They’re turned on, plugged in, revved up. They’re hungry for information and cunning in their grazing. They’re not about to be ignored. They’re the new generation of individual investors, and they’re increasingly demanding attention from IROs.
‘The IR department is the gateway to the company, the most suitable place to start any analysis,’ says David Cooper of the Association for Investor Assistance, a Denver-based organization that profiles IR departments (formerly the Association for Investor Awareness).
The AIA’s steady stream of press releases rating IR programs since last August has prompted curiosity in the US IR community. In fact the group is a bit of an enigma. Cooper, the PR officer, says it is a not-for-profit corporation funded by a small group of private investors. These individuals ‘are concerned with increasing the credibility of the internet as an information provider for people who want to conduct business and online trading.’
Are they internet service providers? Online brokers? Venture cap investors? ‘The identity of the AIA’s benefactors is a commonly asked question,’ admits Cooper. ‘Unfortunately I am not at liberty to disclose this information.’
What is known is that the AIA’s director is Brian Smith, who replaced Anthony Appel. The association’s founder is Dr Seth Perlman, a ‘defensive, political risk and competitive intelligence analyst’ with a doctorate in security policy studies. He has been an editor and contributor for the likes of Defense & Foreign Affairs. Neither Smith nor Perlman was available for an interview.
The AIA started out last summer doing ‘blind audits’ – contacting IR departments pretending to be a private investor to determine ‘their efficiency, expediency and the overall tone of the organization’ – and soliciting input from investors visiting the AIA web site. Companies rated ‘superior’ were identified in press releases on Business Wire.
Cooper says the AIA has ceased rating IR departments, and now merely profiles them through a written survey faxed to public companies randomly picked from a database of 9,000. So far this year the survey has gone to 1,500 companies, and Cooper reports some 700 responses.
The survey is exhaustive, asking everything from the names of IR consultants, legal counsel and transfer agent to the university degrees held by the CEO, from the percentage of employees who are unionized to the IR department budget. At the time of writing the AIA’s web site (www.investoraware.org) was in the process of ‘sprucing up’ and no IR profiles or investor comments were posted.
‘What we don’t do is analyze the companies or make recommendations one way or the other as to the suitability of the investment,’ adds Cooper. ‘A lot of people are leaning toward investing and trading on the internet, and the key to that is consumer confidence. What the AIA backers are trying to do is build consumer confidence.’
Visitors to the site have to log in as members, a ‘control tool’ to gauge traffic on the site. Cooper claims nearly 1 mn members have logged in since last August. By May the AIA plans to have a report prepared to send out to its entire membership.
In the meantime, the AIA remains mysterious, the identify and agenda of its backers shadowy. One IRO contacted by Investor Relations was completely unaware his department had been rated ‘superior’ last November. An IR consultant says having two of his clients rated ‘superior’ gave him pause – he considers their programs mediocre at best. Maybe the AIA has a hidden agenda, perhaps to build up a database of corporate information and an e-mail list of online investors for a profit-making venture in the future.
Retail revolution
A more credible and certainly far more transparent evaluation of IR programs was kicked off by the Motley Fool (www.fool.com) in January under the slogan ‘Shareholder rights revolution’. In an admittedly ‘wholly unscientific manner’, two researchers each picked ten well-known companies and asked the IR departments about conference calls, web site offerings and earnings press releases. The big priority was whether conference calls were available to individual shareholders and whether a live broadcast was available on the internet. Earnings releases were rated on ‘clarity, detail and depth’, while web sites were checked out to determine ‘usefulness’ to shareowners.
For individual investors unhappy with the IR efforts of companies in their portfolios, the Motley Fool helpfully drafted a model letter demanding improvements. IROs should brace themselves for this new investor revolution: a grass-roots, internet based one; a revolution impossible to ign
