On an unseasonably mild February evening in downtown Toronto, over 450 IROs, senior management and advisors gathered at the Royal York Hotel to toast each other’s successes. The atmosphere at the Investor Relations Magazine Canada Awards 2002 was remarkably festive. After a volatile year in the Canadian market – and worldwide – the IR community was ready to celebrate. And the jubilant mood was heightened by the backdrop of the Winter Olympics men’s hockey quarter-final, pitting Canada against Finland. It was a quintessentially Canadian moment: everyone in tuxedos and gowns, sipping cocktails and barking, ‘Shoot the puck! Shoot the puck!’
If the hockey game was a priority for IROs that night, rebuilding investor confidence would be at the top of their agenda come morning. During the awards ceremony, keynote speakers addressed the current crisis in investor confidence. Barbara Stymiest, president and CEO of the Toronto Stock Exchange, stressed the need to reinvigorate confidence in the markets. Philip Crawley, publisher and CEO of the Globe and Mail, echoed that, saying, ‘Building confidence is key to a healthy marketplace and we need to re-engender that.’
The investor confidence quandary is inherently tied to the Enron scandal. So far Canadian regulators have resisted the temptation to go back and microscopically dissect corporate filings as the SEC has done with telecommunications giants in the US. However, Canadian IROs are talking about how Enron’s highly publicized collapse has underlined the link between corporate governance and investor relations. In presenting this year’s award for best corporate governance, Ken Barnes of the Barnes Organization said, ‘Now more than ever, corporate governance is very important to investor relations.’
Value Gap Advisors conducted the research for this year’s awards. The Toronto-based independent research firm interviewed over 260 portfolio managers, buy-side analysts and sell-side analysts identified by Thomson Financial. Meanwhile, World Investor Link surveyed over 600 retail investors to identify the best communications with the retail market, while Erdos & Morgan quizzed 109 US investment professionals to find the winner of best IR by a Canadian company in the US market.
This year’s research revealed some interesting data about the information analysts value. Asked about the most important information source, 83 percent cited direct contact with management. They also identified quarterly reports as a preferred source, with 67 percent of respondents rating these as highly important.
The survey also shed light on how analysts and investors view the SEC’s Regulation FD and the equivalent Canadian Securities Administrators guidelines. Half of the respondents say Reg FD has reduced the quantity of information disseminated by companies and led to an increase in market volatility. Despite these findings,
62 percent of respondents do not think these new regulatory requirements should be eliminated. Meanwhile, 28 percent of analysts and portfolio managers say sell-side research is becoming less important – 11 percent more than the previous year.
The big winners of this year’s awards were Canadian National Railway, Alberta Energy Company and Open Text Corporation. Each of these companies won best overall IR and best IRO for their market cap category.
All told, Alberta Energy and Open Text each claimed four awards; Canadian National Railway took home five. Another company scoring high marks among analysts and portfolio managers was Bombardier. The aerospace and transportation leader shared the Grand Prix for mega-caps with Canadian National Railway; and it also won the award for best IR to the retail market. For good measure, it basked in the glory of five honorable mentions.
CEOs as IROs
When Canadian National Railway went public in 1995, it established an internal culture based on serious dedication to IR. ‘We worked very hard on investor relations and continue to take it very seriously,’ says CEO Paul Tellier. Tellier, who was awarded best investor relations by a CEO this year, says he spends about 20 percent of his time on activities directly related to IR.
It would certainly be hard to find a CEO more dedicated to IR than Tellier. He once threatened to fire any employee who failed to refer any IR-related inquiry to Robert Noorigian, CN’s vice president of investor relations. ‘The rule is that nobody including myself talks to analysts or shareholders without touching base with Bob first,’ says Tellier. This disciplined approach ensures CN sends a unified message to the investment community. As Tellier says, ‘Without that central point of contact, the Street can get different points of view and then has the ability to play one against the other.’
According to Tellier, an IRO can only succeed with support from senior management. That’s why he strongly believes the IRO should report directly to the CEO: ‘The IR professional must be included in all discussions whether you’re talking about operations or a contract. We have created a culture here where everyone knows Bob cannot be taken by surprise.’
IRO Noorigian adds, ‘You become the primary spokesman for the organization so you have to have support from different people within the company.’ According to this IRO, success in IR requires ‘having a good understanding of your company and industry.’ One of the survey respondents said CN delivers ‘a very high level of disclosure.’ Noorigian’s response is that they are able to have such an open and active dialogue with the Street because of senior management’s dedication to IR. Half of his time is spent communicating with analysts, he says. ‘The rest is spent following up on their concerns and relaying this information back to management.’
Canadian National Railway also won the award for best corporate governance. Jean Finn, chief legal officer and corporate secretary, was in attendance to accept the award. He confirms CN’s belief that corporate governance is good for business. ‘We voluntarily adhere to the highest corporate governance standards in the industry,’ says Finn. Specifically, CN follows the TSE guidelines on corporate governance and those proposed in the Saucier report last November. (The Saucier report was produced by a joint committee on governance led by Guylaine Saucier, a corporate director who’s on a number of boards in Canada. The report is currently being reviewed by the TSE.) Since the company is also listed on New York Stock Exchange, CN also follows the NYSE’s regulations on corporate governance, along with those proposed in the NASD’s blue ribbon report.
‘We pride ourselves on being ahead of the curve in adopting new corporate governance initiatives,’ says Finn. In 2001, CN’s proxy statement showed fees paid to auditors in two separate categories – for audit and non-audit services. This is not a requirement in Canada, but, ‘We felt this distinction was important to shareholders,’ says Finn. Eight out of 15 CN board members are on the corporate governance committee. ‘Last year the committee implemented an annual review of board members to assess how the board is operating,’ he says. And in its current proxy statement, CN has included five pages disclosing its corporate governance efforts.
Scoring high
Waterloo-based Open Text Corporation, the big winner this year among small and mid caps (under $1 bn in market cap), has the ‘best all-round people and resources,’ one survey respondent said. According to Greg Secord, Open Text’s director of investor relations, the company’s strategy has been to integrate investor relations internally: ‘We include the IR function with the general operations of the company.’ By establishing IR on the inside, Secord says he receives constant updates on various aspects of the company’s business so he can paint a more detailed picture for the Street.
The investment community praised Secord for ‘being proactive and focused.’ Secord says during the last year he made a concerted effort to sit down with one analyst a week and tell Open Text’s story. His strategy seems to have been successful: the number of analysts covering the company went from six to 15 in twelve months. ‘In some ways, presenting to analysts is like pitching a news story,’ he says. ‘You can’t just talk about the technology; you have to add some element of human interest that ties into the business.’
All-star game
Besides the trophies for best overall IR and best IRO, Alberta Energy Company – currently in the midst of merging with PanCanadian Energy (see Cash on the barrel, page 41) – also took the prize for best conferencing and best investment community meetings. ‘We try to anticipate the information needs of the investment community in planning conference calls, quarterly disclosures and our annual report,’ comments Brian Ferguson, VP of corporate communications and corporate secretary for AEC. For example, because Ferguson knows analysts need to create their own financial models he tries to include enough material in the company’s financial disclosures so they don’t have to call and get answers to basic questions.
AEC has taken home the prize for best investment community meetings three years in a row now, so it’s clearly getting something right. ‘We host an investor relations open house each year in conjunction with our annual meeting, which has grown in attendance each year,’ says Ferguson. On open house day, analysts and portfolio managers get a tour of the company’s offices and go through an orientation with senior executives from each of the business units. ‘Then they have dinner with our board of directors, which is very important because we get feedback coming into the corporation,’ says Ferguson. In 2001, roughly 50 people (two-thirds sell-side analysts and one-third buy-side analysts and portfolio managers) attended the event.
Center ice
Dick Wertheim was a central focus of the evening as the winner of the lifetime achievement award. Wertheim, managing partner of Toronto-based Wertheim + Company, has been practising investor relations for over 30 years. ‘It’s very gratifying to receive this recognition,’ he says. ‘I have an almost evangelical passion for the IR profession.’
Wertheim is a pioneer of investor relations in Canada. His first corporate IR position was with Northern Telecom (now Nortel) in 1976. ‘That gave me the opportunity to do things no kid in his mid-20s should have been doing, and in the process allowed me to establish one of the first comprehensive IR programs in Canada,’ he says. Wertheim joined Niri that same year, seven years after the organization had been born. Three years later he helped establish a Canadian chapter of Niri that eventually became Ciri.
In his acceptance of the award, Wertheim said, ‘Over the past three decades, I have been continuously challenged to keep up with the changes in our field – in regulatory regimes, accounting practices, technologies and techniques.’ He also offered his own predictions for the future of investor relations, including the elimination of hard-copy annual reports, face-to-face meetings and paper proxy forms. All of these ‘stale, dated’ forms of communication will one day be on the internet, suggested Wertheim.
Facing-off
Janet Craig, director of investor relations for ATI Technologies, claims she didn’t do anything exceptional in terms of her IR program last year. However, the Street might disagree as it awarded the company the prize for most improved investor relations. Craig, who joined ATI in February 2001, says her strategy has been to simply ‘make sure we communicate effectively with the Street and built good relationships.’ During 2001, Craig initiated marketing campaigns in the US and Canada and regular analyst and technology briefings. She also made sure everyone had full access to senior management. As Craig puts it, ‘Nothing fancy; just making sure to return people’s phone calls.’
From a pragmatic standpoint, ATI Technologies’ stock price moved from $6 to $20 in six months during 2001. For the coming year, Craig plans to be even more proactive in communicating the company’s message through conference calls and news releases. ‘Refining and improving what we do is key,’ Craig says. ‘Let’s hope we don’t take home most improved investor relations award again next year.’
