A front row seat at the sixth annual IR Magazine Canada Awards
In the worst of times it was, perhaps, the best of times. The sixth annual IR Magazine Canada Awards, held February 27 in Toronto, celebrated the finest IR officers and programs of the past year – a period that may, for years, be remembered as the acid test for IR smarts.
In the aftermath of an era defined by corporate rot – when professionalism decayed, sell-side analysts lied to our grandmothers, regulators remained flaccid, and the clamor for transparency grew louder than ever while the serpent of uncertain war became clearly visible beneath a translucent egg – IR professionals faced tough challenges. This year, the winners and runners-up in all categories earned accolades for not merely surviving but thriving in truly interesting times.
The biggest winner was Royal Bank of Canada. Nabanita Merchant, veteran senior vice president of investor relations, and her crew handled a total of six bottles of champagne (one for each award, care of Georgeson Shareholder, which in this reporter's opinion deserves a separate award for most convivial sponsor).
Winning the grand prix for best overall investor relations in the mega cap category (for the first time), as well as best IRO (the third time for Merchant), best financial reporting (third year in a row), best financial media relations, best IR web site and best corporate governance, the RBC team enjoyed some serious sponsored drinking.
'The lengths I'll go to to get that extra bottle of champagne,' quipped RBC's Merchant. 'There's no way someone can win best IRO without loving their job, and without having absolutely the best team behind them.'
A similar trend of sentiments emerged from all winners. The recurrent themes: winners won because they had senior management support for the IR function; and because they resisted the urge to stay in their shell during tough times when eyeball-to-eyeball contact is more and more essential.
Management's edge
Epitomizing these virtues, nickel producer Inco brought home a first-time grand prix for best overall investor relations in the large-cap category. For her part, Sandra Scott, Inco's director of investor relations, took top honors for best IRO in the large-cap range: 'Completely on top of the job – everything you would expect is taken care of,' said one investment pro in the awards survey.
'Nickel is this girl's best friend,' said Scott in her acceptance speech. But as she concedes, along with virtually all other Canadian winners, senior management had to be a friend as well. 'Our CEO [Scott Hand] devotes about 20 percent of his time to IR,' says Scott. 'Our awards are a tribute to his work.'
Another hard worker in 2002 was Michael Sabia, president and CEO of BCE, Canada's biggest telecoms company. Appearing in larger-than-life video, Sabia told the evening's invitees that his award for best investor relations by a CEO honored the overall company. Not surprisingly, BCE also won for best use of technology and garnered top spot for most improved investor relations.
BCE began 2002 under particularly difficult circumstances. When Sabia took the helm in April he knew the only policy was honesty. 'IR's basic focus is to not give people surprises,' says Maarika Paul, BCE's vice president of investor relations. 'You have to keep people informed regularly. Some of your news will be good, some bad. You have to provide it all.'
Sabia's candor (along with Paul's IR team) helped convince investors that the company had a plan to change for the better. 'We tackled things head-on,' says Paul. 'We set out clear objectives and delivered on them. Delivery is key because you can tell a story, but if the story differs from the action, you lose credibility fast.'
As befits a telco, BCE maintains a robust and constantly upgraded range of technologies aimed at keeping investor information channels open. But, for this company, face-to-face contact is the big deal-maker. 'Investors want to get a feeling for what kind of personality a CEO presents,' says Paul. 'We have made an effort to ensure we set aside two to three days to meet current and potential investors after each quarter. That's when issues are fresh and people have the most questions.'
EnCana, a 'mega cap' company created last year by the merger of PanCanadian Energy and Alberta Energy, lived up to Alberta Energy's past success in the large cap category. It won for best investor relations during a takeover or merger as well as best investment community meetings.
As a new company, EnCana was faced with communicating its strategy to the Street. It had a busy year, not only completing the merger, but also ensuring investors understood how a subsequent round of divestitures and acquisitions fit into the bigger picture.
Sheila McIntosh, vice president of IR at EnCana, believes the award for best investment community meetings had a lot to do with the company's investor day in November when it presented the new company – without even an annual report to work from. 'We ensured we had representatives from a number of levels within the organization so investors got the opportunity to talk to the people actually managing the various business units.'
As an investment community meeting virtuoso, EnCana's McIntosh echoes the call for face-to-face meetings. 'It is becoming increasingly important that companies get out there and meet directly with their shareholders,' McIntosh comments. 'Obviously, the market was turbulent in 2002. Investors want to directly see the companies in which they are investing.'
Rugged individualism
EnCana was first runner-up to Scotiabank for best IR by a Canadian company in the US market. For Scotiabank, the winning formula was a mix of responsiveness and availability. 'US investors want to sit across the table from our executives,' says Kevin Harraher, vice president of investor relations at Scotiabank. 'We see our top US investors probably five or six times a year. At the same time, big US funds have sharp analysts who do their research in-house. They don't rely as much on the sell side. They build their own models and they want to talk to you in detail about the models and the numbers behind them. You can't afford to waste their time.'
With 'themes' trendy on Wall Street, Scotiabank's message is simple: it's not the biggest bank in Canada but it is the best run based on financial metrics such as productivity, and on non-financial ones such as customer service. Meanwhile, as Canada's 'most international' bank (19,000 out of a total 46,000 employees have Spanish as their first language, for example), Scotiabank is deploying its 'best of breed' practices internationally. 'It's a unique offering,' says Harraher. 'US investors like the diversification and the growth potential.'
Harraher notes that when fishing in the US pond, dinner takes fewer catches. US shareholders account for 10 percent of the bank's shareholder base but, individually, big US funds are the bank's largest – and most loyal – shareholders. 'US investors tend to appreciate the bigger global picture whereas many Canadian funds tend to be more insular,' says Harraher.
Nurturing a shareholder base means managing expectations, and Scotiabank's mantra is 'open and honest communications in good times and bad.' Harraher adds, 'It sounds corny, but we absolutely believe in no surprises. We don't over promise or over promote. That's why one-on-ones are good. You can razzle-dazzle them with charts, but investors want to judge the integrity of management by looking them in the eye.'
Another company to find the US market a fertile one is Zarlink Semiconductor, which won the grand prix for best overall IR in the small cap category, edging out runner-up Inex Pharmaceuticals. What's Zarlink's secret? 'We haven't gone into radar silence in what is arguably the worst downturn ever in our sector,' says Zarlink IR chief Mike McGinn. 'Instead, we said, this is a cyclical business; we know we are onto something so let's get out and tell our story.'
This year's notables
Vancouver's Angiotech Pharmaceuticals is a newcomer to the awards, overtaking last year's winner (and this year's runner-up), Open Text, for the mid-cap grand prix. The addition of Dr Rui Avelar, a doctor and biotech analyst, as vice president of IR and communications in 2001, gave Angiotech the edge. Avelar won for best investor relations officer while the company also picked up a best use of conferencing award.
The soft-spoken Avelar is modest about his acclaim as best IRO. 'Being an MD is sort of an unfair advantage,' says Avelar. 'But this is more a company award. When you work for a company that has a compelling and provocative business model, that is aggressive in building its business especially in this economic climate where the bears are out and most people are bunkering down trying to weather the storm, then you stand out.'
Angiotech's conference calls were also praised for being notably clear and easily understood. Avelar, showing his finesse at bridging the gap between the medical profession and the investment community, dumbs it down for the non-medical crowd. 'We put drugs on stuff,' he sums up.
Montreal toy maker Mega Bloks tied with TSX Group, North America's first publicly-traded exchange, in the category of best IR for an IPO. Despite the market slump, the Mega Bloks IR team, led by CFO Alain Tanguay, stood out with great presentations and a well-communicated strategy, especially around execution and pricing times. In fact, the company did two offerings last year – pretty amazing given the market climate.
It didn't hurt that Mega Bloks had a great story and a fantastic fiscal 2002 to back up its IR. While many companies struggled to keep lines of communication open with investors during 'the bad times', Mega Bloks was chalking up record numbers.
'It was almost too easy,' comments Eric Phaneuf, Mega Bloks' new manager of finance and IR. 'Now we must maintain this trend.' Hired after 2002's offerings, Phaneuf is now taking the company into second gear: 'This was a private company less than a year ago so there is a lot of adjustment. We are literally starting from scratch.
As the evening drifted into its 'cigar and port' segment (metaphorically for the former, considering such public behavior is risqué given local village laws), Canadian IR veteran Gary Lloyd took the stage to receive the award for lifetime achievement in investor relations. Following a barrage of applause, acolytes edged forward in their seats intent on gathering sage advice from a man analysts and portfolio managers dub 'a class act'.
Reflecting on his IR career, Lloyd remarked, ' I can't remember dick.' When the laughter subsided, Lloyd did offer an overview of his professional life, emphasizing his rapid career advancement: 'In 1980 I started out as director of IR at TCP. Twenty years later I retired as director of IR at TCP.' Lloyd then consulted for a few years with his global headquarters 'in the basement by the furnace.' In terms of exit strategy, a year ago Lloyd noted incoming checks had dried up. 'I figured that was a good definition of retirement,' he quipped, adding a final admonishment to the crowd in saying, 'Enjoy the rest of the evening and your lives.'
Award-winners were identified by Value Gap Advisors in a survey of over 300 fund managers and analysts using Thomson Financial's database. WILink surveyed retail investors. Order a copy of the report at www.irawards.com
Click here to see the winners