The sun decided to shine on America’s IR community on the day of the third US Investor Relations Magazine Awards. Following five inches of snow the weekend before, temperatures reached 85_F in Central Park the day after the event. Working up a sweat in the city’s Grand Hyatt hotel were nearly 700 representatives of companies and their service providers hoping to gain recognition for their IR efforts from the investment community.
‘It was an honor to see our name up there among the corporate heavyweights in America. It was an unforgettable night,’ says Medtronic’s investor relations officer Chris O’Connell, who walked away with four trophies including the award for best IRO and the Grand Prix for Best Overall Investor Relations (by a company with a market cap of $10-29 bn).
Medtronic was one of a number of newcomers to the IR hall of fame. In previous years, the top-tier of US companies, with their better staffed and better funded IR departments, have swept the board of prizes. This year Investor Relations decided to give a broader range of firms a chance of winning. ‘The level of IR needed for super cap companies is not feasible or even necessary for smaller companies,’ comments Art Rivel of Rivel Research Group, who prepared the Research ReportÃ¥. So for the first time most categories were divided into three, identifying outstanding investor relations programs among companies with market caps over $30 bn, between $10-29 bn, and below $10 bn.
Web measures
As well as singling out winners among America’s IR community, Rivel Research aimed to uncover key trends in investor relations practice through its research. A significant issue emerging over the last three annual awards surveys has been the explosive growth of use of the internet among investment professionals. Four out of five respondents report they now access corporate information via the web – a 31 percent increase from last year’s level; itself a threefold increase over 1995-96. Furthermore, nine out of ten respondents say they now use electronically-disseminated information of some kind.
When it comes to using the web for IR, it was no surprise that Microsoft was honored with the award for best web site by a $30 bn-plus company for the third year running. ‘You can get anything you want,’ commented one fund manager. ‘Microsoft provides speed and ease of use on its web site,’ said another. Among the $10-29 bn market cap companies, there was also a clear winner, with Dell Computer Corp streaking ahead of the competition, again because of the ease of web site navigation and clarity of information.
The new format of the awards, widening the scope to allow for the possibility of there being smaller cap winners, did not preclude the strong presence of America’s corporate giants. Coming out ahead of the rest – for the second year running – was GE, winning awards for best IRO, best investment community meetings, best management of disclosure policy, as well as the coveted Grand Prix for Best Overall Investor Relations (by a company with a market cap over $30 bn).
‘They know much more of what’s going on in the heads of the company’s top executives and exactly what the decision points are than almost all the other investor relations people with whom we deal,’ commented one of the 1,500 analysts and portfolio managers surveyed to determine the winners.
‘The major difference from other companies is that instead of having a meeting once a year, General Electric has a meeting every month,’ enthused another. ‘We get a much better flow of information as to what’s going on with the company. Also, we get a much better feel knowing that there’s somebody very competent behind each of the businesses and, more importantly, that they work together rather than disjointed or separately.’
Credible speakers
Investor relations officer Mark Begor who, it was announced the day after the awards, is to become the new CFO of GE subsidiary NBC, is naturally delighted about winning four awards and, he says, surprised, despite the company’s landslide victory last year. ‘The standard of investor relations among US companies is very high and the bar is continually being raised. So being judged as the best is a real honor,’ he comments.
Begor’s sense of major IR improvements seems to be shared by the investment community at large. Sixty-eight percent of respondents to the survey noted an improvement in corporate IR programs over the last three years. Furthermore, the research demonstrated that investor relations officers are, in general, now viewed as credible spokespeople for the companies they work for, with 80 percent of respondents expressing a willingness to attend corporate meetings chaired by investor relations officers.
Monica Brown of HBO & Co, which won the Grand Prix for Best Overall Investor Relations by a company under $10 bn, puts this willingness down to the fact that more and more IR personnel come from business backgrounds rather than being simply communications people. ‘Both members of our IR department have a background in business planning which means we have an in-depth understanding of our products and of what investors might need to know about them. Because of that fact, senior management give us a lot of freedom to discuss strategy and policy which in turn gives us credibility with investors,’ says Brown. ‘And I don’t think we’re alone. Whereas the investment community used to try to go around IR people, they are now, in the main, very happy to see us.’
Despite the increasing credibility of IROs, however, providing access to senior management is still seen as an essential element of any successful investor relations program. For companies under $10 bn, there were joint winners in this category: Aflac and Newell Company. Newell’s IRO Ross Porter also went home with the award for best IRO (in companies under $10 bn). He says the key ingredients for a good communications program are the ‘three Cs’: consistency, credibility and creativity. ‘Consistency refers to earnings as well as accessibility, that is, making sure we return calls to people as soon as possible. Credibility means being honest and prepared to give bad as well as good news in a timely fashion. And creativity is required for all our written communications, particularly the annual report,’ comments Porter.
Mark Begor puts a large part of GE’s success in the investor relations field down to its proactive approach. ‘In essence our aim is to try to get more than our fair share of investors’ minds by spending as much face-time with them as we can. We reckon that if we’re not talking to them, someone else is.’
Begor says that GE is always looking to improve on its performance and continually benchmarks itself against its competitors. The awards night plays a significant part in that process. ‘It provides an ideal opportunity to see which companies are doing the best, in which areas. We can then model ourselves after them in that regard.’
Four easy pieces
For most other companies, GE provides the perfect model to benchmark against. According to Gerard Gould, at The Stanley Works, following the example of GE’s IR program was a major contributing factor to its winning the award for most improved investor relations (for a company under $10 bn). ‘John Trani came on board as CEO last year and the first thing he said to me was to go and find out what makes a really good IR program,’ comments Gould. He went straight to Mark Begor who gave him four pieces of advice. ‘First he told me to hire the Carson Group, second he said to get out there and meet investors, third to be responsive and make sure I return phone calls immediately and fourth to have a good annual report.’
Begor’s advice seems to have paid off. The analysts and fund managers questioned for the research noted The Stanley Works’ increased focus on communicating its strategic direction as well as greater availability of senior management. ‘They had several analyst meetings to introduce the new chief executive officer and the company’s new philosophy. Now, whenever they have sweeping changes, they broadly publicize them and schedule meetings around them,’ comments one analyst.
Good IR is not only about telling the good news. It’s also about conveying the bad, in a timely and honest fashion. And, of course, it’s also about handling crises. That was something that ITT Corp, winner of the award for best IR during a contested takeover, had plenty of practice in last year. According to ITT’s investor relations officer, Anne Tarbell, perhaps the hardest thing about the attempted hostile takeover by Hilton was handling the media onslaught that Hilton put in motion. ‘Hilton chose to make it personal. They were very critical of our management and what our intentions were. I knew they were wrong but it was a matter of communicating that to our investors,’ Tarbell explains.
That was obviously well done, according to respondents to the survey. ‘A lot of times when a company is going through a contested takeover, they are not forthright with the investment community about what’s going on inside the company. I felt ITT Corp was blatantly honest and that’s always the best policy at times like that,’ comments one fund manager.
And Anne Tarbell feels gratified by the support. ‘We won the battle because we delivered what we promised – namely to increase shareholder value. But we’re delighted to get this added recognition. It means that the investment community was really listening to us.’
The continuing improvement and professionalism of IR at US companies, large and small, means the message getting out to investors is becoming louder and clearer. And judging from the results of this year’s Awards, the message coming back from investors and analysts is that they approve.
The report of the survey costs $215 (subscribers) or $275 (non-subscribers).
To order a copy, call Cherlye Hill in NY
(Tel: +1 212 425 9649 Fax: +1 212 425 7589)
or Rebekah Bawcutt in London
(Tel: +44 171 637 3579 Fax: +44 171 637 3594).
The Winners
- The Niri Grand Prix for Best Overall Investor Relations
- over $30bn: General Electric
- over $10bn: Medtronic
- under $10bn: HBO & Co
- Best Investor Relations Officer
- over $30bn: General Electric
- over $10bn: Medtronic
- under $10bn: Newell Co
- Most Improved Investor Relations
- under $10bn: The Stanley Works
- Best Investor Relations for an IPO
- Equity Office Properties Trust
- Best Communications with the Retail Market
- over $30bn: Intel
- over $10bn: Sun Microsystems
- under $10bn: Starbucks
- Best Investor Relations in a Contested Takeover
- ITT Corp
- Best Investment Community Meetings
- over $30bn: General Electric
- over $10bn: Medtronic
- under $10bn: HBO & Co
- Best Asia-Pacific Company IR
- Sony
- Best European Company IR
- Nokia Corp
- Best Latin American Company IR
- Cemex
- Best Management of Disclosure Policy
- over $30bn: General Electric
- over $10bn: Medtronic
- under $10bn: Guidant
- Best Senior Management Communications
- under $10bn: AFLAC, Newell Co
- Best Use of Financial Media
- under $10bn: Tribune Co
- Best Use of Technology in IR
- under $10bn: CenterPoint Properties
- Best World Wide Web Site
- Microsoft
- Best Corporate Advertising to the Investment Community
- under $10bn: Fortune Brands
- Best Use of Conferencing
- over $30bn: Intel
- over $10bn: WorldCom
- under $10bn: Guidant
- Best Annual Report
- over $30bn: Coca-Cola Co
- over $10bn: Sara Lee
- under $10bn: NIKE
