Q. I work for a mid-cap retailer and our stock has been picking up speed over the last two quarters after a particularly challenging time in the first half of 2003. I think we need to be out there selling ourselves as a growth story but my CEO is very reluctant. He fears we might be jumping the gun and doesn’t want to attract short-term growth investors. Any advice?
A. Given the recent deterioration of investor confidence and corporate credibility, it is vital that your company is accessible to shareholders on a consistent basis. Senior management may wish to retreat to the safety of silence but, as the IRO and key communicator of company performance, you owe it to your shareholders to tell the company story through both good times and downturns.
There seems to be a misconception that being accessible and telling the company story is equivalent to ‘selling ourselves’. As Lou Thompson of the National Investor Relations Institute (Niri) pointed out in a recent letter to Forbes, ‘Investor relations is not about sales.’ It’s about transparency and better, more open communication.
To pacify your management, review your target investor list and lay out a meeting strategy that will put your CEO in front of long-term investors on a regular basis. But keep in mind that short-term investors are not necessarily a bad thing and can play a valuable role in shoring up your stock during difficult times. You just have to be ready for them to jump ship as soon as they realize their profits.
Q. As experts are predicting shareholders will submit a record number of shareholder proposals this proxy season, should I be getting involved in preparing for our annual meeting? Most of the proxy and governance-related duties fall to our corporate secretary but I have heard other IR professionals are beginning to present to the board and talk to investors to get their views on management pre-proxy. How involved in governance should IR professionals be?
A. It’s vital that IROs be fully involved in corporate governance. Although you may not have a formal role in preparing materials for the annual meeting – most IROs don’t – you can play a critical role as the eyes and ears of the company. With shareholder activism on the rise, you may need to solicit pre-proxy feedback from investors. In listening to their questions and concerns, you are in a unique position to pick up on possible ‘withhold’ votes prior to the meeting.
Where there are potential issues, it’s up to you and the other relationship-holders – the CEO and the CFO – to explain the thinking behind company policy and the way in which it can benefit shareholders. It’s also vital to get feedback because voting results do not necessarily indicate what shareholders really care about.
If you are not already partnering with your general counsel and corporate secretary in the pre-proxy period, take the initiative to review potential areas of concern with them and then share any feedback you get from investors.
