Survey of investor relations practice in Canada
The survey of the investment community for the 2011 Canadian investor perception study took place between September and November last year through a combination of electronic and telephone surveys. Researchers spoke to or received completed questionnaires from 247 portfolio managers, sell-side analysts and buy-side analysts, asking them to nominate the investor relations officers, chief financial officers, chief executive officers and companies that they believe demonstrate best practice investor relations, CSR and corporate governance.
Respondents were also asked to nominate companies for the quality of their overall financial reporting, IR website, earnings calls, investment community meetings, IR for a corporate transaction, and their general progress in investor relations. The overall points tally was then used to determine the sector award winners.
The first stage was to email all the contacts with an electronic version of the survey, which was devised by market research firm Fox Insight. Mary Maude Research of London then conducted in-depth telephone interviews of 10-20 minutes each with some 240 of the respondents before the results were analysed to identify winners of both the category awards and the sector awards.
This year’s investor perception report was written by XbInsight and will be made available to all premium subscribers to www.irmagazine.com after the IR Magazine Awards Canada event has taken place in Toronto on February 2. A hard copy of the report will also be available then. Canadian companies will be able to use the online benchmarking tool to measure the quality of their own performance against that of other domestic companies and also against their global peer group.
The research further provides an opportunity to gauge sentiment toward current issues in the capital markets. This time, the survey asked respondents for specific information about the challenges they face. The result was that the unpredictable macroeconomic climate – especially currency uncertainty – is presenting real difficulties for the Canadian buy side and sell side.
Crucially, Canadian listed companies, which are dominated by minerals and resources companies, are at the mercy of large-scale fluctuations in the value of global commodity prices. While the current boom may not be perceived as an immediate problem, there will likely be a longer-term challenge to maintain momentum. Some analyst respondents bemoan the difficulty of forecasting gold prices in the current environment.
There are also distinct challenges facing companies in the basic materials sector, where experts cite rising costs, the uncertainty of the demand outlook and the declining quality of assets and mines as key concerns. Additionally, there is a ‘dearth of geology and mining graduates’, which has made finding trained operatives difficult.
The Canadian dollar remained strong in 2010, leading some to describe foreign exchange challenges as a key obstacle over the past 12 months. Others cite ‘the Chinese influence’, high debt and demand weakness in forest products as hindrances to the basic materials sector.
Access to information is always a top priority for investors – and this year is no different, with complaints focusing on comparability and consistency of reporting from issuers. Positive comments go to those who provide plenty of time for Q&A during meetings, whether in-person or on conference calls; and to companies offering open access to senior management.
A question of governance
This year we asked respondents to define how important corporate governance is as a consideration when making an investment decision. The results reveal that, broadly, it matters quite a lot: 61.7 percent of respondents agree with the statement: ‘corporate governance is of fundamental importance when making an investment decision’.
Almost a quarter (23.3 percent) of Canadian investors polled say corporate governance is not a critical factor when making an investment decision and 15 percent neither agree nor disagree with the statement.
A selection of verbatim comments from survey respondents
‘It would be good if there was a level playing field for reporting information. It’s been improving, but firms still use many different operating figures; it would be great to bring them into line.’
‘A major challenge is trying to adjust to the constant news flow about bids for the companies we cover and setting expectations. Many are underestimations while others are overoptimistic.’
‘The reserve replacement is always a problem – how do you maintain growth when constantly looking for new sources? Low gas prices are also a problem, but at least the oil price is good.’
‘We requested a meeting with the CEO and the firm accommodated us. We got an hour and a half of his time, during which he was as forthright as he could be, and we left feeling good about the company.’
‘I really appreciate its honesty; it is open and up-front about plans even if it exposes the firm to criticism.’
‘Corporate governance is high on my list of important issues. If you don’t trust the management and board you have no business investing in them.’
‘Corporate governance does help with an investment decision but the underlying business model is more important – financial strength, industry strength and position in the sector’
‘Even if the CEO is out of town, he will call. He makes it his business to be involved with shareholders. His understanding of the business ranges from the macro vision to the extremely detailed.’
‘Too many of the companies I cover waste time with long introductions and big discussions about results; then they cut us off when we want to ask questions. [This one] carries on until all our questions are answered.’
XbInsight is IR magazine’s research brand, building on the publication’s established research efforts. Since 1991, IR magazine has taken its renowned investor perception study around the world to markets as diverse as Brazil, China, Singapore, the Nordic region, South Africa, Canada, the UK and the US. Across the global markets, thousands of buy-side analysts, sell-side analysts and portfolio managers are asked which companies have the best IR.
XbInsight is now building on that expertise and launching a series of studies examining successful IR and the key drivers of investor sentiment. It also provides:
- High-quality thought-leadership studies
- Benchmarking initiatives, including IR magazine’s online interactive benchmarking tool
- Global consolidated IR magazine research.
Specifically, the research division at XbInsight is looking to understand why some firms perform better than others in IR magazine’s investor perception studies. The first step in conducting this analysis is to gain a deeper understanding of the different IR practices at listed companies around the world.