IR Society conference 2015: a taste of futuristic nostalgia
‘IR2020: Back to the future’ was indeed a well-chosen theme for this year’s IR Society conference, where interactive polling was ubiquitous, testimonials by IR veterans poignant and the ever-growing strategic importance of IR celebrated. A reference to video sequels even sparked a chuckle among the audience. ‘You should view corporate storytelling as a box set,’ joked one participant. ‘Always think about the next season!’
After a greeting from the Society’s chair Sue Scholes, Xavier Rolet, chief executive of the London Stock Exchange, delivered a keynote speech calling for financial infrastructures to be less ‘siloed’.
Reminding that the bulk of new jobs created in Europe has been thanks to the dynamism of the 23 mn small and medium enterprises, Rolet urged regulators to modernize their framework in favour of entrepreneurs. The speech was also an occasion to announce the launch of the LSE’s new social media network ELITE Connect, a ‘primary capital market platform’ aimed at facilitating investor interaction for IROs, who reportedly spend the equivalent of a month’s time in face-to-face meetings each year.
The first session kicked off with moderator of the day Evan Davis sparking a debate on IR’s evolution, its current issues and how IROs should address them. Polled on whether they thought IR had grown in importance over the past 10 years, a resounding 95 percent of IROs responded positively. IR Magazine’s founder Janet Dignan recalled the early days of the profession, ‘when IR was often confused with PR’, noting the great leap forward which has now positioned IR as ‘a final polish to step up to be CFO-ready,’ highlighted Shire’s head of IR Sarah Elton-Farr.
A second poll however showed that only half of the audience expected more IROs to be in the C-suite in the next five years. ‘Just talking about IR is not enough,’ stressed Alexandra Hockenhull director of corporate communications and IR at Xchanging. ‘If you want C-suite responsibility, you should press upon senior management colleagues that you have something to contribute.’
Elton-Farr added that ‘it’s easier to expand your role in a smaller company than in a large one, where IR is usually more compartmentalized’. David Walker, head of IR and corporate development at Hays reminded us that although the IR role can be somewhat ill-defined, with great disparities in responsibility from one company to another, it’s important to keep in mind that it is ‘fundamentally a people’s business’.
As delegates joined different breakout sessions on results presentations and managing change and uncertainty, I opted to attend a discussion on how to successfully master the discipline of being a listed company. Since being in the public domain puts everything a firm does under scrutiny, management needs to step up in order to display discipline in reporting, on the balance sheet, in disclosure and in governance, explained moderator Catherine Nash, Royal Mail’s IRO.
She recommended setting up the IR function long before the actual IPO so IR can project-manage the transaction, and revealed her firm started engaging future shareholders two years before the actual listing.
Senior management, especially the CFO, should be prepared for high visibility at conferences, noted TSB’s Martin Adams, while David Schriver from Tulchan Communications pointed out that after an IPO a company inevitably gets put in a pot, and should therefore aim for ‘the pot that says transparent, sustainable, and growing.’
Roger Wilkinson from Newton Investment Management pointed out that a company often needed short-term pain to get long-term gains and therefore discipline would generate the confidence ‘that will make investors believe you can go down that path. I also realized I didn’t need to like the CEO of a company to invest!’ he quipped. ‘Just tell it straight and the market will reward you for that,’ urged RBC Capital Markets’ Oliver Hearsey, which was taken a step further with Nash’s concluding advice to ‘just do what’s said on the tin!’
Bidding for research
In a lengthy lecture about the regulatory landscape, the FCA’s director of market oversight Marc Teasdale reviewed the ever-controversial topics of the future of research and recent structural changes in the market. ‘Everyday bankers wonder how to price research,’ commented Neil Brown, an investment manager for Pan European equities at Alliance Trust, adding that equity analysis reports had been ‘a bit of an all-you-can-eat buffet up until now. What we need is fewer notes but better quality research.’
Mark Stockdale, managing director of corporate broking at UBS, advocated an auction sale model for research, where ‘clients will compete for analysts’ time and brain power.’ Surprisingly, despite the uncertainties surrounding the future of corporate access, 77 percent of delegates revealed that recent rule changes had not made a difference to their role yet, and half of the audience believed the sell side profession would be only ‘slightly different’ in three years’ time.
‘Over the past few years, the calibre of responses to our enquiries has gone up dramatically, enthused Abigail Herron, Aviva investors’ head of responsible engagement at the IR forum on promoting stewardship. ‘IROs and CFOs are much more prepared on the ESG subject.’ Her USS counterpart Daniel Summerfield stressed that with more funds having moved in-house, this has allowed the higher education pension fund to develop a bespoke allocation approach. And, he said, his enquiries aren’t ‘only about remuneration: we want to discuss strategy.’
The percentage of share capital being voted has gone up but the level of dissent is low, concerning only three percent of resolutions, noted SSP’s IR director Charles King. Lorraine Young, president of ICSA UKRIAT, explained that IR and the corporate secretary should seek to collaborate efficiently by understanding their different roles and making the effort to communicate regularly.
Moderator Sue Scholes asked how to engage asset managers ‘without swamping them’, to which Herron replied that stewardship should extend beyond the AGM and that the second half of the year was the best period to build a relationship.
Should IROs be measured on share value asked Lorraine Rees from IR-Connect, moderator of the session on IR as a driver of corporate reputation. ‘Assessment has evolved from hard metrics to long term or short term KPIs such as the number internal conferences or the quality of roadshows,’ said Rupen Shah, Britvic’s finance and IR director, advising IROs to ‘know the conversations that are taking place.’
This view was not shared by Helen Parris from G4S, however, who said she must base 30 percent of her staff’s bonus on quantitative measures such as ‘getting the consensus within a certain range, the results of the Extel survey and more recently getting the firm off the blacklist of certain SRI funds.’ Simon Cole, founder of Reputation Dividend, recommended determining and working on the components of reputation which are going to provide greater returns. He added that in the oil and gas sector reputation can contributes to up to 28 percent of a company’s market cap.
To wrap up the event, delegates had the pleasure of listening to former BBC journalist Stephanie Flanders, now JP Morgan Asset Management’s chief market strategist before enjoying well-deserved drinks, canapés and informal networking at the evening reception.