Corporations are regularly flooded with questionnaires on corporate responsibility (CR), covering environmental, social and governance (Esg) issues. Iros complain about the time and money their companies spend on them – especially considering that most investors don’t really care.
But is that really true? With the aim of understanding – and even helping – the dialogue between companies and their shareholders, IR magazine teamed up with Thomson Financial to examine two sides of the CR equation: the investor relations view and the investors’ angle. In March we surveyed 54 corporate officers and 33 buy-side professionals.
The findings show IROs underestimate the emphasis investors put on CR. While 97 percent say it is important to their companies, only 61 percent think it’s important to investors and just 8 percent think it’s very important. Yet 78 percent of investors say CR is important to their investment decisions, with fully 36 percent saying it’s ‘very important’.
So while companies and investors both highly value CR, they don’t really understand each other. Consider that 59 percent of IROs say CR affects stock price; 73 percent of investors feel the same way. As Thomson puts it, ‘a perceived lack of shareholder concern persists in widening the communication gap between the two groups.’
Furthermore, companies and investors tend to focus on different areas of CR. The top concerns for both groups are governance and ethics. But while nearly 50 percent of IROs say community development issues are important, only 34 percent of investors rate them among their top three concerns.
IROs are also more concerned about equal employment standards and environmental impact, while investors are more concerned with product safety and labor standards (see CR issues chart, opposite).
A recent McKinsey study shows that 84 percent of executives believe the role of large companies is to generate high returns to investors but to balance those returns with ‘contributions to the public good.’ The two goals are not in conflict, according to our survey; 73 percent of IROs and 60 percent of investors say a focus on CR helps corporate performance.
In light of our survey results, Thomson’s experts suggest IROs should recognize that their shareholders are focused on CR issues – even if these issues don’t come up in investor meetings. Consider reaching out to your top 10 or 15 shareholders to identify their specific CR concerns. Perhaps add a few slides on CR to investor presentations – especially anything that might have a material impact on share price, like corporate governance or risk metrics.
Give a CR briefing to the whole senior management team at least once a quarter, updating it on both the company’s activities and investors’ views. The hope is that by narrowing the culture gap, your CR values will be better reflected in your stock price.
