Talking to some of the winners from the first Investor Relations Magazine Canada Awards
It was a night to remember for the financial community in Toronto. According to Allelix's IRO Jerry Ormiston, glitz and glamor is not their usual fare. 'Typical Canadian events are quiet and reserved. There might be a low-key dinner and a bit of networking but then people will make their way home. This was different. It was glamorous. It was prestigious. It gave an upbeat viewpoint of our activities, something that is important for IR as well as the financial community at large. The bottom line was it was fun.'
Ormiston, who went home with the award for best IRO (for a company under $1 bn), was not the only happy punter on the night of February 26. Over 300 people turned up from all over Canada for the gala event at the Four Seasons Hotel. In retrospect, many said they had been unsure of what they would find. Jane Fielding of BCE, honored for its communications with the retail market, was frankly surprised at the turnout. 'Canada is a very large country and people aren't always prepared to travel such great distances. It's also a time of budget cuts.'
Joyce Davies said she and her colleagues at Barrick Gold shared this initial skepticism. 'It's a very busy time for everyone in investor relations at the moment, what with year-end results and publication of the annual report coming up. Add that to the fact that this was a new event in Canada and it's pretty impressive how many IROs and senior management showed up.'
Most of all, perhaps, the turnout was a testament to the enormous growth in the importance of investor relations in Canada over the last few years. 'The success of the night confirmed the stature and maturity that the IR profession has now reached in Canada,' comments Joanne Brown, president and CEO of the Canadian Investor Relations Institute (Ciri), which sponsored the Grand Prix for Best Overall Investor Relations. According to Brown, Ciri has seen more than a 20 percent increase in its membership in each of the past five years. 'The value of investor relations to the investment community has been recognized by the awards.'
That growth was also clearly demonstrated in the research carried out to find the winners. Of the 250 fund managers, analysts and brokers questioned, 80 percent said the quality of investor relations programs had improved over the last five years while another 81 percent felt its importance would increase in the next five. According to Derek Redwood of Rushmore Judge, who carried out the research, if there was any hesitation in answering this question it had to do with whether it was possible for investor relations to be any more important than it already is.
The research uncovered some key IR trends in Canada, most notably the need for investors to have direct management contact. Ninety-five percent of respondents rated this as the most important feature of an investor relations program, followed closely by timeliness of information and full disclosure of company information. 'Access to management is critical. The investor relations person must know his audience and make decisions as to what is important to me and what isn't,' said one respondent. 'I would like more exposure to senior management. I get more comfort when senior management from various operations get involved,' commented another.
Great divide
According to Redwood, this is an issue that divides large and small cap companies in Canada. 'At a lot of small caps in Canada, investors still communicate mostly with the CFO, who they can call directly. In many cases we had problems getting specific names of IROs from respondents. If they can talk to management then the IRO isn't really an issue. With larger caps it's different. They realize these people are stretched in a lot of different directions so they're much more willing to talk to IR people. It's the trade-off they make if they want more timely information, although this doesn't mean they rate talking to management any less highly.'
One company that seems to negotiate the difficulty of offering direct management contact without compromising on timeliness, is Barrick Gold. It won the awards for best senior management communications and best IRO as well as the Ciri Grand Prix for Best Overall Investor Relations (for a company over $1 bn). According to the Canadian investment community, much of Barrick's excellence in the field is testimony to the talents of Belle Mulligan, the company's IRO. 'Belle Mulligan adds 10 percent to the value of Barrick's stock,' said one respondent to the research.
Modestly, Mulligan stresses that her work is only one part of a team effort. 'The key to our success is that there is a commitment to investor relations throughout the company from the chairman down. IR is considered to be a senior management function and an essential part of the company's overall strategy.'
John Carrington, the company's president, who spoke on the night of the awards, reiterated this, describing IR at Barrick as 'a religion'. For investors, this means they get the management contact they want. 'I can have someone on the phone, put them on hold and then call up someone in operations and say look, there's someone I really think you should talk to, and put them straight through,' says Mulligan.
Mulligan herself offers an in-depth knowledge of the workings of the company. 'I pride myself on knowing the numbers. Yes, communication skills are important, but you've got to have a strong sense of the business in order to be able to provide investors with the level of analysis they want,' she comments.
This need for the IRO to demonstrate a real understanding of the business was also an important element in Newbridge Network Corporation's second place ranking both for best overall investor relations and for best IRO. 'John Lawlor is extremely knowledgeable in terms of the industry and the company. It's a really complex business and he presents the story in a way that makes sense to a generalist like me,' said one respondent.
However, some at the awards ceremony seemed less appreciative of Newbridge's talents. Indeed there were signs of surprise when the company picked up the prizes for best use of the internet and conferencing (for a company over $1 bn), and signs of relief when Barrick pipped it to the post for the Grand Prix. The surprise was no doubt connected to the announcement of Newbridge's $144.3 mn loss in the quarter ended February 1. Then there was the stock price plunge earlier in the month, to a low of $27.75 from $95 last October. But according to respondents to the survey, one of the most important elements of an effective IR program is to communicate all a company's news, good and bad, something they have confidence John Lawlor does with real candor.
'We're going through a product transition at the moment, and sometimes when you're moving from an old to a new system you hit a speed bump,' explains Lawlor. 'I think the investment community understands that fundamentally Newbridge is a very strong company with an excellent product and that we'll weather this bump.'
Crisis skills
Another company that gained recognition for its crisis management skills was Wascana Energy, which won the award for best IR during a contested takeover for its handling of a hostile bid from Talisman and its subsequent acceptance of a friendly deal with Occidental Petroleum. IRO Tim Jeffrey puts his success in handling the crisis down to close communication with the company's investors. 'We canvassed the investment community immediately after the bid was made to make sure that they understood what was going on,' says Jeffrey. But the company also listened to its shareholders' reactions. 'We didn't come out and say, This is what we're going to do. We considered the whole gamut of options and how they fitted in with our shareholders' needs.' The incident demonstrated to Lambert what an essential function IR is. 'We were able to make the right decisions because we had a real understanding of why our shareholders hold their stock and therefore what they want from the company,' he explains.
Communicating bad news to their investors has not been a problem of late for Michael Lambert and Garth Mitchell, respectively CFO and CEO and president of Mark's Work Wearhouse, winner of the Grand Prix for Best Overall Investor Relations (for a company under $1 bn). But that doesn't mean they're getting complacent. 'We take IR very seriously,' Lambert comments. Indeed all investor relations functions at the company are carried out by senior management rather than by a separate investor relations department. 'We think the caliber of answers people get from us is much better than they would be from an intermediary. What singles us out is that we're open and forthcoming about everything we do,' he adds.
Other companies were recognized for the improvements they've made in the quality of their investor relations programs. Most notably, Thomson Corporation's IRO John Kechejian walked away with the prize for most improved IR. Some of the analysts were less than sanguine about their reasons for voting for Thomson. 'Thomson has improved the most in my judgement because it only had one way to go and that was up! They started from a very low level.'
Kechejian, who was appointed to the company last June, is very frank about the company's recent introduction to investor relations. 'I was the first person at Thomson to really own the IR function and that's made the real difference. A company which has the fourth largest market cap in Canada needs someone to provide really good communication with its investors.'
The success of the first Investor Relations Magazine Canada Awards seems to indicate a recognition that good communication with investors is something all companies in Canada, large and small, need to provide. And the caliber of the winners strongly suggests that many are already doing it.
Why the winners won
So how do we decide who actually wins? All the glitz and glamor of the night may give Investor Relations Magazine Awards ceremonies a reputation for being the Oscars of the IR world, but this shouldn't detract from the seriousness of the event. These are not beauty parades. The winners are chosen by the people whose opinions really count: the portfolio managers, securities analysts and retail brokers on the receiving end of IR.
The first Investor Relations Magazine Canada Awards were no exception. We commissioned Rushmore Judge, a Toronto-based research firm, to ask the questions for us and between October and December last year, they interviewed 250 analysts and fund managers, across a range of sectors and specializations.
Commentators were asked to nominate three companies in each of the categories in which awards were to be presented. The companies were ranked in order of best, second best and third best and points were given based on these rankings. A composite of scores in key categories was then used in combination with a separate question about who had the best overall investor relations to rank companies for the Grand Prix.
The report of the survey is published at C$200. To order a copy, call Cheryle Hill in New York
(Tel: +1 212 425 9649 Fax: +1 212 425 7589)
or Rebekah Bawcutt in London
(Tel: +44 171 637 3579 Fax: +44 171 637 3594)
The Winners
- Ciri Grand Prix for Best Overall Investor Relations
- Company over $1bn: Barrick Gold
- Company under $1bn: Mark's Work Wearhouse
- Best Investor Relations Officer
- Company over $1bn: Barrick Gold
- Company under $1bn: Allelix Biopharmaceuticals and Meridian Gold
- Most Improved Investor Relations
- Thomson Corp
- Best Senior Management Communications
- Barrick Gold and Northern Telecom
- Best Corporate Governance
- Bank of Montreal
- Best IR in a Contested Takeover
- Wascana Energy
- Best Financial Reporting
- Placer Dome
- Best Use of the Internet for IR
- Newbridge Networks
- Best Use of Conferencing
- Company over $1bn: Newbridge Networks
- Company under $1bn: Lumonics
- Best Investment Community Meetings
- Company over $1bn: Bombardier
- Company under $1bn: Promis Systems
- Best Environmental Reporting
- Noranda
- Best Communication with the Retail Market
- BCE
- Best Investor Relations in the US Market
- Canadian Pacific