Dirk 2017: Ethics, boards and fines for IR
IROs often find themselves in an ethical bind, trying to balance a duty to the company on one hand and shareholders on the other. That balancing act is growing more complicated in Germany with the supervisory board increasingly in contact with investors, offering IR another stakeholder to manage.
This situation highlights the challenge IROs face to retain integrity amid competing demands and loyalties. Dirk, the German IR association, made this dilemma the main focus of its 2017 annual conference, entitling the event: ‘What are our values worth? Investor relations: Between an ethical bedrock and a hard bottom line’.
The conference, celebrating its 20th year in 2017, began in the now usual format of a day of events taking place in different Frankfurt locations. Henrik Pontzen, who heads the institutional client group at HSBC Germany and also sits on the ethics panel of the DVFA, the society of professional investors in Germany, delivered a talk on ethics and the capital markets at the DVFA’s HQ.
Later, Andreas Posavac, managing director at Ipreo, revealed the findings of a new survey into German investment trends. ‘The results of the studies specifically showed there is a significant shift to passive, which is not surprising as it is a global trend, and there is a really increased sensitivity to ESG topics,’ he explained to IR Magazine in an interview at the conference.
Other events taking place on the first day included media training classes and IR mentoring sessions with experienced Dirk members, before everyone came together at the Westin Grand Hotel for a drinks reception.
For the second day, all delegates headed to the Westin to hear further keynotes, panel discussions and breakout sessions. Wulf von Schimmelmann, chairman of the board at Deutsche Post, kicked off the day with a wide-ranging discussion about the role of the board and governance trends. He said governance rules are like traffic rules: just because people are following them, it doesn’t mean they are good drivers.
Throughout the day, speakers returned to the issue of the growing interaction between the supervisory board and investors. In Germany’s two-tier system, the supervisory board manages the management board, with the latter having previously had little contact with shareholders.
As that changes, IR may find itself privy to conversations between the supervisory board and investors on issues that concern the management board, such as CEO succession.
‘When you talk about things like replacing a CEO, an IRO might very well find himself or herself between a rock and a hard place, and might know even before the CEO that [the issue] is being looked at,’ Kay Bommer, Dirk’s managing director, told IR Magazine at the conference. ‘So it is not always a nice position to be in, but definitely the extended role of an adviser, not only to the management board but also to the supervisory board, is an extension of what IR functions are experiencing at the moment.’
Among other topics under discussion, Bommer picked out new legal risks for IROs as a key area of focus. ‘We have quite strict regulation now for things like directors’ dealings and ad hoc statements,’ he explained. ‘The fines have gone up and could potentially hit IROs themselves with theoretically six or seven-digit numbers in euros, which puts some of the colleagues here on edge. So we were very happy to have a representative of BaFin, our oversight body in the financial markets, to elaborate a bit on that. ‘
The afternoon saw a mix of smaller sessions covering topics from digital IR to investor marketing and regulation. Mifid II proved one of the most popular topics: a session discussing the results of a new survey on the predicted impact of the European regulation was standing-room only and saw a few unlucky delegates turned away for lack of space.
‘Mifid II is changing the landscape on where we get research and the landscape of corporate access and so these are all things in the flow,’ said Bommer. ‘We do not know what that will look like and how the brokers will mold their models from January 2018 onwards. We are very keen on hearing what their view on these things are.
‘There are a lot of things that are constantly changing the landscape in which IR is working and that is what our conference is for: a lot of networking, exchanging views and learning from each other.’