These days it’s hard to find an IR conference or open an issue of Investor Relations that doesn’t heavily feature the internet. The web is everywhere. If it’s not occupying our computer screens, it’s advertised on billboards, on television. It’s in the newspaper, it’s on the radio. The web is news. In IR, the high profile of the net is hardly surprising considering how it has revolutionized investor relations practices in the past few years. It’s hard to remember a time before IR web sites, days when webcasting sounded more like a study of arachnids.
Sure, the web has helped IROs communicate with more investors than ever, but it also allows shareholders to contact listed companies as well as each other more quickly and easily than ever. One group of investors who have benefited particularly from the advent of the web is shareholder activists.
Thanks to the internet, disgruntled investors from all over the globe can gather, discuss and organize action against companies they deem to be failing. The web sites described here are not the stuff of message board web slander. Similarly, the activists named are not the frowning faces behind XYZcompanysucks.com and the like. On the contrary, these are well-educated investors. Some rally around single causes, such as environmental or discrimination issues. Some target poor governance and transparency. Others take aim at companies they consider to be persistent underperformers.
Whatever their cause celebre, one thing they all agree on is that the web has made shareholder activism easier to organize. Take one of the best-known sites of this genre, the Shareholder Action Network (SAN). A project of the Social Investment Forum, the SAN is supported by interests ranging from labor unions and investing institutions to NGOs – indeed anyone with an interest in socially responsible investing. ‘We had previously worked on an ad hoc basis, but the members decided that we needed a central network, a resource for information on social and corporate governance issues,’ explains Tracey Rembert, director of SAN.
The site was launched in March 2000, and the web is now the main source of communications for the group. Without the net, SAN ‘would have been unable to communicate with such a diverse community,’ Rembert adds. That diverse community includes far-flung investors in South Africa, Kenya as well as Europe and North America. ‘Ten years ago, there’s no way anything like this would have happened. The net has speeded up the process of spreading the word,’ Rembert concludes.
Getting results
And it’s not as though online activists are merely fringe groups, struggling for recognition in the wide open spaces of the web. They are getting results for their efforts. Take e-Raider. Beginning with a chance encounter on the Yahoo Finance message board several years ago, e-Raider has developed into one of the most effective online shareholder campaigners around. Using a mutual fund attached to the site, co-founder Aaron Brown has launched several shareholder actions against smaller US listed companies. ‘We buy the 5 percent stake necessary to file a resolution and then try to get other shareholders on board,’ he explains. A shareholder activist and investor for over 20 years, Brown and his colleagues can already point to numerous successes, all achieved through the proper legal channels. E-Raider’s latest struggle is against US energy group Goldfields, where Brown has taken issue with the stock and power held by the CEO and chairman. ‘They were very friendly, but effectively stonewalled our requests. Now we are attempting to replace the entire board, and I think we will be successful,’ he explains.
Not all disputes between companies and their investors result in an annual meeting showdown like this. The Equality Project was founded in the early 1990s to press for equal anti-discrimination workplace rights for all, regardless of sexual orientation. Vice chair for shareholder initiatives Shelley Alpern reports that after consultations most companies opt to alter their statutes rather than face an investor ballot. So far, only two companies have been stubborn toward their demands, resulting in shareholder votes.
The group is now working hard on its battle to force ExxonMobil to add sexual orientation to its non-discrimination policy. This year will be the third year that the issue will be voted on at ExxonMobil’s annual meeting, and since the last round the Equality Project has gathered support from investors such as the New York City pension fund and the New York state pension fund as well as Trillium Asset Management, which are organizing the campaign. ‘We made the web site user-friendly so both shareholders and non-shareholders can access action alerts, giving them instructions on what they can do next,’ Alpern explains. The site also gives small investors the ability to contact the large pension funds and institutions to support the Equality Project’s resolution. ‘We want shareholders to be motivated to write to their mutual funds.
That’s where the real potential lies,’ she adds. Brown of e-Raider agrees wholeheartedly. ‘If we can go after companies with the big institutions behind us, then the sky’s the limit.’
Strange reaction
But it hasn’t all been smooth sailing for the online shareholder activists. Brown readily admits that e-Raider has been learning about exactly what gets online investors motivated to challenge management.
‘The raiders of the 1980s wanted cash reserves, companies that use their capital poorly. Now people are interested in issues such as executive compensation,’ he says, though he bemoans the attitude of many online activists: ‘People often have little faith that it is possible to turn a bad business around’.
The reaction of companies to approaches from internet-based activists can vary wildly. ‘At first they often think we’re just coming straight from the message boards, and then they see us as old-fashioned corporate raiders,’ says Brown. ‘It often takes us about six months to prove we’re something in between.’
Listed companies may be tempted to try and paint online activists with the same brush as the rumor-ridden stock message boards. But that doesn’t wash with Shelley Alpern. ‘We are shareholders. It is not in our interests to seek to damage a company.’
So how should companies respond when the online activists come knocking? Juna Rowland, director of corporate and investor relations at JLG Industries and a member of Niri’s volunteer advisory network with expertise in shareholder activism, advises that companies should look inside themselves first for the answer. ‘Take a look at what your company is doing vis-Ã -vis taking advantage of the communications channels available. If you’re facing shareholder activists, then something clearly isn’t right,’ Rowland counsels. ‘It’s best to prevent these problems by following best practice.’
Tracey Rembert of SAN believes companies should actively engage with online activists. ‘It will save them a lot of hassle, because if they ignore an issue, it will only come back to haunt them,’ she says. Others agree that legitimate, fact-based debate with investors is a much healthier option than ignoring the problem or resorting to veiled threats.
One way or another, listed companies are going to have to learn to deal with online activists because they are set to grow in strength and number in the future. As the amount of information and analysis on the web grows, investors will become better informed than ever. And as the internet spreads, more and more small investors will be able to access shareholder activist sites.
Both SAN’s Rembert and Alpern of the Equality Project would like the major financial portals such as Yahoo Finance and Motley Fool to publicize information on upcoming resolutions. ‘This would bring shareholder activism to the attention of more internet-based investors,’ Rembert says. ‘A lot of stockholders are unaware of shareholder proposals, so doing this would open a lot of eyes and help us reach more minimum thresholds for resolutions. But there are powerful interests against such a plan,’ Alpern adds.
For e-Raider’s Brown, the battle with Goldfields is key to the development of his own brand of online shareholder activism. ‘If we succeed in ousting the board we can focus on a new round of companies. That is crucial. If we lose, we go back and look at how we can make a difference.’ He would like to see simpler, more understandable proxy information made available to all investors. ‘Other proxy materials we receive are very difficult to understand – I wouldn’t go for high school president with them,’ he jokes.
Historically, shareholder activism has been handicapped by an inability on the part of the shareholders to reach other investors and communicate freely in an affordable way. Thanks to the internet, this is now possible. ‘A non-issue can become a big issue in a matter of hours on the net,’ warns Alpern. She believes the collection of online activists out there may only be the start. ‘After all, there isn’t much shareholder activism on the web… yet.’
For more information go to eraider.com, sanebp.com, shareholderaction.org and equalityproject.org.
BP bashers
Online investor unrest may still be largely the preserve of American-based web sites, but in the UK, one of the best-known activist sites is sanebp.com, launched by Greenpeace in early 1999. Climate campaigner Stephanie Tunmore takes up the story: ‘We wanted to contact BP shareholders and use the web to get a like-minded group of people together to question BP’s corporate strategy.’
Now entering its third year, sanebp.com has been at the forefront of campaigns to halt the oil group drilling in Alaska and force the company to focus on more renewable energy sources. ‘We initially targeted an audience of fund managers, analysts and other investment institutions. Since last year we’ve also aimed at individual investors and have made the site more populist,’ Tunmore explains. BP hasn’t come out with any official reaction to the Greenpeace site, but according to Tunmore, BP’s main site has been forced to respond to the campaign built around sanebp.com. ‘They adapted their site to include sections explaining why they are drilling in Alaska. They clearly felt the need to respond.’
Ironically, last year’s revamp of BP’s main site drew comparisons with sanebp.com. ‘The basic design of our site hasn’t changed since its launch, but their new site now bears an uncanny resemblance,’ Tunmore says. And she claims that some of the most frequent visitors to sanebp.com are BP staff themselves: ‘We even added a special welcome to the front page, especially for BP employees.’
Technology round-up
Price is right
IROs and investors alike can be forgiven for developing a dislike of share price displays – after all, they seem to be permanent bearers of bad news in today’s markets. But that hasn’t stopped news giant Reuters from teaming up with Quartal Oy, a Finnish technology specialist, to launch a new share price information service aimed at UK IR web sites, after trials in France and Belgium.
Dubbed Reuters Share Monitor, the service allows companies to display share information on their corporate IR sites, including price charts, trading volume and also plot stock activity against recent events. What’s more, Reuters and Quartel claim the charts can be customized to fit seamlessly with the design of any corporate IR site.
Top of the class
Six UK companies were victors at the inaugural Investor Relations Web Site Awards, jointly organized by the London Stock Exchange and the UK’s Investor Relations Society.
Invensys carried off the top prize in front of an audience of 400 investors and IR professionals, winning the award for best IR web site for a FTSE 100 company. Enterpise Oil picked up the gong for a FTSE 250 company, while Holidaybreak won best smaller company web site.
BP Amoco was awarded the prize for best innovation in an IR web site, while supermarket group J Sainsbury took the trophy for best corporate web site for institutional investors, with BT winning the private investor award.
The awards were judged by a voting panel, which included representatives of the media, the Investor Relations Society and so on. ‘This was the first year and it will hopefully be the first of many such events,’ says John Wallace, London Stock Exchange spokesman, who confirms that plans are afoot for a second, similar event next year.
Web watch
digitalisrael.com
Launched earlier this year, digitalisrael.com is a financial site developed by the publishers of the Jerusalem Post, Israel’s leading English-language newspaper. As well as local investors, the site targets the large number of North American investors who hold shares in US-listed Israeli companies.
Packed with features and news on issues such as Israeli companies on Wall Street, high-tech companies and the Tel Aviv Stock Exchange, digitalisrael.com is a must for anyone interested in Israeli companies or markets.
irstreet.com
The brainchild of a consortium led by Japanese IR consulting firm FinanTec, irstreet.com was launched late last year. The predominantly-Japanese language site was set to launch a new IR information service at time of press, providing key IR data on around 25 major Tokyo-listed companies.
