Companies could learn from NFL, says governance expert
It’s unlikely many of those who gathered at the RBC Centre in downtown Toronto for the IR Magazine Investor Perception Seminar ‒ Canada came with thoughts of football on their mind. Instead, they came determined to learn more about investor attitudes, network with their peers and sharpen their skills in an increasingly competitive capital market.
Still, by day’s end, while most had no doubt scaled a few rungs on the investor relations learning ladder, many also left with a new appreciation of how taking a page from the NFL playbook might add value to their boards and the organizations they oversee.
‘What if one single change, one tiny shift, doubled the number of diverse directors on North American boards in the next 10 years?’ asks Sylvia Groves, president and creative director of Governance Studio, speaking after the event in an interview with IR Magazine. (The event itself is held behind closed doors, and there is no direct reporting of what people said.)
While panelists agreed substantive changes to Canada’s proxy voting ‘plumbing’ or reductions to the early-warning reporting threshold appear less than imminent, Groves warns that regulators are increasingly keen to take action on the issue of diversity in Canada’s boardrooms.
‘The regulators have strongly hinted that if we don’t see a shift in boardroom composition in the next three years we can expect the introduction of quotas,’ she says. ‘That’s the path other jurisdictions have taken. For now, there is a small window of opportunity for boards to take matters into their own hands and demonstrate to stakeholders that they are moving forward.’
To head off the specter of imposed quotas, Groves proposes that boards, perhaps encouraged by their corporate secretaries or IR teams, voluntarily adopt a policy committing them to interviewing female candidates when board positions arise. Boards could also choose to add a target goal and other diversity aspects if they desire.
‘In terms of gender diversity, it would leave control in the hands of the board,’ adds Groves. ‘Directors aren’t [currently] feeling like they have to hire a diverse, and perhaps less than ideal, candidate.’
At the same time, drawing on comparisons with the NFL’s Rooney Rule, Groves says the mere action of interviewing diverse candidates will help broaden the pool of available talent. Adopted in 2003, the Rooney Rule requires at least one of the candidates interviewed for every head coaching job to be African-American. The result has been a dramatic rise in the total number of minority head coaches in the span of 10 years.
‘Without quotas, the NFL saw more change in a decade than in the previous 70 years,’ says Groves. ‘It significantly moved the needle ‒ and that’s the kind of impact we are hoping this one simple action can achieve in Canadian boardrooms.’
In support of this initiative, Governance Studio is launching a public registry of firms that adopt the policy at www.diversityone.org. Registered companies will also be authorized to display a nifty Diversity One logo in their public disclosure documents.
A straw poll of investor perception seminar participants revealed a handful in favor of quotas while most agreed a ‘soft touch’ was the best way to handle the problem.
Subsequent panels included IR teams from Loblaw Companies and TD Bank Group discussing how they do more with less, a chat with IR Magazine Awards nominees Christian Green, director of investor relations and compliance at RioCan REIT and Pat Marshall, senior vice president of communications and investor relations at Cineplex Entertainment. The day concluded with a rundown of global investment trends by Mark Thompson, director of global markets intelligence at Ipreo.
Staying onside
One especially practical session featured sell-side analysts and portfolio managers revealing the aspects of investor relations they find most ‒ and least ‒ valuable. Here’s a summary of comments.
Investor days:
• Don’t have one if you have nothing new to say and no one new to say it. Regurgitating quarterly information is worse than useless. Strive to provide additional granularity and quantitative data points along with unscripted time with a broad range of management.
IR websites:
• Keep them up to date and comprehensive. Provide industry data. Keep executive videos short.
Answering questions:
• Know strategy and financials inside-out. Anticipate questions. You have three minutes before the analyst or portfolio manager has figured you out.
Disclosure:
• The sell side is excruciatingly aware of regulatory scrutiny. You do no one any favors by revealing non-public information.
Activists:
• Listen to them: chances are they are on to something. The best defense is to have fantastic earnings, a great strategy, competitive advantages and great relations with the Street. Companies with under-leveraged balance sheets are ‘sitting ducks’.
Board diversity:
• In terms of evaluating a board, analysts and portfolio managers couldn’t care less.
