During the research carried out for the Investor Perception Study, Europe 2011, analysts and investors were asked for their views on access to management and reverse roadshows. On the whole, more than 90 per cent of respondents say meeting management is important before they will buy or recommend a stock – but the buy side and the sell side hold very different views on just how important meeting management actually is.
The buy side tends to be more measured about the issue, with several respondents pointing out that it is not always possible to meet with management. This can be either for geographical reasons or because the management team has insufficient time to meet every potential analyst or investor. In those circumstances, a few respondents say a phone call to the CFO would suffice. Some are even happy to forgo management access altogether and rely entirely on the sell side.
By contrast, the great majority of respondents on the sell side consider it to be extremely important to meet senior management before making a stock recommendation. They perceive an initial meeting to be part of their due diligence; vital to their understanding of the company, and a valuable add-on to the marketability of their views.
This initial push to meet management, however, diminishes after the first meeting; thereafter, it is considered less vital to meet the C-suite on a regular basis. Nor is everyone on the sell side clamoring to meet management. As one weary German analyst puts it: ‘I would definitely recommend a stock without meeting management – looking at the numbers, talking to colleagues and speaking with IR departments is enough. It’s so hard to get to see senior management of major European companies.’
On the corporate side, the results of the Investor Perception Study, Europe 2011 and the related Euro Top 100 rankings throw up some conflicting evidence regarding the significance of allowing greater access to management. The contrasting approaches of Nestlé and Novo Nordisk serve as a good example. Nestlé tightly controls access to its top-tier management, whereas the chief financial officer of Novo Nordisk is a regular fixture on the conference circuit. Yet both companies rank highly in this year’s Euro Top 100: the Swiss food and drink company comes in at number two and the Danish diabetes drug manufacturer at number three. Each won multiple awards in 2011 and both featured in the European top 10 last year.
The respondents to this year’s investor perception study describe Novo Nordisk as ‘open’ and ‘shareholder-friendly’. Similarly, Nestlé is singled out for the strength of its website and its ‘perfect’ method of communication. This would suggest that access to management may be important for investors but it is by no means essential in order for a company to have a highly regarded investor relations practice.
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