Opinion: What a non-executive director wants from IR
As I do with everything in my life, I am going to start with: Why? Why is the IR function important for a me as a non-executive director (Ned)? I then want to address how the IR team can help me achieve my purpose and objectives as a Ned, using one of my board positions – discoverIE – to illustrate these needs and requirements.
The purpose of discoverIE is to make a positive difference to the planet and people’s lives. It achieves this by creating innovative electronic products for equipment used in sustainable growth sectors of renewable energy, medical, transportation and industrial and connectivity.
My role as a Ned is to support the management of the company in achieving this purpose in a way that is in the best interests of the business, its shareholders and other stakeholders. So, how does IR at discoverIE help me carry out my role?
Let’s start with the sort of information my board director colleagues and I expect from the IR team:
- A structured plan for communicating with investors that should include where I might be asked to engage directly with shareholders. For example, I found it very constructive and directional when I had a call with one of our impact investors. It gave me a good sense of what we as a company are doing right around ESG and where we could do more
- Up-to-date shareholder register movements and clear explanations for such movements. This is particularly important when there are significant additions or other movements
- Share price performance relative to our sector and our peer group
- Short positions on our shares compared with our sector
- Consensus numbers by analyst – and not just the average – so we get a better idea of the range of forecasts. I also expect the IR team to be actively working on building coverage
- Feedback on communications with investors
- Information on what types of institutional investors are interested in the company
- Distillation of feedback and themes from investors and, separately, from analysts following a regulatory news announcement.
How – and how often
The IR team then needs to consider how to best present this information to us and how often:
- Considering the amount of information that needs to be read and properly digested before each board meeting, we appreciate when the IR section of our board papers (as with the rest of the pack) is in an easily readable and understood format
- Alongside our IR manager’s updates to the board, the weekly reports from our broker make it easy to look at share price, liquidity and market updates between board meetings
- What I have appreciated the most at the discoverIE board meetings, is our IR manager having a dedicated (and unhurried) slot to answer our questions. This enables her to elaborate on any significant issues presented in the board pack and to update us on anything else that has happened between when we received the board pack and the day of the board meeting. We all know, in this fast-changing world, that this is critical.
How the board uses IR information
Having the right information – in the most user-friendly format – is one thing. What we, as board directors, then do with the information provided is another. Accurate, well-analyzed and clear information from the IR team helps us to determine and satisfy ourselves that:
- Investors are being communicated with accurately and frequently – and being listened to
- There is sufficient activity by the IR team, the CEO and CFO to raise awareness and create interest in our company
- The business is being represented and marketed among the global investment community
- The market’s expectations of our performance and earnings are not materially different from our internal forecasts
- We are focusing on the right issues including what we produce, how we go about our business, global trends that affect our sector and our business, and whether we have identified the right risks to our business and are managing these effectively.
Choosing the right KPIs
Finally, there is the question of which KPIs are useful in determining the effectiveness of the IR function. It is important to mention that these KPIs should be based on what the company is trying to achieve at the specific point in time.
The KPIs could include:
- Share price performance, valuations and premium rating relative to indices, our sector and our peer group over a period of time to monitor quality and value
- Trading liquidity
- Increase in and diversity of shareholder base in terms of geography and type
- The number of investor meetings held and the quality of investors keen to meet with management or with individual board members
- Feedback from analysts and investors.
Increasingly, we are seeing that investors are just as interested in how a company goes about making profit as they are in how much profit a company makes. For example, there is an increasing interest in the ESG aspects of a business.
It is therefore important that, as a board, we have all the necessary information to holistically meet our investors’ expectations – and the IR function is critical in ensuring we meet this obligation.
Rosalind Kainyah is an experienced non-executive director, strategic adviser and speaker on sustainability risk