pull and push >>

There are essentially two ways of communicating with investors: “pull” strategies, where you motivate people to seek something out; and “push” strategies, where you have control of the communication and you send it out to your audience.

The web is an example of a pull strategy, because people need to be induced to find something online. Printed material on the other hand is a push strategy - the company proactively communicates with the entire constituency, and takes more control over how they want to be understood.

IR Landscape shows you how to  use a combination of both pull and push channels to involve, inform and empower investors.

what’s happening offline? >>

Offline, we’re seeing the “technical” annual report stripped right back to bare compliance bones - essentially the financial section with a Directors’ Report and Corporate Governance, produced in black and white and printed in minimal quantities. This is the new iteration of the Annual Report, and a printed version of this still has to be available for those who request it in hard copy form.

However, while this Report fulfils compliance requirements, it also creates a gap in investor communications, because there is still a story that needs to be told to ensure the business is best understood by investors. The need to bridge that gap has led to the creation of a new communications’ channel, the Annual Review.

Early indications are that these Reviews are 16 – 28 pages, and are much less formal in their style than the Report. They tell the back story, outline brief performance and future strategy and outlook, profile some resource talent, and give large-type/highly graphic versions of top line financials

We’re producing such documents for Air New Zealand, Commonwealth Bank of Australia and Lion Nathan already. And because they are not annual reports, they can be legally sent to all shareholders (unless those shareholders specifically ask to be removed from the mailing list).

To fill out that understanding, market-leading companies are using  the cost savings made possible by the new legislation, to communicate with their shareholders more often, mailing them the review twice a year, and sometimes even having a quarterly newsletter sent in between the Annual and Interim Reviews.

The reason is simple. As investor research from one of our clients indicates, while many investors don’t see value in the full traditional Annual Report, they do want to ‘feel as though they matter’ to the company, and want their relationship to be ‘acknowledged’ on a regular basis, as it ‘legitimises, values, and respects’ their role. These findings clearly show the influence of consumer attitudes and values. Regular communications enable public companies to achieve those objectives.

meanwhile, online …

The temptation is to believe that all communications can be achieved online. However, because the internet is a “pull” strategy, relying solely on the web means shareholders must make a conscious effort to access information about the company. The questions are, will they do so, and can you afford that communication risk?

Online is ideal for sourcing information, data, downloading financials etc. It’s also perfect for frequent updates and topicality. However, online has inherent disadvantages from an investor communications’ point of view. It’s not a great medium for telling the stories that make the investment a compelling proposition, for building investor loyalty, for making an investor feel they have a stake in the company, or for totally reassuring about the value, present and projected, of their investment.

It requires much more effort for users to respond to, for example, proxy mailings online. That also means the opportunities for distraction and procrastination are higher than with the traditional model. Evidence from the US shows that only 4 percent of retail shareholders voted in 69 company meetings in 2007. Compare this with 17 percent the previous year when the same companies could not use default electronic delivery. The number of retail shares voting was also down  - by a whopping 50 percent - to 13.3 percent, from 28.0 percent the previous year (source)

Lack of engagement at these levels from large segments of the shareholder population could cost companies the loyalty of key allies and supporters who have voted in line with management recommendations historically.

Also, while online may have become mainstream as a reporting channel, a lot of web-based information delivery needs to be completely reconsidered and upgraded to align fully with the new reporting regime.

That’s because most company’s IR sites simply do not deliver what shareholders are looking for, and don’t appear to have been strategically planned as part of a total investor communications package. With the legislation change now turning the spotlight directly onto the quality of a company’s IR web delivery, companies that don’t lift their game will be found wanting by investors and judged accordingly.