In order to meet today’s demands for greater disclosure and more effective dissemination of corporate information, investor relations departments have relied heavily on new technologies. Any company serious about IR already has a comprehensive web site that is useful to both retail and professional investors, and e-mail has more or less replaced the fax.
This in turn has generated greater demands and higher expectations from the marketplace. Just five years ago investors were still receiving updates from many companies via fax, and most corporate IR web sites were providing only the basics. Nowadays, information is increasingly communicated to shareholders directly, and almost in real time.
IR magazine has been commissioning research on corporate information delivery methods in US and European markets for a number of years now – and we’ve noticed some of the trends that have pervaded the use of the latest technology in corporate communications efforts.
Geographical differences
In 2000, just before the use of e-mail and the internet became widespread in IR departments, our surveys in mainland Europe revealed a low but increasing appreciation of both these means of electronic communication. At that time, our research showed just 14 percent of respondents from both the buy side and the sell side considered e-mail to be an essential communications tool, with a comparable figure for the internet. But the same survey also found a growing thirst for faster communications delivery and response times.
It’s worth noting that at this time there was already a widespread perception among analysts that the adoption of new technology was happening more slowly in Europe than in the US. ‘I’d say none of them are very good,’ said one sell-side analyst in 2000 about UK corporate web sites. ‘The web sites tend to be a lot better in the US.’
Indeed, when a comparable question was asked for our US Research Report in the same year – What is your preferred method of delivery for corporate information? – 82 percent of those surveyed were already saying it was e-mail, demonstrating strong US enthusiasm for this technology at an early stage.
It took two more years for these technologies to become the standard delivery methods in Europe. But even today, despite widespread use, overall European IR communications through the internet still lag behind the US.
Regulatory encouragement
The reason behind this disparity lies in part with the different requirements and guidelines set down by local financial regulators. In the US, the SEC made it compulsory to file all important corporate documents, including quarterlies, on a central web site called ‘Edgar’ – thereby ensuring equal access to information for everyone. This also encouraged companies to make information available online. Moreover, Reg FD, whereby companies must disclose material news quickly and simultaneously to the entire market, has been a huge driver in the adoption of electronic information delivery systems.
In contrast, there is still no single pan-European framework for financial news dissemination; each member-nation is responsible for its own system. However, as part of the aim to establish a harmonized European financial market by 2005, changes could occur on this front as part of the transparency directive proposal currently being discussed in the European parliament.
Until and unless this happens, investors are likely to continue encountering problems. ‘Even the release of information by the European stock exchanges is hit and miss,’ says independent UK fund manager Richard Simmons. ‘There is inconsistency in the release of information within countries and across countries. For example, changes in forecasts are not always widely disseminated.’
The end result of European reforms for more effective financial news dissemination may or may not encourage greater use of online disclosure. In any case, European companies listed internationally or with large numbers of overseas investors generally conform to the higher US standards.
Better web sites
As company web sites have gained greater credence with the investment community, corporations have begun investing much more time and money in developing them and giving them a higher profile. The best IR web sites are being continually modified to satisfy investor needs and the changing regulatory and business environments.
By 2003, in our Eurozone Research Report, investors ranked web sites fourth (up from seventh in 2002) as their preferred source of information, with only personal meetings with management, broker research reports and annual reports being more popular. Meanwhile, our US Research Report in the same year found that buy-side and sell-side analysts were logging on to company web sites on a regular basis for annual and quarterly reports, webcasts, conference calls, press releases and product information.
For Simmons, the ideal web site is ‘easy to navigate, has a clear division between the customer and investor relations site, doesn’t have too many graphics, provides the full text and charts of downloadable annual reports, important documents and other announcements, and archives information for five years’.
But beyond some of these obvious basics, there is a series of additional features investment analysts consider valuable, which have rapidly become IR web site staples. These include having all the financials available in spreadsheet form, archived conference calls and presentations with transcripts, extensive corporate governance and corporate social responsibility sections and, where appropriate, the use of a second language.
Bells and whistles
Webcasting of major conferences and presentations, with audio, video and PowerPoint slides, has taken longer to evolve, mostly because of problems with bandwidth. These days, however, thanks to better technology, analysts are increasingly able to view presentations for all the companies they cover – often in real time.
‘I would argue that if analysts are trying to get up to speed quickly with a company they don’t know anything about, [webcasting] can be valuable,’ says Graham Neale, director of research at UK-based Killik & Co. ‘A video feed is an easier way to learn than reading a 200-page annual report.’
Online IR, like any other type of communication, has become a more complex form of multimedia so investors are demanding more options and interactive features, including audio, video, spreadsheets and the facility to ask questions via messaging during live webcasts.
With all this going on, we have to ask ourselves – what will technological development leave for IROs to do? According to Simmons, who relies heavily on the internet for his research, ‘as soon as all of the information is available accurately and speedily online, the best thing the investor relations profession could do is declare itself redundant, sparing us its costs and removing an unnecessary layer between investors and management.’ Well, we’ll have to wait and see about that.
additional reporting by Matthew Gower
Sorting the wheat from the chaff
IR web sites are invaluable time and effort-saving tools for many buy-side and sell-side analysts, who are under increased pressure to cover more companies than before. In the case of some buy-side institutions the trend is to do more in-house research and establish direct communication links with the companies.
Webcasts – particularly video webcasts – are well regarded by many in the investment community as an excellent means of achieving greater proximity to their target companies. By listening to and watching CEOs and CFOs on their screens, analysts and retail investors are able to gain a better ‘feel’ for a company, without the need for a one-to-one meeting.
But while many companies offer some form of webcasting, interested parties still need to find the time to go in and retrieve the information – and when you’re dealing with several dozen companies at a time, this can be very cumbersome.
As a result, a range of service providers has emerged in recent years to take away the headache, help manage the plethora of webcasts out there and, in some cases, provide extra value and content.
In addition to traditional business news providers such as Bloomberg and Reuters, newer players are making their mark. One such company is Raw Communications, which offers a secure video network of archived webcasts for institutions that may not be allowed to access them online for security reasons. Another new player is Cantos – in addition to webcasts, it offers a growing archive of hard-hitting interviews with UK CEOs and CFOs. The main idea here is to make it easier for researchers to access company information directly.
‘I could do my job without it,’ says Chris Wickham, investment analyst at Lehman Brothers, of one such service. ‘But it’s good to have and be able to use.
I can remember an instance where the chairman of one very large tobacco company made some important remarks, and at that time it was very useful to have them archived online.’
Typically, these services include additional features, such as an alert system for important news, a schedule of upcoming webcasts, and the facility to home in on the exact bits of a presentation that are of interest, without having to listen to the entire recording.
