Your investors are your customers and the principles guiding your Investor Relations program should reflect this.
If customer service does not form the bedrock of a company’s investor relations program, you are not leveraging your trading symbol to the upmost. Although it sounds pretty simple, the idea that your retail investor is a part owner of your company is true, but what we often seem to be missing is that they are also a safety net for growth capital and can represent a real impediment to accessing the capital markets. After all, retail investors provide liquidity and liquidity provides the lubricant for institutional funds to flow into your company. If these institutions can’t see a smooth exit, they are reluctant to invest. The bottom line is that your company is selling a product (shares) which requires support through ongoing and consistent communication.
As owners of your firm, shareholders can band together and join part of a tide moving against a management team. Fred Green, former CEO of Canada‘s second largest railway, CP Rail recently experienced this after New York-based activist fund manager, Bill Ackman, successfully led a proxy battle for Mr. Green’s removal along with a swath of the CP Rail board. Discontented investors can broadcast your shortcomings, real or imagined, on their favourite bullboards and, in the case of one of our past clients, invent a blog dedicated to spreading mischief and misrepresentations about a company and its leadership team.
As a company, you will be judged by what you deliver and not what you promise, and it often comes back to bite you if the two don’t align. There are a number of things to keep in mind when implementing your investor relations program that are effective when it comes to interacting with the street.
Provide facts – not your best guess
As the person answering investor phone calls on behalf of your company, you are expected to be an expert on every aspect of your operations, projections, targets and past promises. Shareholders often want you to listen or reassure, not correct or speculate. Investors are allowed to guess, brokers and analysts are paid to project, IROs need to provide facts. Oh, and make sure it’s information in the public domain.
Answer the phone… no seriously, answer the phone
I can’t stress it enough to busy CFOs or IR Managers that the key to having retail investors defend your company, in social media forums or on investing sites, is by first answering the phone when they call. If you don’t have time to take a call, make sure you have someone available who does. Investors are typically calling or writing with a specific question or concern, and getting your voicemail or out of office reply is almost never the answer they are looking for.
The minimum is not the answer
Taking the extra step is part of building a solid reputation as an effective IRO. For example, I had an investor complain once that he asked for specific information and was emailed the general web URL for the company. I would guess that the information was in the pages somewhere, but having it supplied directly in correspondence would have saved this individual valuable time and energy. Give more than what’s expected in your answers, ensuring the information is publically available; make an effort to provide additional context as to why management made a particular decision. Follow-up with the information you promise to provide quickly, and identify why it’s important – and make sure that you provide rationale with your answer.
Out of date is out of touch
Keeping your communications materials up-to-date should be a no-brainer. Old or outdated presentations sitting on your website are not a good source of information for investors looking to make a buy decision. The impression it leaves is that your company does not care, or is too disorganized to get information out to the market. Although the event you attended in May of 2010 has been epic, a link to the webcast is not helping investors get a feel for how the company is doing today.
Much like getting blown off by busy sales staff, failing to communicate with your investors can do damage to your reputation and hinder your business. It is important to keep in mind that investors play a vital role in the success of a publically traded company, by creating liquidity and supporting the value of your share in a less than perfect market. Simply put, it’s the small things that IROs do to treat their investors well that will make the difference in how they perceive your role and your company.
