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Current trends and discussions in Germany

The German Investor Relations Association (DIRK) is the largest European professional association forging links between companies and the capital markets. Kay Bommer looks at DIRK’s current agenda.

IR activities are intended to improve communication between issuers, investors and relevant intermediaries. This is by no means a simple task. IR managers are caught between investors’ expectations, the demands of their companies’ management and the regulatory guidelines which serve as the framework for their work. A glance at the current challenges for IR managers in Germany shows that this tension is evolving, however, and changes are currently underway in all three of these areas, to which IR managers must respond.

1. Change in reporting obligations
As a result of the implementation of the European Transparency Directive Amending Directive into German law and the corresponding adjustment of the Exchange Rules for the Frankfurt Stock Exchange, issuers on the German capital market have been subject to less stringent reporting requirements since January 2016. Companies listed in the Prime Standard are now able to publish their reports for the first (Q1) and third (Q3) quarters in the form of brief notices (‘Quartals-mitteilungen’). Companies outside of the Prime Standard are even entitled to waive reporting entirely in Q1 and Q3.

The change in the law will make things easier in principle. However, it is currently creating a lot of work for most IR departments in Germany as existing reports have been reviewed and have undergone extensive changes in many companies. A survey of 160 companies listed in the DAX, MDAX, SDAX and TecDAX has found that around half of all Prime Standard issuers changed over to the new notification format in the first quarter of 2016. Moreover, almost all companies have slimmed down their publications, on average by 25%. Several companies have revised the format of their reports entirely, which now appear in a form resembling a magazine or a presentation.

2. Dialogue between supervisory board and investors
Ever more frequently, investors – particularly those outside Germany – are contacting supervisory board members directly, in order to discuss questions relating to the company in question at a personal level. This is a difficult situation in the German two-tier system where the communication with investors is a core responsibility of the management board. Since there is no clear legal definition covering the dialogue between investors and supervisory boards in Germany, IR managers are currently discussing the possibilities and channels for appropriate communication.

The ‘Developing Shareholder Communication’ initiative has launched and fostered this discussion. In June 2016, it published eight principles relating to communication between supervisory boards and investors. The general mood is that companies should permit this dialogue, and this is a view which will likely soon be incorporated within the German Corporate Governance Code (GCGC).

3. Strategic/integrated function of IR
The third issue that IR managers in Germany are currently occupied with is entirely different. It has to do with the way that they see their work and the strategic significance of IR for their companies.

Unlike when the field of IR started out, nowadays it no longer merely serves as a mouthpiece for the issuer’s communications with the capital market. Communication within a company is just as important. IR managers have important, strategically relevant skills on account of their close relationship with the capital market. They are familiar with market trends and notice changes in investor behaviour and thus frequently have a better idea of the company’s profile on the capital market than its CEO or CFO does.

IR is a young profession which has undergone dynamic development in Germany over the past few years. A short glance at current discussions in the German IR community shows that this development is still far from complete. It is thus important for IR managers to remain willing to learn and open to change.

Published: 22 December, 2016