Learnings from CIRI 2016
Last week nearly 200 delegates from across Canada converged on Quebec City for CIRI’s 29th Annual Investor Relations Conference. ‘That’s quite a feat given current market conditions,’ says Yvette Lokker, president and CEO of CIRI.
‘Given the capital markets activity here over the past few years and what we are dealing with in the oil patch and our depreciating Canadian dollar, Canadian IR professionals are facing some of the biggest challenges of any IROs globally,’ comments Chaya Cooperberg, vice president of IR and corporate communications at Progressive Waste Solutions. ‘To meet these challenges we can all benefit from each other’s experience because we all need to up our game.’
This year’s programming theme, ‘360 [degrees] of IR: creating value for the long term’, reflected the strategic role IROs have in building investor trust against a backdrop of difficult market conditions and cyclical industries.
Fittingly, following a settling-in on Sunday where early-bird IROs got to soak up some of the historic city’s charm (including the conference venue itself, the majestic Chateau Frontenac), Monday morning kicked off with a talk by the leader of a 20-year-old oil and gas firm that has delivered long-term value to shareholders throughout numerous commodity cycles.
Unique among Canadian firms, ARC’s governance committee is led by David Carey, senior vice president of capital markets, who is responsible for all facets of IR, communications and corporate governance. ‘That’s an important link for our shareholders,’ remarked Stadnyk. ‘And it’s pretty clear there is a direct link from investor confidence to valuation.’
The day continued with break-out sessions on communicating during challenging economic times, an exploration of the various ways IR and corporate communications teams can integrate their work, and a survey of the key governance concerns currently keeping directors and investors up at night.
‘Compensation is a topic near and dear to everyone’s heart,’ said Gord Pridham, principal of Edgewater Capital and chair of waste management company Newalta Corporation. ‘I can tell you that when you get all the committee reports, [compensation] is the one where everybody in the boardroom sits up and listens.’
Faced with growing investor perception of a disconnect between share price and management pay, Newalta’s board has begun to directly reach out to its top shareholders. ‘The exercise has been extremely well received,’ noted Pridham. ‘These are strategic discussions where, for instance, [investors] get the opportunity to hear directly from the board about its compensation philosophy.
So far, Newalta's IRO Anne Plasterer does not participate in these meetings beyond arranging them. But that may change. ‘This conference has triggered some interesting thinking for me,' commented Pridham. 'The IRO's interface with our board is probably not as great as it could or should be. I think there is great value in the IRO being the prime communicator with the board.'
A matter of honor
Over lunch, delegates honored several distinguished IROs for their contribution to the profession, their organizations and their peers. Colleen Vancha, president and CEO of Creative Advantage Consulting, George Kesteven, manager of corporate and investor relations at Sterling Resources, Jo Mira Clodman, partner at Clodman Hecht Communications, and Isabelle Adjahi, vice president of IR & corporate communications at WSP Global all joined the prestigious ranks of CIRI Fellow.
Meanwhile, Greg Waller, vice president of IR & strategic analysis at Teck Resources, became the seventh recipient of the Belle Mulligan Award for Leadership in Investor Relations while Shirley Chénier took home a remarkable soapstone carving as the 28th recipient of the Award for Excellence in Investor Relations.
Not enough information
Afternoon sessions offered more insight into how IROs can gain traction with their boards, tips on investor presentations based on research jointly conducted by CIRI and Corbin Perception, and revelations from a survey of Canadian institutional investors that point to a yawning chasm between the ESG information companies are providing and what Canadian investors want to know.
‘The message from Canadian institutions was clear: they do consider ESG issues when making investment decisions,’ said John Truzzolino, managing director of global compliance services at RR Donnelley, which sponsored the survey in conjunction with Toronto-based governance and shareholder communications firm SimpleLogic. Still, added Truzzolino, only 30 percent of respondents find the ESG information companies provide good enough to help them assess its materiality to the company’s business.
‘What is missing is context,’ said Isabelle Laprise, senior adviser for responsible investment at pension fund manager Caisse de dépôt et placement du Québec. ‘I want to know why ESG matters. Why are certain factors being discussed? What are the financial considerations and why is this relevant in order to create long-term value?’
Laprise said she looks for a CEO letter to help her understand how ESG is integrated into a company’s vision, values and strategy. She also encouraged firms to provide graphic data.
For Jennifer Coulson, senior manager of ESG integration at British Columbia Investment Management Corporation, it’s all about the data. ‘We must have some data to benchmark companies against their peers,’ she said. ‘Like financial analysts have models, we also have ESG models and to build them we need that data.’ Coulson looks for summary data tables to aid her research and noted that while some companies do that very well, ‘others are missing it.’
Given the thin gruel currently offered up by some companies, survey results show 75 percent of respondents prefer to get ESG information from third parties ‒ yet even then complain these sources rarely provide what they need to understand materiality.
The day’s business concluded with a lively discussion by leading IROs from a variety of industry sectors on how each manages the IR message in the face of stiff economic headwinds.
Light at the end of the tunnel?
Tuesday’s agenda included sessions on IR’s role in corporate development, ways for IROs to better understand their company’s trading activity, a regulatory update, targeting shareholders for an effective roadshow, and a ‘power lunch’ where IROs and fund managers shared thoughts on the issues driving engagement.
But perhaps the most entertaining (and at the same time terrifying) information was presented by Bloomberg Intelligence economist Richard Yamarone. The session was titled ‘Today’s economy ‒ when do we see the light?’ Yamarone’s answer: Don’t hold your breath.
Yamarone’s dire warning is partly based on his analysis of various economic indicators, the upshot of which can be summarized by his observation that ‘people just aren’t making the money they used to’. In addition, unlike some other professionals in his field, Yamarone extends his information environment beyond numbers on a page. He is the creator of the Bloomberg Orange Book, a compilation of macroeconomic anecdotes largely gleaned from quarterly conference calls. He also, he says, drinks a lot in hotel bars.
‘As the famous economist Yogi Berra said, You can observe a lot just by watching,’ noted Yamarone. ‘This I find much more valuable than any of the economic data or charts and things like that. Use data as a guide ‒ but listen to what people are saying.’ And, says Yaramone, what they are saying is that middle-class consumers, once the Atlas holding aloft the economy, are buckling. As a result, Yaramone predicts (official) recession in both Canada and the US within a year. His investment portfolio consists entirely of US treasuries.
If Yamarone is correct, telling a story based on long-term value creation may be something IROs will get to perfect for years to come.