It’s not that much fun for me to go to parties in Australia. Don’t get me wrong, I love a few laughs, but I have come to dread the question, ‘So what do you do?’ If I say ‘IR’, people automatically assume I mean industrial relations. If I say investor relations, I’m usually met with blank stares. It’s only when I say those magic words ‘stock market’ that people’s ears prick up.
So when I got wind of the new Australasian Investor Relations Association, I breathed a sigh of relief. Finally, a way to raise the profile and understanding of the industry in Australia and New Zealand.
The foundations of Aira, as it is known, were laid in 1999 when a group of senior IR practitioners sought to respond on behalf of the investor relations community to Heard it on the grapevine, a set of draft guidelines developed by the market regulator, the Australian Securities and Investment Commission (Asic), for best practice disclosure. Heard it on the grapevine was the precursor to Better disclosure for investors, Asic’s guidance principles promoting timely disclosure of market-sensitive information.
Before the publication of Heard it on the grapevine, Australasian IROs had met informally on an irregular basis but lacked a formal association. What began as an informal gathering has now grown to a membership of 50, and Aira’s first investor communication summit this July attracted a crowd of 70. Another milestone was the first Investor Relations Magazine Australia Awards in spring 2000. As one awards survey respondent commented then, ‘Australian IROs have hauled the corporate world here out of clubby insularity to a world-class level.’ This year’s awards will be presented September 13 in conjunction with the first annual Aira conference in Sydney.
The association describes its mission as being to advance the awareness of and best practice in investor relations in Australasia, and improving the relationship between listed entities and the investment community. Ian Matheson, Aira chairman and the driving force behind its development, believes the association will ‘set agendas and push boundaries.’ He continues, ‘Our vision is to build a relevant industry body that can play a role in the development of the investor relations function in Australasia.’
‘There are many issues relating to listing rules and corporations law that are of interest both to government and the media, and we are hoping to make a contribution in an advocacy sense on those issues affecting the practice of investor relations,’ he adds.
‘We’re keen to develop best practices suitable for the Australian and New Zealand investing environments,’ Matheson says.
So far, Aira has been extremely well received by IROs in the region. According to Ioana Ward, investor relations manager at BT Funds Management, ‘There was a real need for a body such as Aira in the Australasian market. There was a gaping hole.’
David Lindsay, managing director of Channel Investor Relations, concurs: ‘Aira is to be welcomed and applauded. It’s a great initiative which reflects the increasing profile of investor relations in the Australian and New Zealand capital markets.’
Best practice
makes perfect
BT Funds’ Ward hopes Aira will pay attention to IR practices overseas. ‘Investor relations is a very young industry in Australia and we can learn much from what others are doing around the globe,’ she comments.
But defining what constitutes best practice is sometimes difficult. To this end, Aira unveiled a set of IR benchmarks at its recent summit, against which IR performance can be measured. The association is also looking to develop comprehensive training programs for senior and junior practitioners.
Ian Matheson reports that Aira has so far received hearty backing from within the IR community for its training programs. Meanwhile, he has already been in contact with a number of universities interested in developing IR studies. ‘There is strong demand for an annual residential course, and there is also demand for introductory courses, particularly focusing on the financial skills needed to fulfil the investor relations role,’ he says.
But the association’s IR education duties do not stop with IROs. Aira is also looking to explain the benefits of investor relations to other professionals. John Bowie Wilson, a director of BNP Paribas equities, believes it is crucial to ‘educate the person who employs the IRO. CEOs and directors, especially non-executive directors, should be made aware of the importance of investor relations,’ he opines. ‘Investor relations is right up there in the list of must-haves for a listed company and the investor relations officer must be high in the corporate hierarchy.’
Similarly, Channel’s Lindsay sees a need for ‘increased awareness among public companies about what IR can contribute in terms of assisting to build the credibility of the company within the investment community.’
Some in the IR community are even hoping Aira will develop a set of selling tools that will help quantify the value of the investor relations function for senior management – that is, so IROs get paid more.
Communication abyss
One of Aira’s main challenges will be tackling a perceived communication gap between Australasian companies and their current and potential investors. Investor communications have come under the spotlight in Australia since the messy collapse of telco One.Tel and insurer HIH. Chairman Ian Matheson is anticipating the association will be ‘a bridge between companies and the market.’
Andrew Bowden, head of IR at media group Village Roadshow, commented at the Aira summit that ‘generally, a high standard of investor relations practice has developed and been maintained, due mainly to the efforts and professionalism of individual practitioners and… the continuous disclosure regime, but there is still much the investor relations industry in Australasia can do to improve communication between companies and the market.’
David Lindsay concurs. ‘There is a huge gap in terms of the information institutions need to make an investment decision and the information required to be released under continuous disclosure obligations.’
BNP’s Wilson believes there needs to be more recognition that ‘companies are run for the investors, not just for the sake of running a business’ and that ‘good communication between a company and the market is reflected in the company’s share price, which leads to increased market capitalization, enabling the company to grow.’
There are clearly some gaps between what the market expects in terms of information and what is being issued by listed companies in Australia and New Zealand; and Aira is seeking to play a role in increasing the understanding of IR in the wider investment community.
Gimme guidance
Establishing the credibility of investor relations through accepted procedures and practices is another important issue, and the first task for Aira’s board has been the development of best practice guidelines for communication between listed entities and the investment community.
Designed to sit alongside the Australian Stock Exchange’s and the New Zealand Stock Exchange’s listing rules, the guidelines suggest each company appoint a communications officer responsible for administering the disclosure policy. Similarly, they advise that only authorized spokespersons speak on behalf of the company.
The guidelines, released in time for this year’s reporting season, recommend companies develop and publish individual disclosure policies that spell out which channels will be used to distribute information to individual stakeholder groups, and clearly address issues such as the process for deciding materiality.
According to Andrew Bowden, ‘Information that is material for one company may not be material for a larger company.’ With this in mind, the guidelines aim to recognize that listed companies operate within a range of different circumstances, and have been designed to be flexible, particularly with regard to materiality.
Conference time
Aira’s next major event, being held in conjunction with Investor Relations magazine, is the association’s first annual conference on September 13 in Sydney.
The one-and-a-half-day conference, which is expected to be attended by many of Australasia’s top IROs, as well as CEOs, CFOs and company secretaries, will cover topics such as changes to disclosure guidelines, the role of the CEO in building and communicating value, increasing global competition for capital and retail investor relations.
The development of Aira has been long anticipated by the Australasian investor relations industry. It’s the first time IROs in the region have had a forum within which they can debate the challenges facing the industry, and work out solutions to complex IR issues as well as deal with local IR matters.
More than that, the establishment of an enthusiastic Australasian investor relations forum should help attract talented people to the profession, creating a voice and profile for the investor relations industry in Australasia.
I think I’d better start accepting invitations to parties again.
For more information about Australasia’s new IR association, contact Ian Matheson at [email protected]
