Best Practices in Investor Relations

Amid a flow of rules, regulations, and scandals, companies are searching for new guidelines and measures.

“Gold Standard” or Merely Standard

To establish their own investor-relations standards, most companies rely on an unscientific amalgam of talking to other IR professionals, examining surveys and studies issued by trade organizations and consulting firms, and soliciting feedback from institutional investors and sell-side analysts. In the end, many companies walk a fine line between “best practices” and widely used practices — in other words, between the gold standard and the merely standard.

A worthwhile starting point suggested by many experts is to participate in organizations such as the NIRI, Financial Executives International (FEI), or the Investor Relations Association, which can serve as resources for gathering information about other companies’ practices. Sprint’s Fawkes, however, recommends that investor relations officers go straight to the source.

“We talk to the investment community all the time,” he says. “We ask investors, are we giving you the right information to make an informed judgment about [our company's] investment merits? Are we disclosing the right metrics? Is it timely, and so forth? We rely on the investment community to drive best practices for us. They’re the customer.”

Conference calls are one area where Sprint and Campbell Soup have implemented innovative practices gleaned from such methods. At Sprint, the IR team recently added a “deck,” or slide presentation, to quarterly conference calls. “Investors can see graphically what we are describing in words,” explains Fawkes. “That was something we saw other leading companies doing, and not just within our industry.”

For its part, Campbell responded to requests by institutional investors to include the company’s CEO on conference calls. And for webcasts, Campbell, too, has added slides and video to what were once audio-only presentations, because other companies were fast adopting this as a practice. “It forced us all to say, you’ve got to do as complete a job as you can,” recalls Griehs.

A Snapshot of Current Practices

So, what practices are on their way to becoming the gold standard for conscientious investor relations departments? According to a recent Thomson Financial survey of more than 250 IR professionals, here’s a snapshot of how investor relations officers (IROs) are handling some major responsibilities associated with reaching out to the buy side and the sell side.

  • 24 percent of all IROs surveyed said they travel quarterly to meet with investors; 36 percent travel monthly. However, at mega-cap companies, fully half of IROs travel to meet with investors every month.
  • More than 64 percent of IROs said they plan on holding an “analyst day” during the next year. Within that group, 55 percent now host a half-day. A whopping 94 percent said attendees include both the buy side and the sell side, but not fixed-income participants. Only 35 percent of IROs said they schedule small group meetings at analyst days, and 23 percent schedule one-on-one meetings. Nearly 90 percent of respondents said that Regulation FD has not affected the number of one-on-ones that they hold.
  • 84 percent of IROs said they host group investor meetings (other than a formal analyst day) with management at company headquarters. Nearly 40 percent of respondents said these meetings take place each quarter; almost 30 percent host them once a month.
  • A majority of respondents — 68 percent — feel that sell-side conferences are effective, although mid-cap, small-cap, and micro-cap companies were most likely to express this sentiment. Fully 78 percent of IROs said they are pursuing alternatives to sell-side conferences, such as analyst days, road shows, and trade or industry conferences. Fixed-income investors are out of luck, however: More than 74 percent of respondents said they will not be attending fixed-income conferences during the next year.

IR Monthly Update is produced for CFO.com by Thomson Financial. This information is believed to be true and accurate, and we are not responsible for inaccurate information. If you have investor relations news to share, please send it to Kara.Newman@thomson.com.

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