Read some anonymous comments from IR magazine's think tank in Palo Alto earlier this year
Shareholder engagement – during and after the proxy season
‘Thirty-eight percent of street-name shares are still held by retail shareholders, but retail voting has gone way down since the introduction of notice and access. So what can we do to encourage retail shareholder participation, not just because we need their vote, but also because it’s the right thing to do from a good corporate governance perspective? We’re figuring out the technology that will best enable that participation.’
‘Starting last year we’ve been doing hybrid live and virtual annual meetings. I would love to go all-virtual, but the objective has to be to make it as transparent as possible – for example, with a shareholder forum in the lead-up. The big worry in dropping a physical meeting is that the company is then in control of setting the questions asked at the meeting. A forum, with everyone able to see everyone else’s questions, would be a good way to go.’
‘It’s been hard for us as IROs to reach the governance people at institutional investors, and even when we approach them we’re sometimes rebuffed, or if we get in touch with them they don’t seem to want to stay in touch. It hasn’t been easy setting up those relationships.’
What’s next for the internet – and why it matters
‘When it comes to social media, you need to listen before you can talk. This is the world’s largest focus group. If you’re not listening and leveraging that intelligence, you’re missing out on a great data source. Some companies are running social media searches before earnings so they can see the conversation around certain themes and then decide whether they need to spend extra time on certain points.’
‘At our company, we get subject matter experts to engage with people using social media as part of their day-to-day duties. Younger engineers coming in today are using social media to communicate anyway. Plus, there’s an opportunity here and we’d rather embrace it than not.’
‘We have quarterly reporting cycles, and in between not a lot happens that is really meaningful. But social media can inject a lot of information into the markets and create tradable events. Besides, my guess is that our large institutional investors are not listening, but that small hedge funds with 400 percent turnover are.’
‘It’s clear there is value for IR in engaging in social media, but it requires additional resources, and once you start, you can’t back away; you don’t want to do it half-heartedly. The potential downside of doing it the wrong way is much greater than the potential benefit you might get, so it requires dedication, commitment and resources.’
Questions for the sell side
‘I list my sell-side analysts according to how effective they are. I don’t worry about their rating; I worry about how they’re articulating the story. I ask investors who they like and I keep track of the names that keep coming up. I have probably nine or 10 good analysts – around half of them from bigger firms – and another 10 who do solid work. The bottom 20 or so are hard to manage.’
‘Every other year, we host our analyst day in conjunction with our annual client conference. Analysts and investors love the opportunity to mingle with customers and hear first-hand what their issues and buying motivations are. For the off-years when we hold our analyst day in New York, a customer panel works great.’
‘As an analyst, I do not like it when someone tells me he/she tries to treat all us sell-side firms equally. The level of commitment – market-making, outreach, global distribution – for a large firm like ours is so vastly different. Meanwhile, the buy side expects a lot more from us than it does from a tier two or three firm. I’m very much in favor of tiering.’
Buy-side trends to watch
‘After the credit crisis of 2007 and 2008, there has been an overall move by many large fund managers toward more liquid positions. Meanwhile, high-frequency trading has created more liquidity for large companies relative to small ones, so the trend favors large-cap equities and larger debt issuance.’
‘Growth in exchange-traded funds has happened very quickly, from 0 percent to 15 percent of all shares out there. It could be 30 percent in a few years. In terms of the number of active investors we meet with, the number of shares or percentage of ownership, the market for us as IROs is shrinking. It risks affecting the demand for our services overall.’
‘We’ve seen inflows to passive management globally, especially since 2010 and 2011, as assets leave the active management side. But the expansion of passive investment means the active managers you speak to on a daily basis really have more control over the price of your stock. In the end it makes the relationship with the active manager that much more important for stock performance.’
IR Magazine Think Tanks are free, invitation-only events for select groups of corporate IROs. Find out about upcoming think tanks in London, Toronto, Chicago and New York at www.irmagazine.com/events.
The IR Magazine West Coast Think Tank was sponsored by:
