IR30: A look back to February 1998 – Changing colors

‘Competitiveness’, ‘shareholder value’ and ‘transparency’ are just three of the words that have begun to echo around the boardroom tables in Milan, Paris, Frankfurt and Madrid, as Europe’s directors adopt the so-called Anglo-American approach to capitalism and business.’ So began the cover story for the February 1998 issue of IR Magazine, titled Changing colors. 

‘Greater attention is being paid to the concept of good corporate governance,’ wrote David Fanning back in 1998, as companies on the continent sought to adopt policies that were already the norm in the UK and the US. This drive for better corporate governance coincided with a new focus on shareholder value and the bottom line. 

All change at Pirelli

One of the companies grabbing this new approach by the horns was the Milan-headquartered Pirelli tire and cable group. Alberto Borgia, Pirelli’s then director of IR, who left the firm in 2001 only to return for another five years in 2003 and now works for the Italian Association for Financial Analysis, talked to Fanning about the changes that had been taking place at the company.

‘A few years ago we brought in a value-based management approach and we have now adopted an economic value-added measurement of all our activity,’ he told IR Magazine back in 1998. ‘There’s been a total change of culture within Pirelli, since the crises of the 1980s and 1990s. Also, the workforce was substantially reduced and two thirds of the management had been replaced by 1993/1995. 

‘Investors welcome the extent of our disclosure and openness and there has been a dramatic increase in the number of foreign shareholders.’

And the mood for openness was catching, said Fanning, noting that the previous summer had seen ‘astonished’ analysts invited to a meeting with the directors of Assicurazioni Generali, with one observer stating that this was ‘an unprecedented event in the long history of Italy’s largest insurer.’

As companies on the continent became increasingly aware that investors – ‘particularly the larger institutions with changing portfolios’ – could ‘vote with their feet’, Fanning wrote that this was a time when big investors were looking at conglomerates and asking why these giants were not demerging and taking advantage of the value in separately managed and floated companies. 

While Milan Wielinga, then with ABN Amro in Amsterdam, told IR Magazine that for Dutch investors, at least, there was more interest in seeing growth in share value than in good governance, the Anglo-American approach was winning over investors and regulators alike.

‘With more and more continental European companies listing on US and UK exchanges, and having to adopt US and UK standards of disclosure and behavior as a result, a new business culture is quickly gaining strength,’ concluded Fanning in 1998. ‘Far from being just a ‘necessary evil’, the concentration on shareholder value and better performance is bringing worthwhile dividends for companies, not least an appreciative response and increased loyalty from investors.’

Costa del IR

Fast-forward 20 years and one of the cities Fanning mentioned at the start of his feature – Madrid – certainly seems to be a contender for the continental IR crown. 

While Germany has long been known for its beer, bratwurst and great IR (as well as great big IR teams), Spain has quietly climbed the ranks with the likes of Ignacio Cuenca from Iberdrola (winner of the award for best overall investor relations in the large-cap category for the second year in a row at the IR Magazine Awards – Europe) taking home numerous awards in recent years. In fact, the Spanish utility won the same award in the small-cap category back in 2003 – proving just how consistent its IR efforts have been over the years.

Banco Santander was another strong company at this year’s Europe Awards, taking three trophies back to Spain. In total, 10 awards went to Spanish firms as well as a massive 31 runners-up places or short list nods. Italian companies also had a good night back in June with six wins and 23 firms gaining a runners-up place or short-listing, while Portuguese companies won two awards and were short-listed 19 times. 

The 2017 awards saw a similar trend with Iberdrola at the top, the UK’s AstraZeneca in second place and Italy’s Intesa Sanpaolo climbing from 29th position the previous year to round out the top three. As IR Magazine wrote when the winners were revealed at Park Lane in London, the ‘IR sun rises over Southern Europe’.

As IR Magazine builds up to its 30th anniversary issue – the upcoming winter 2018 issue, which will be the 279th edition of the industry’s flagship magazine – we’ll be posting more throwbacks to old covers, revisiting some of the hot topics from the past 30 years of investor relations and hearing from some of the industry titans. 

You can look back over old covers and keep track of all things 30th anniversary at our dedicated hub.