Ahead of the US presidential election next Tuesday, IR Magazine looks at how a number of IR teams have prepared for the uncertainty in the market, the volatility that is beginning to pick up and the different potential outcomes.
Traditionally investors take a cautious approach heading into the second half of an election year, and this year’s election coincides with ongoing uncertainty about Covid-19 and the rapidly rising case numbers across the US.
Speaking at IR Magazine’s Global IR Forum earlier this month, Michael Spencer, general manager of investor relations at Microsoft, stressed the need to communicate regularly and with clarity. Microsoft withdrew its quarterly and annual guidance earlier this year, and Spencer said it’s the first time in the last seven years the investment community hasn’t had annual fiscal guidance from the firm.
With that in mind, he said the IR team does its ‘very best to communicate with investors regularly and let them know about everything we’re seeing in the market. The best thing we can do is stick to our guns on how we operate with transparency and honesty with the investor base, because trust is one of the only things we have to hang our hat on outside the execution of the business.’
Working with the Trump administration: Microsoft’s TikTok story
While this may sound like maintaining the status quo in IR terms, Spencer also explained how Microsoft’s recent rumored acquisition of TikTok meant the Seattle-based company had to communicate more immediately than it ordinarily would. Working with the Trump administration can be volatile and have an effect on share prices, after all.
‘With the dynamic we were dealing with, it was pretty visible to the Street and so we put out a statement in early August to say we were actually in negotiation, which we’ve never done before in our history,’ Spencer said. ‘Certainly for a deal at the stage it [had reached] at that particular time, it was a direct result of the politics involved.’
Spencer added that Microsoft took the action to reassure investors the company was still conducting business in its usual manner.
Partnering with government affairs
For Elena Rosman, vice president of investor relations at Aptiv, preparations for the election cap a busy few years of collaboration between IR and government affairs – covering Brexit, the North American Free Trade Agreement and its replacement by the United States-Mexico-Canada Agreement, and US-China diplomatic relations. Speaking at the Global IR Forum, Rosman said she now meets on a weekly basis with Aptiv’s government affairs department and, since the Covid-19 pandemic, the two departments have been sharing some resources.
This is consistent with comments made by a number of IR professionals in conversation with IR Magazine, suggesting that the last few years have thrust upon IR teams a need to comment on political and geopolitical issues more than ever before.
Hoping for a decisive outcome
And while some are commenting on politics more than before, many public companies are going one further and participating in politics. Speakers from Hannon Armstrong and Adverum told the audience at the Global IR Forum that election day this year is a paid holiday, so employees can cast their votes without being concerned about waiting in long lines for the ballot box. More than 1,700 companies have now signed up to the Time To Vote movement to enable higher participation and staffing of the election.
Regardless of how many people vote in this year’s election, for Aaron Howald, head of investor relations at Louisiana Pacific Corporation, the echoes of the 2000 George W Bush and Al Gore election can be heard loudly. President Donald Trump has consistently refused to commit to a peaceful transition of power in the event he doesn’t win the election, setting up the potential for a legal contest if Biden wins.
Speaking at the Global IR Forum, Howald said he hopes that isn’t the case: ‘Certainly there are plenty of people in the market who have very much at stake in one person or the other winning the presidential election, but I think that more important than who wins is how clearly that person wins, and how soon that clarity is understood. Election day itself will be interesting, but the days and weeks that follow will be very telling in terms of the level of uncertainty or consumer confidence that the election adds.’
Bracing for higher taxes
Elsewhere at the Global IR Forum, Lucy Rutishauser, executive vice president and chief financial officer at Sinclair Broadcast Group – which has faced criticism in recent years for airing scripted pro-Trump messages across its local news stations – said a Biden presidency would likely lead to an increase in corporate tax rates.
The Tax Cuts and Jobs Act of 2017 cut the corporate tax rate from 35 percent to 21 percent. 'I think a democratic win will most likely result in higher corporate tax rates and potentially some reregulation for some industries,’ Rutishauser said. ‘I think people need to brace for that, because higher taxes are going to eat into corporate profits.’
Accelerating the energy transition
During the same panel, Rosman said she thinks a Democratic sweep – a Biden presidency and a Senate victory for the Democrats – would lead to an acceleration of the energy transition in the US ‘due to some of Biden’s proposed policy changes, including tighter fuel economy standards, greater subsidies for electric vehicles, and investment in components, batteries and charging infrastructure throughout the US.’
One company that spends a lot of time thinking about the US energy transition is Hannon Armstrong. Chad Reed, the company’s vice president of investor relations and ESG, said his colleagues have been exploring the different election scenarios internally.
‘We have an internal working group looking at the various scenarios with a potential Biden administration and the Senate under various levels of control,’ Reed explained. ‘We’ve looked at how we think policy may look in each of those scenarios, especially as it relates to climate and energy policy.’
While Reed said Hannon Armstrong’s business is designed to be resilient to policy changes, he added that the company has been thinking more about how it leverage relationships with trade associations from a lobbying perspective, and that the company is considering establishing a political action committee for its employees.
Click here to find out more about the Global IR Forum and access the recordings.
