web just doesn’t work.

C: I agree. When I look at investor sites, particularly in the U.S. where templated IR websites are so dominant, they are often little more than repositories of regulatory filings and data feeds. If you want more context about a company and its investment proposition, you really have to dig for it. And frequently that information is just not there, so the site is doing nothing more than addressing compliance requirements. Do the companies who have these filing cabinet sites just not understand the web or have they just not prioritized it?

T: It seems that they just don’t recognize the opportunity they have with the web or the impact that a good site can have on their IR program. I just gave a presentation a couple of months ago to the CICA with Tony Zuck from Zu and Kelly Freeman, Manager Investor Relations at PotashCorp – the person responsible for our website now. As we prepared for this presentation, Tony spoke of numerous examples of companies who had great stories that were buried deep within their website or in a PDF tucked away in a library. Most users would never see this great information. This is just a lost opportunity.

For any publicly traded company, the number one concern of investors is “what’s the big bogeyman that is hiding out there – that I don’t expect – that’s going to get me.” The way you communicate on the web can show that you are transparent, that you’re putting the information out there and investors can see the whites of your eyes. It helps to build trust. That’s a very important thought process that you have to go through in planning your website.

The web is not just a document repository; it’s a communications opportunity, a management opportunity, a strategic opportunity. The companies that do the best job of brand and brand governance, not surprisingly, also typically do a good job in their web strategy and their stakeholder outreach. These companies are thinking about brand governance when they are creating their communications strategy for the web.

C: With the recent market volatility, I have feedback from some IROs who have been charged with cutting communications budgets, including reducing their spend on web communications. It seems strange to be cutting back on communications at a time of heightened investor uncertainty and concern. What do you think?

T: I absolutely agree with you. We did not pull back budgets, although I’m not sure it’s a budget question only. It’s more important to communicate in a crisis (of any kind). You may get sucked into an economic crisis by no fault of your own, but the business has to have a strategy for facing these challenges and investors and other stakeholders need to understand your strategy, and hear from you often. Uncertainty adds risk, risk reduces valuation, and transparency can help to offset that. There are newer, more innovative and less expensive ways to communicate MORE. So if facing budget pressure, be more innovative – and the web/social media provide great opportunities.

We’ll be issuing part 2 in this series soon – stay tuned!

Related posts:

1. PotashCorp: The Makings of a Best Practice IR Website – Part 2 This is the second part of an interview I conducted...
2. New Rivel Research: Buy-side Perspectives on Best Practice IR Websites Rivel Research is well-known for their ability to gather, analyze...
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That’s why we’ve decided to put together a list of some interesting things we’ve been reading and subsequently sharing with our followers for the week of July 18, 2011:

Is the SEC redefining Insider Trading: http://t.co/XMYHB2B

Google+, Investor Relations and Lawyers’ Panic Attacks: http://bit.ly/mOXqND

First Level 1 ADR company gets verified StockTwits Account: http://t.co/JgR0L4S

55% buy-side expect Twitter for Investor Comms to increase over next year: http://bit.ly/o6Yi2S

Why No One Should Believe Apple’s Earnings Guidance: http://t.co/BzymxAj

Trader pleads guilty to threatening financial regulators: http://nyti.ms/nPQMv6

Social Networking Policy: Write Now or Regret Later: twb.io/jQNBP5

CSA finds 55% of issuers reviewed deficient in corporate governance disclosure: http://post.ly/2TvPv

The next five social media trends and their impact on marketing: http://bit.ly/ohNa3l

Happy Reading!

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The survey polled financial analysts and investor relations officers (IROs) at companies across Canada and the United States on operational and corporate crisis preparedness. It also revealed the biggest mistake companies make during a corporate or operational crisis is lack of communication and transparency with their stakeholders.

Interestingly, the survey also found that half of responding IROs from the financial services and healthcare industries claim they don’t follow a crisis communications plan at all.

Here are some stats:

• Of the companies with a crisis plan, only 29% update it once a year.
• 85% of the analysts surveyed say fraud resulting in accounting restatement has the greatest negative impact on a company’s value.
• Over 50% of the IROs surveyed say their company plan only prepares them for an operational crisis.

Social Media

• Few companies have a crisis plan in place that incorporates social media protocols.
• Over 50% of the analysts surveyed look to the corporate blog for information during a crisis.
• But only 17% of responding IROs say their company uses a blog as channel for crisis communications.
• Less than half of the IROs surveyed monitor social media platforms during a crisis.

Role of the IRO During a Crisis:

• 85% of the analysts who responded said that IROs are a main point of contact – specifically for a corporate crisis.
• 55% of the IROs surveyed don’t know if the crisis communications plan is updated after a crisis.
• 50% of the IROs surveyed don’t know if their company conducts crisis simulations.
• Only 19% of the IROs surveyed contribute to the corporate blog.

Join me on Thursday April 14th at 11 a.m. EDT for #irchat as we discuss steps companies can take to put together a crisis communications plan.

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What follows are ideas incorporated from the discussion (with direct ideas attributed where applicable) as well as commentary prompted by various articles (which will be referenced in the body of this post).

Before I get started a summary of the rule from this WSJ article:

Under the rule, companies will be required to allow shareholders to vote once every six years on how often they would like to cast a “say-on-pay” vote with three options: annually, once every two years or once every three years.

In addition, the provision provides institutional investors with a nonbinding vote on “golden-parachute” payments that are compensation arrangements for top executives associated with merger transactions, acquisitions and going-private deals.

Early results from recent annual meetings conducted this year revealed that most companies want shareholders to vote every three years, but shareholders want the ability to vote on an annual basis.

The votes on executive compensation will be non-binding, which means that companies can ignore the early results (previously cited) that have shown that some shareholders want an annual vote.   This may be a missed opportunity for companies as a shorter timeline can potentially allow companies to tie in compensation targets with corporate metrics otherwise disclosed (@InsuranceIR).

Fully disclosing compensation targets and tying them into the bigger picture will help provide a better understanding amongst shareholders and show them that management is aligned with stakeholder interests and doing what is best for the company.

If companies choose this path, IROs should be well versed in the topic – if they aren’t shareholders could be easily turned off (@brocromanek).

One way to help IROs get up to speed on the contents of the compensation agreements is to work with the corporate secretary to refine wording to remove jargon & legalese that will help the IRO and ultimately shareholders understand the agreements better.

Providing documents that are easier to read (and ultimately understand) may also help reduce the number of calls to the IR department.

Another way that IROs can help reduce the number of calls about executive compensation is to have proactive conversations with shareholders throughout the year that may help alleviate contentious issues before or even during the annual meeting.

Companies should also not forget the power of their IR website.  Adding any compensation-related questions from shareholders to the “FAQ’ section can also mitigate the number of calls. Also providing a direct link to the CD&A as posted on Edgar in the corporate governance section is another way of being transparent about executive compensation.

Companies could even go as far as incorporating a scorecard that explicitly outlines how effectively the company is executing its strategy that reinforces compensation targets with corporate metrics otherwise disclosed.

Coincidentally, in conjunction with the approval of say on pay, as reported by Jeff Morgan, President & CEO of NIRI in a recent edition of NIRI IRWeekly:

The CFA Institute, with the assistance of NIRI and other related organizations, released a “Compensation Discussion and Analysis Template” to help companies prepare their CD&A.

I agree with him 100% when he goes on to say that ‘IR professionals should become conversant in the CD&A and part of the internal strategy discussion for developing and improving this disclosure. The CD&A needs to be a cornerstone of your compensation-related shareholder outreach, so important in the wake of Dodd-Frank mandated say-on-pay. This is an opportunity to show the value of IR within your company – take advantage of it.’

To view some (what the working group who developed the template deem are good) examples of companies that provide CD&As I also encourage you to read a piece written by Dominic Jones of IR Web Report on the CDA Template.

I think the piece sums up the value of the CD&A and how it can help IROs address say on pay nicely with a quote from the working group:

As many stakeholders and markets around the world continue to scrutinize executive pay practices, we hope that this project will improve understanding, serve as a global model for improved investor communications on this important issue, and elevate compensation disclosure beyond an exercise in legal compliance.

Taking the time to work with the corporate secretary to gain a complete understanding of the compensation agreements as well as using tools such as the IR website and the new CD&A template can help IROs effectively communicate say on pay to shareholders.

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A review of how Polycom uses each channel revealed consistent messaging and current and up-to date information.  Some of the senior management team also regularly tweet and are active bloggers providing additional commentary on an industry-related topic or company specific news. With it increasingly difficult to attract and retain investors in this economy, this sends a very clear message in terms of their transparency and their personal interest in listening to their stakeholders.

The fact that the senior management is seemingly committed to the company’s social media strategy and that the company in general was doing such a great job over several social channels, I thought I’d contact them to see how they became to use the social networks they are; which department(s) is responsible for the strategy and who ultimately is in charge of the content.

After doing a scan of all of their social media accounts, I reached out to Caroline Japic (@CarolineJapic), Vice President, Corporate Communications and Customer Marketing as she was listed as the contact on Facebook.  As it turns out, the Corporate Communications team was instrumental in implementing Polycom’s social media strategy.  Here’s what we talked about:

1.    How long has Polycom been using social media? And what tool did you begin using first and why? Polycom employees began blogging several years ago, but we launched the official Polycom Social Media Program in January 2009. We created Twitter, LinkedIn Groups, Facebook Fan pages, and a YouTube Channel at that time. Yammer was already being used inside the company.

2.    Who was responsible for implementing social media? The Corporate Communications team defined and implemented the program, but we recruited the entire employee base (nearly 3000 strong) to participate in the program.

3.    How did the Corporate Communications team get buy-in? The Corporate Communications team researched social media options and brought the recommendations to our Chief Marketing Officer Heidi Melin. Heidi was our executive champion, helping to gain support and buy in from the Executive team.

4.    Any resistance from legal counsel? Not at all—Polycom legal is very progressive. We worked with our legal team to revise our “Blogging Policy” to become a “Social Media Policy”. Once we agreed on guidelines they were in full support of the Social Media program.

5.    Are there any channels that are strictly dedicated to investor relations? Not yet. We use our main “All About Polycom” Twitter account the most at this point, but are expanding our IR activities using other social media channels for our next earnings call in October. We do host archived video streams from our quarterly earnings calls on Polycom.com/investors.

6.    If no, what would be the determining factor(s) to do so? While we considered a direct channel for IR, we found that those interested in IR are also interested in the other events happening at Polycom such as new product launches and customer win announcements. So, we made the decision to use our existing channels to communicate the IR message.

7.    Is there any interaction on any of the social networks with retail or institutional shareholders? If so, do you have a procedure in place to defer to the IR dept? If we receive any IR requests, they go directly to our CFO Mike Kourey who manages the IR program.

8.    Some of the senior management team has Twitter accounts and actively blog.  How did this come to be?
As part of the initial plan, we had a training session with the Executive Staff and helped them set up their Twitter accounts and Facebook pages. Other execs, such as our Co-Founder Jeff Rodman, have been active bloggers for years and were early adopters of social media. We encouraged participation by all Polycom employees and continue to do so in quarterly all-company meetings, using employee contests, and through ongoing training.

9.    The content seems synergized amongst all of the channels, is this driven by one person who informs the others of the information they should share on the channel?
The Corporate Communications team shares our main channels so that the burden doesn’t fall on only one person. We discuss social media efforts during our regular meetings and encourage team members to post relevant content on their respective channels.

10.    Do you monitor your social media efforts? Yes, we use Radian 6 to monitor and measure our efforts. We have daily reports that are routed to the appropriate departments for action where needed.

11.    Is it important to measure the success of your social media efforts?  If so, how is success measured? Absolutely.  At Polycom, we measure all of our Corporate Communications programs. For our social media efforts, we measure trends, mentions, share of voice, tone of voice, activity spikes, and we watch our conversation cloud very carefully. Success is measured by analyzing a combination of all of these factors.

12.    Do you have a social media policy? Yes, we do. It covers all employees and their social media efforts.

13.    Anything notable you’d like to share i.e. increased website traffic or other less tangible things such as better consumer relations etc., you have seen from using social networks? We compare the social media results with the results from our Customer Experience program to identify trends. We’ve also improved our customer service efforts–anyone who has a challenge with a Polycom product and Tweets about it will be contacted by our customer service team.

14.    Now that you have been using social media for two years, have you changed your strategy for its use? We haven’t changed our strategy, but we’ve evolved it. A good example is that we are adding more IR activities, but not changing our overall strategy.

15.    Any advice for other public companies of the value of using social media? Don’t be surprised if there are many nay-sayers when you start the program. However, progressive companies need to stay abreast of how their various audiences (media, customers, partners, etc.)  are receiving information, and social media is an important information source for many. Social media creates a unique opportunity for conversation, and that conversation is happening with or without you. As the traditional role of the media continues shifts to social media, those who are listening and participating in the conversation via social media will be the ones who win.

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We are pleased to announce that we have partnered with Virtua Research to offer analysts and sophisticated investors the Interactive Analyst Center – a new standard of rendering a company’s financial data.

The Interactive Analyst Center was originally designed at the request of Agnico-Eagle Mines Limited with the purpose of providing investors and analysts the most advanced new suite of interactive financials and graphing tools, all embedded in a single, logical location — the investor section of a company’s website.

Some of the KEY FEATURES include:

• Excel like Presentation – for ease of use and accessibility
• Multiple Annual and Quarterly Data – for simplified, more contextual investor understanding
• Export to Excel – statements and data can be exported for simplified model building
• Interactive Graphs – build, select and graph interactive operational and financial ratios
• Links to Actual Filing Data – right-click any line item to view source documents
• Ratio Descriptions –  left-click any ratio for more detailed  information and formula

There are also many BENEFITS to making this feature available on your company website as it will:

• Increase your company valuation with best practices transparent disclosure
• Offer the interactivity of exporting to Excel up to 5 years of aggregated financial data
• Save time, effort and money educating existing and potential investors
• Improve control of your financial message for more consistent investor modeling
• Update your quarterly financials in real time for conference call “housekeeping” questions
• Provide new methods of visualizing financial relationships with interactive graphing tools
• Seamlessly integrates into any corporate or investor website

Click the button below to view a live demo.

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An interesting discussion developed when Dan Dykens, CEO of Meet the Street and host of #irchat asked “What do you think about Rivel Research’s buy-side survey which suggests that the valuation differential between good and bad IR is 35%?”

This question stirred up quite a debate, especially since no one had access to the methodology or a definition of what constitutes “good” vs “bad” IR.  So the responses were based on the information we had.

Shortly thereafter, Brian Rivel, president of Rivel Research Group, the firm specializing in perception research for public companies posted the following comment:

Glad to see that this data sparked such a debate! One of our most popular findings, as you might imagine. Just as an FYI, the study goes on to define what IS superb IR, according to the buy-side. That result can’t be looked at in a vacuum. I would be happy to provide more flavor to anyone who is interested.

With that, I jumped at the chance and contacted him for an interview:

SJ: Let me begin by addressing something that has been getting a great deal of discussion lately. One of Rivel’s research findings last year dealt with IR’s role in a company’s valuation. There have been conflicting accounts or interpretations of the research; can you clear this up for us?

BR: Definitely. As you can imagine, this is one of our most popular findings as it really comes as close as you can to putting a tangible number on the value of IR. And that always sparks such a fervent debate. Last year we surveyed over 250 buy-side investors from various industries on, among other things, whether or not good IR has a meaningful impact on a firm’s valuation — nearly three out of four said they believe that good IR does have an impact.

We then asked for them to quantify that impact and what we found was quite compelling. IR can account for a total variance of 35% in a company’s valuation – ranging from a premium of 10% for “superb” IR to a discount of fully 25% for “poor” IR. This is notable because just three years ago when we asked the same question, buy-side investors estimated a discount of 15%, so the risk associated with poor IR is increasing, given the level of uncertainty out there.

SJ: Now that begs the question, what constitutes “superb” IR?

BR: Thankfully, we asked the buy-side this follow-up question as well, and what we discovered was while “superb” IR rests on the usual tenets of good disclosure and responsiveness and ample access to senior management, the one standout was transparency.

SJ: But wait, you mentioned disclosure and transparency. Aren’t they essentially the same thing or is there a difference?

BR: Actually there is a big difference in the eyes of the investor. Investment professionals define transparency as clear, unambiguous information through which companies articulate definitive strategic goals, why they are important and the drivers by which they will be achieved. In essence, it’s the clarity of message that brings forward key challenges, how they are being addressed and frank, forthright discussions of the company’s prospects … in good times and bad. That last part is quite important as we’ve seen in many of our custom projects. Being transparent when times are rough goes a long way and is genuinely appreciated by the investment community.

On the other hand, disclosure is simply providing data, metrics, operating figures, what have you, on the many facets of the company, typically in the financial realm, but market share, product development, etc. come into play as well. Normally, disclosure in itself does not provide any color or interpretation on management’s part.

So a company can provide mountains of data on their operations, but they fail to provide any discussion or insight into what it means now or in terms of future performance…for example, how they are connecting the dots between A and B (A being where we are now and B being where the company expects to be in the future). And I can’t stress enough the key to having transparent communications is openness, honesty and frankness.

SJ: I can already hear IROs buckling at the prospect of giving away more information since managements loathe giving away too much disclosure in the interest of their competitive edge. Have you found in your research what the perfect balance is between too much information and not enough, especially as it relates to earnings guidance?

BR: Interestingly, our research shows that the recent implosion of the markets has altered expectations about guidance. First of all, when asked to name the most important aspects of superb investor relations, guidance rarely makes the list. Secondly, guidance is not all about earnings. Relative to a set of five types of corporate insight, earnings guidance ranks fourth. What the investment community is looking for is qualitative insight on the strategy.  How are you going to execute your strategy to achieve the goals you have outlined?  They are saying “connect the dots for us.”

But to answer your question, we haven’t done a definitive study on such a balance since it really varies between types of companies, their sectors, etc. Anecdotally, I can tell you from many of our custom research studies that investors do understand the competitive nature of their business and are aware there’s a fine line between too much and not enough. So they get that. But what they prefer is a sufficient level of disclosure surrounded by a discussion on what management thinks about it. They don’t want volumes upon volumes of data they can’t use. They want management’s take on the data and how that translates into future financial performance. After all, managements theoretically have the best view of what’s going on in their company and their industry.

SJ: So, in a sense, you are saying management has to do more to appease the investment community, even if they think what they are giving is adequate?

BR: In a manner of speaking, yes that’s the case. But it gets back to the original question about IR and valuation. Since the IR program is almost always viewed as an extension of management, if a company wants that premium of 10%, then becoming a superb IR department means having to provide transparency in their communications. It’s not necessarily MORE information, rather, the right information and the right level of transparency…“this is our strategy, these are the key elements, this is some detail around those key elements and this is how we think this will produce future financial performance.”   Without it, you risk being judged on the poor side, and with the continued market malaise, why run that risk when detailed and transparent investor communications are entirely possible with the right amount of work on the company’s part?

SJ: Sounds like a prudent move, but I wonder if management balks at giving such insight in what is a heavily controlled Reg. FD world we’re living in nowadays.

BR: I’m sure there are many internal discussions (or debates, I should say) between the IRO and their management about this subject. But in the end, our research shows that transparency helps set the stage for management credibility, which is at the core of investment decisions today. Having credible senior leadership always tops the list of factors investors take into account when making decisions about a company.

Transparency is also an IR code word for education since now more than ever, educating the investment community is an imperative for IROs as preconceptions about a company’s investment attractiveness are challenged by new economic realities.

SJ: Thank you, Brian for enlightening us on this ever-fascinating topic of IR’s role in valuation. If you have an update to your research, please let us know.

BR: Thank you, Sheryl. I will be sure to that.

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