News and views

Core issues

Overview

One of the Society’s principal roles is to act as a conduit for its members’ views on current investor relations issues. Thus the Society regularly contributes to policy debate at times of proposed regulatory and compliance changes. The Society, having sought member’s views, will aggregate these and present them to the regulator. When required, it will lobby to promote its members’ interests in the name of best investor relations practice.

Corporate Governance

The IR Society supports the principle of ‘comply and explain’ and believes that good corporate governance is a key element in developing trust between shareholders and companies.

The Society recommends the separation of the Chief Executive and Chairman roles; the retirement of non-executive directors after 10 years service; that retiring executive directors should not stay on as Chairman or as a non-executive directors of the same company; that directors should retire on reaching the age of 70; that there should be a good gender balance represented on the board; that every board should include directors with a good balance of managerial, sector, financial, and corporate and professional services experience; that all boards have audit, remuneration and nomination committees; and, that all companies appoint independent remuneration advisers.

Significant failings were evident in the build-up to the financial crisis and we welcome steps taken subsequently to ensure more robust corporate governance.  In 2010 we published 'Guidance for Investor Relations Practitioners on the UK Corporate Governance Code' designed to interpret this from an IR perspective.

The Society believes that a more flexible approach is desirable for small cap and AIM companies.

Shareholder Identification

The IR Society strongly believes in the principle that companies have the right to know who their shareholders are. We believe that companies can only communicate effectively with their shareholders if they can reach them directly through transparent identification and that this in turn promotes responsible voting by shareholders.

The Society opposes external pressures to erode the UK’s shareholder identification regime. The Society successfully lobbied the UK regulator for a 3% disclosure threshold in Contracts for Differences and maintains vigilance to ensure UK shareholder identification remains effective.

Accounting/Reporting

The Society believes that best practice corporate reporting empowers the investor relations function to explain the company’s story to investors and other stakeholders.  Reporting should never be ‘boiler plate’ and must aim to provide more than a basic level of compliance, as a valuable opportunity to engage with stakeholders.

The Society supports the current regulatory reporting regime (of results and interim management statements), and successfully lobbied the EU to ensure that the UK did not adopt mandatory quarterly reporting.

The Society promotes best practice in narrative reporting through its own awards programme and by lobbying government and regulators to promote transparency. The Society believes that the current narrative reporting regulations, by and large, provide an adequate framework for transparent reporting and does not believe that further regulation is required, however it supports the efforts of government and regulators to improve the standards of narrative reporting.

Transparency and disclosure

Transparency is at the heart of best practice investor relations.  A company’s Board should provide the lead, the IR team acting as a conduit and not as a gatekeeper. 

The Society wholeheartedly supports the current disclosure and transparency regime and is a rigorous upholder of the principles of universal, proactive and prompt dissemination of information to shareholders.

Meeting with Shareholders

The Society believes that companies should provide their shareholders the opportunity to meet with the CEO and CFO at least once a year. In addition, it believes that the Chairman and/or Senior Independent Non-Executive Director should be available to meet with major shareholders once a year as required. 

Social Media

The Investor Relations Society welcomes the use of social media in IR although it recognises the need for this to be compatible with the regulatory regime. Social media is a core media tool to be managed in parallel with formal means of disseminating information.

Crisis management

The Society believes that companies have a duty to communicate openly and regularly to shareholders during a major crisis and that effective communication during such a period can be a significant mitigating factor in protecting a company’s reputation and the downside in its shares. This includes the Chief Executive, Chairman and other key Board members being highly visible during the crisis as well as compliance with the disclosure and transparency regime.

Risk Management

The IR Society recognises that within the business review requirements of the Companies Act 2006, companies are required to be open about potential business risks.  IR departments have a role in ensuring these risks are effectively communicated and explained to shareholders.

IR in the boardroom

A key function of IR is to act as a two way conduit between the company Board and the markets.  The Society believes that IR professionals should have ready access to the Board as a key component of the role. 

The Society believes that IR should be at the heart of the corporate decision making process, in order to communicate and explain strategy to shareholders, as well acting as a sounding board to gauge the impact of decisions on  market perceptions and share valuations.

Guidance

The Society believes that the provision of public guidance on a company’s current trading and future prospects is best practice. The exact form that guidance may take and the combination of narrative and data points provided will depend on the nature of an individual company’s business model and its established practice. We believe that consistency in the provision of relevant and comparable guidance is important.

CSR and SRI

The Society believes that corporate social responsibility should be fully integrated into company strategy. Reporting CSR must never be a ‘tick-box’ exercise and should cover issues which are relevant to the company.

The interaction of investor relations and financial public relations

The Society believes that companies should communicate in an integrated way, so that what a shareholder reads in the newspapers is the same as that which he or she heard in person in a one on one meeting. Shareholders have a reasonable expectation not to read inside information in the press prior to it being issued to the market and IR professionals should be vigilant in ensuring compliance with the disclosure and transparency regime.

Market abuse

The Society supports the current regulatory regime and tough stance being taken by the FSA to prosecute market abusers such as insider traders. It believes that shareholders have the right to trade their shares with the knowledge that the markets are operating efficiently and that the price they pay or receive for their shares will not have been distorted by the actions of third parties.      

Annual General Meetings

The Society believes in the continuing relevance of the Annual General Meeting as both a conduit for face to face communications with individual shareholders and as the embodiment of the enfranchisement of shareholders. The AGM remains the principal forum for bringing directors to account in a public environment where all shareholders have the opportunity to participate.

Electronic shareholder communications 

The Society believes that electronic shareholder communications is an effective way of communicating with shareholders in the digital era. However, it should not be seen as a replacement for direct communications or as a means to keep shareholders at arms’ length.

Shareholder feedback

The Society recommends that all companies should seek formal feedback from shareholders at least once a year, preferably collated by an independent third party. Feedback should be designed to elicit opinions on the company’s strategy, the performance of its directors, its investor relations, and its disclosure.  The feedback should be provided to company non-executive directors and included in board packs as a matter of course. 

Advisers

The Society recommends that companies seek independent advice where possible as it has concerns regarding the conflicts of interest inherent within the current investment banking model as well as the insular culture of companies that do not retain external advisers. Such a culture often entrenches poor corporate governance, weak risk management and opaque communications. 

The Society therefore recommends companies retain a separate financial adviser (i.e. an independent corporate finance firm), an investor relations consultancy and a financial public relations consultancy.