Standard setters: IR Magazine US Award-winners 2008

This last year was perhaps the hardest yet for managing IR. There were more than a few plagues for those running public companies, including crashing stock prices, the rise of the short-seller and the subprime disaster.

It was not surprising, therefore, to see a number of experienced insiders among the winners at the IR Magazine US Awards 2008. A total of 54 companies vied for 22 awards recognizing key aspects of IR. Five winners – GE, Limited Brands, Wachovia, Cisco and Nokia – were firms that again and again earn the highest marks. Newcomers stood out for their innovative or energetic efforts.

The awards are the culmination of IR magazine’s annual US research to recognize excellence in the practice of investor relations. Each year, the results serve as a benchmark for best practice in IR by singling out notable performance by individuals and companies.

Investment climate
Bad markets motivate IR teams to better performance, said Limited Brands senior vice president Tom Katzenmeyer, picking up the prize for best IRO in the mid-cap range with colleague Amie Preston for the fourth year in a row. That also seemed to be the case for Wachovia’s IR team, Alice Lehman and Ellen Taylor, who took home the best IRO award in the mega-cap group in spite of being in the middle of the ravaged banking sector.

Analysts and investors responding to the survey said Wachovia hit the key marks for IROs: knowledgeability, responsiveness and transparency. Taylor, Wachovia’s director of relationship management, explains that she and Lehman, who is head of IR, have the advantage of being bank veterans, having worked both in the back office and out front with customers. ‘It makes it easy for us to have great contacts throughout the organization,’ she says. ‘That’s a huge help to us as we tell our story.’

Wachovia also got points for the ‘thickest and deepest disclosure’, as one analyst described it. The bank produces written guidance for the year every quarter, then goes back to address what it hit and what it missed. Taylor says the work is a help, not a burden. ‘Putting out there in writing what we expected to do and deliver on makes it a lot easier as we move through the quarter,’ she adds.

Good relations
Laurel Lefebvre, the Staples IRO who won the grand prix award for best overall IR as well as best IRO in the large-cap group, says her 15-year tenure with the company is valuable. She started as an assistant to the founding CEO, and a perch next to his gave her a great perspective. ‘He did a lot throughout the company’s history: the IPO and explaining the concept to investors,’ Lefebvre explains. ‘So I had a good understanding of IR from his involvement.’

Lefebvre also pays attention to the basics. ‘I answer my own phone,’ she points out. ‘I call everyone back right away and I don’t prioritize too much. If I don’t know an answer, I say I’ll work on it.’

Survey respondents noted Lefebvre’s grasp of the competitors in her sector. ‘I listen to every conference call, read every transcript and read every research note about them,’ she affirms. Her boss John Mahoney, who is out on roadshows for a few days each quarter, won best IR by a CFO. ‘He has the same sense of urgency about IR,’ Lefebvre adds.

Triple winner Dan Janki, vice president of corporate investor communications for GE, says the challenge for him was the size of the operations and the interest in his $330 bn firm. GE holds 350 investor meetings per year, but Janki welcomes them. ‘We’re a big company and we try to simplify the business and let investors come in and touch and feel it,’ he says.

GE is also an advocate of field trips, hosting about one event each quarter. Last year, there were visits to a research facility, the aviation business and the leadership team at NBC. For the latter event, open invitations went out to institutional shareholders. About 120 investors attended and 50 more joined via webcast.

In addition to winning the grand prix award in the mega-cap range and the award for best corporate governance, GE took the prize for best communications with the retail market. Janki notes that it is always difficult to address this audience, but also essential given that 40 percent of GE’s 10 bn shares are held by individual investors.

On the release of this year’s annual report, GE president and CEO Jeff Immelt hosted a live webcast, spending a half-hour answering questions by phone and email. He could only take a few questions on air, but the IR team began posting answers to more points on GE’s IR website.

Most intense experience
Some of the most demanding IR occurs in a merger situation or new listing. Respondents commended CommScope for being open to investor questions instead of relying on ‘no comment’ during its merger with communications equipment manufacturer Andrew. CommScope’s head of IR Mark Huegerich says there were huge communications challenges, which he managed with the help of PR company Joele Frank and legal firm Fried Frank.

Concho Resources won the award for best IR for an IPO in a tie with MF Global. Both companies were recognized for openness and good disclosure on their investment prospects. Concho chairman and CEO Timothy Leach explains he had worked on all kinds of corporate finance deals including bond offerings and secondary offerings, but never an IPO. ‘It was the most intense experience, not just in a business sense, but in general,’ he adds.

Most improved IR went to Parker Hannifin. Vice president and treasurer Pamela Huggins says the company revamped its disclosure to offer more transparency, enhanced its communications efforts and aimed for better organized investor days. Analysts noticed the improved response times and better slides during quarterly conference calls.

Parker also changed the way it reported certain information after analysts said this would help the company build better models. Respondents liked the openness on analyst day, too. The CEO spoke ‘as if he were leading a business school case discussion.’

Global demands
Some companies have to face the difficulty of running IR programs an ocean or two away from their home markets. This year, analysts and investors ranked Infosys Technologies and Nokia for excelling in this area. ‘It’s a challenge,’ admits Sandeep Mahindroo, IRO at Infosys, which beat Toyota for best communications in the US market by an Asia-Pacific company. ‘We don’t always have easy access to management.’

Mahindroo copes by relying on his IR counterpart in India, having regular discussions with senior management and managing some international travel, although he has been back to Bangalore only once in 22 months. He also spends time with executives when they come over for US roadshows. As 20 percent of Infosys’ holdings are in US hands and it is part of the NASDAQ-100 Index, a group of the exchange’s largest non-financial stocks, the company stations Mahindroo in New York. ‘It’s important for us to have someone here,’ he explains.

Mahindroo, who trained as an accountant, has been in the IR role for five years and with Infosys for eight. He enjoys IR because it allows him to interact with people who have diverse backgrounds and views. ‘It is fascinating how everyone has the same information on a company, but they all evaluate it differently in terms of investment ideas,’ he notes.

Bill Seymour, head of IR in the US for Nokia, picked up the award for best IR by a continental European company in the US market for the second year in a row. Like Mahindroo, he doesn’t always have access to management. That means he is on his own for many US roadshows, although analysts in our survey reported being very comfortable having him step in for management.

Nokia’s analyst day, which is being copied by competitors, involves sessions led by senior management in the morning, followed in the afternoon by four concurrent meetings with second-tier management.

The Finnish mobile phone giant doesn’t have the challenge of investors ‘knowing us in the US’, Seymour adds. ‘But we do have 50 percent of our ownership in Europe and 50 percent in the US. That’s a lot of places to cover, and we have a very extensive outreach effort.’

The IR team surveys analysts and investors for feedback. ‘You pick up a lot in day-to-day discussions,’ Seymour says. ‘We’re in constant contact with the sell side and the buy side. More formally, we sit down with the sell side in meetings.’

New faces
Finally, Life Time Fitness, a chain of sports clubs, won the grand prix for best overall investor relations and the award for best small-cap IRO. ‘This is a result of three or four years of hard work,’ says senior finance director Ken Cooper.

A policy of open access to management ‘helps give traction to our investor base,’ Cooper adds. ‘I put myself in the shoes of the investor. I think, What would I want to know if I was making a sizeable investment?’

Although he is new to the IR Magazine US Awards, Cooper says he has studied past winners. ‘We just went public in June of 2004 and we used a lot of examples out there – including Limited Brands, Best Buy and Target – to set up our investor relations program,’ he recalls. ‘We managed to get a lot of insight.’

Praise for restraint

At the awards ceremony, there were comments all night about IR not being an individual sport. But Quintin Kneen, vice president of finance and IR at drill technology company Grant Prideco, which won best IR by a chairman or CEO, joked that ‘CEO Mike McShane’s not here because I didn’t tell him. It’s hard when your boss wins an award for your job.’ McShane drew notice in the survey for being steady and frank in his communications – ‘He is a master of the under-promise and over-deliver approach,’ one respondent said.

Also in the ‘spin-free’ group, as one respondent called it, is Northeast Utilities, which won the award for best annual report. It was not an easy category to win, facing competition from Berkshire Hathaway – with Warren Buffet’s famous letter to shareholders – and Limited Brands, illustrated with photos of lingerie models.

Deborah Beauchamp, Northeast’s manager of enterprise communications, says the company ‘tells it like it is – the full picture.’ Chairman, president and CEO Chuck Shivery took a very active role in all parts of the book, emphasizing a straightforward explanation of the company’s results and vision, Beauchamp notes.

Analysts responded to the detail in the management’s discussion and analysis section, which was expanded to explain a divestment decision, says IRO Jeffrey Kotkin. ‘We also provided capital spending projections, to give more insight into our growth opportunities,’ he adds.

How we found the winners

In an online survey conducted between November 28, 2007 and January 11, 2008, we asked analysts and investors to nominate and vote for companies and individuals who had the best IR over the past year. The survey drew responses from 1,427 buy-side and sell-side analysts. In addition, 1,206 retail investors voted in the award for best communications with the retail market. Their votes also contributed to the best IR website category.

The independent research was conducted by Erdos & Morgan using databases for investment professionals provided by Thomson Financial and Ipreo. The retail investor respondents included BetterInvesting members and Barron’s online subscribers.

Our Investor Perception Study, US 2008 contains the names of nominated companies, verbatim comments about them from survey respondents, and an overall ranking of the top 200 companies. In addition to gathering votes and comments about specific companies, the survey covers opinions on key IR issues.

To order your copy of the Investor Perception Study, US 2008, please contact Megan Bruce at +1 212 430 6861 or email megan.bruce@thecrossbordergroup.com.

IR Magazine US Awards 2008 winners

Grand prix for best overall investor relations – mega-cap company
GE

Grand prix for best overall investor relations – large-cap company
Staples

Grand prix for best overall investor relations – mid-cap company
Limited Brands

Grand prix for best overall investor relations – small-cap company
Life Time Fitness

Best investor relations officer – mega-cap company
Alice Lehman & Ellen Taylor – Wachovia

Best investor relations officer – large-cap company
Laurel Lefebvre – Staples

Best investor relations officer – mid-cap company
Tom Katzenmeyer & Amie Preston – Limited Brands

Best investor relations officer – small-cap company
Ken Cooper – Life Time Fitness

Best investor relations by a chairman or CEO
Michael McShane – Grant Prideco

Best investor relations by a CFO
John Mahoney – Staples

Best corporate governance
GE

Best use of conferencing
Cisco

Most progress in investor relations
Parker Hannifin

Best investor relations for an IPO
Concho Resources
MF Global

Best M&A investor relations
CommScope

Best corporate advertising
Target

Best communications with the retail market
GE

Best crisis communications – small to large-cap company
JetBlue Airways
Mattel

Best annual report – small to mid-cap company
Northeast Utilities

Best investor relations website – small to mid-cap company
PF Chang’s China Bistro

Best investor relations by an Asia-Pacific company in the US market
Infosys Technologies

Best investor relations by a continental European company in the US market
Nokia

Lifetime achievement in investor relations
Art Rivel

Market cap ranges as of December 31, 2007
Mega-cap: over $30 bn
Large cap: $10 bn-$30 bn
Mid-cap: $2.5 bn-$10 bn
Small cap: under $2.5 bn