Shareholder transparency
The FSA is currently reviewing its rules on shareholder transparency. At the think tank, most IROs felt issuers have a fundamental right to know who has an economic interest in their shares.
‘Increasingly, contracts for difference (CFD) holders are beginning to act like ordinary shareholders, which is a big problem. IROs are getting telephone calls from fund managers who say they control 5 percent of your company and would like to see management – and you don’t know whether that’s true or not.’
‘There have been cases of abuse related to CFDs. The question is: what should be done about that? If broad sweeping change is introduced, designed to root out individual cases of abuse, you end up with something that’s worse for your system as a whole – does anybody remember Sarbanes-Oxley?’
‘We ended up building up a rolling log of what we called ‘hidden holders’. But the problem is that people will never tell you when they stop holding, and if you added our register and our hidden holdings together you’d probably come to 120 percent.’
‘This whole debate seems very much about trying to produce a nice little list, so we can say we know who our legal and economic holders are, which to me is the quest for the Holy Grail. It’s not a good place for the industry to take itself when it’s trying to be taken more seriously.’
Investor relationships
This segment saw attendees relate their best and worst experiences of dealing with the investment community. Discussion topics ranged from ‘friendly’ hedge funds to awkward CEOs. ‘Hedge fund is term that covers a thousand sins and there are any number of hedge funds that are very serious, intelligent, long-term investors.’
‘We are dependent on our corporate brokers for advising us on which new investors we should see, and there are times when we’ve been to meetings and we wonder quite why we’ve had them, because the meeting was clearly done as a favor to the broker.’
‘We have a 40 percent family stake, and a decent following of large institutional investors, so our shares are quite illiquid. What we try to do is target the secondary market, the private client stockbrokers, the small boutique institutions, and the people who really aren’t on the radar of our corporate broker.’
‘In the post-CP176 [a UK transparency rule] world of greater transparency, companies should be able to have an open relationship with institutions. The market is more perfect than it was and information should flow a lot better than before.’
Narrative reporting
The recent adoption of the business review (which replaced the operating and financial review) means annual reporting remains a hot topic for IROs. Moray MacLennan, speaking on behalf of the IPA, told those present that reporting is a ‘communication opportunity’ and not just a ‘regulatory burden’.
‘A prescriptive set of key performance indicators (KPIs) won’t work across companies in the same sector, so it certainly won’t work across companies in the wider market. Instead, you should have broad themes covering what KPIs should cover, but without being prescriptive.’
‘I think the term ‘non-financial’ is actually a misnomer, because things like carbon emissions have a financial impact on the performance of a company. Carbon trading is here now and it’s going to have a financial impact.’
‘What we find very unhelpful is when people try to suggest checklists to us or say you need a certain number of KPIs to be successful.’
‘We’re on the front line, and it feels like it’s the accounting firms, marketing firms and advertising agencies that want us to engage them and increase our narrative reporting.’
Communicating strategic messages online
A host of multimedia tools were viewed and debated in this session, such as really simple syndication (RSS), investor videos and corporate blogs.
‘By using links on your corporate website, you can make the annual report – which, by definition, is historic – a living document.’
‘You’ve got to think about who’s actually going to watch an investor video. Private investors may get more out of it but, given our shareholder base, where should we put more emphasis? You’re going to look after your institutional investors first of all.’
‘We thought it was important to put RSS on our IR website because we know from journalists’ verbal feedback that quite a lot of them like it.’
‘The reason I’m not going to do an RSS feed on my site is because I’m really trying to encourage communication, and RSS is a little anonymous. If I get people to actually register for an update, I’ve got some information; I know who they are and I can keep track of them that way.’
