Every year investors and analysts identify our award winners by voting in a huge perception study. Most of the survey is about good IR, naturally, but respondents jump at the chance to chastise some companies for bad IR. The same complaints come up again and again with surprising consistency. Here are the top 10 from last year’s survey, starting with the number one all-time worst mistake in IR.
1. Bad attitude
Rude, classless, evasive, antagonistic, adversarial, hostile, combative, lethargic, angry and negative: these are all words used by investors and analysts in our awards survey to describe CEOs and CFOs.
For all their Wall Street posturing, investment pros are sensitive flowers. The most common accusation leveled at senior management is arrogant, followed by condescending.
‘They should be private. They don’t give a crap about investors,’ was one comment about a certain cable company.
Attitude from the IR team is a big irritant: ‘I get lip every time I call. I just want information.’
Another investor complained about a power company whose IR team acted like he was disturbing them every time he called – ‘Like they have better things to do.’
Apparently a lot of companies view analysts and investors as a necessary evil. Some management teams are seen as ‘openly angry’, or at least ‘suspicious of the investment community.’ ‘They act as if we are the enemy.’ One investor in the survey squawked of ‘unmitigated contempt.’ Ouch.
2. Poor responsiveness
Never mind strategy, quality of management, guidance, use of technology, or any of the other crucial factors you think make for great IR. If you don’t pick up a ringing phone or respond to emails, your investors and analysts will hate you.
‘They ignore investor calls. I’m still waiting to hear back after their earnings call more than two weeks ago!!! You’d think they would have time NOW to call me back,’ whines one portfolio manager.
Exclamation points around this peeve outnumber the rest combined by around two to one.
‘Horribly unresponsive to phone calls and emails! Takes them forever to respond to requests.’
‘They never call you back!’ ‘
There is a team of two or three people there and it could take days to get a return phone call. It’s ridiculous; the people who run the program should be fired!’
Investors and analysts also notice – and never forget – if you say you’ll get back to them on a specific issue but don’t follow up.
3. Sheer absence of disclosure
Where’s the SEC when you need it? According to analysts and investors, plenty of companies simply don’t have adequate disclosure: ‘Disclosure is terrible. IR’s role seems to be to obfuscate.’
But maybe the SEC is toothless here. Most of the complaints are about proactive best practice that has come to be expected by investors and analysts but that isn’t mandatory – like discussing some kind of near-term or long-term plans and objectives or providing commentary beyond the 10Q and 10K.
One of the most important qualities investors and analysts want in an IRO is knowledge about the company and the sector. So when knowledge is lacking, they notice.
Sometimes the problem is the IR team doesn’t grasp what investors need from the department. Or they’re just not clued in on details: ‘They don’t have a good handle on the business and, more importantly, don’t find people who can answer our questions.’
Other times the IRO isn’t ‘in the loop’ with management and is just a mouthpiece. In one case, an analyst said the IR team at a $30 bn company was what you’d expect to find at a $3 bn company. (Nothing against $3 bn companies, but their IR teams are typically smaller and maybe less senior than at companies 10 times the size). Or maybe the problem is that junior people with limited knowledge handle calls they aren’t prepared for.
5. Lack of access to management
You’d think this would be higher up the priority list. Maybe the problem is less widespread than others. But a lot of companies have no analyst days, don’t do investor conferences, and don’t do one-on-ones with the investment community, and even if they’re making serious returns, they get scathing comments.
‘No questions on calls, no meetings, no access,’ bleats one investor.
6. Playing favourites
A big-name CEO is said to only talk to ‘his bigwig friends’ – just one of many companies playing favourites in terms of both access and responsiveness.
This is often dependent on an analyst’s rating: ‘They’ll give you information if you rate them favourably and purposefully ignore you if you rate them unfavorably.’
But there’s another kind of complaint emerging. Without naming names, IR programs outsourced to a certain consulting firm are accused of being difficult to deal with. ‘The web of relationships with a small group of sell-side firms causes a level of distrust in the investment community that is growing daily,’ wrote one respondent in the survey. According to another, a company’s affiliation with the same IR firm ‘is a huge liability and completely negates any genuine effort to communicate with current and prospective shareholders.’
‘Come up with a story and stick to it.’ Sounds simple, but consistency is one of the most sought-after qualities in any IR program.
Sometimes it’s consistency through time, with a company overpromising and under-delivering.
But more often it’s a matter of mixed messages, with the CFO communicating a different story than the CEO or IRO. In another case: ‘They have four people communicating four different stories: the executive chairman, CEO, CAO and CFO.’
How else to put it? These nominees for the worst IR are corporate America’s Dumb & dumber.
‘They regularly provided misleading information, failed to disclose certain events that were considered by many to be material, and buried key emerging data points in parts of website typically not accessed by the Street,’ remarked an analyst.
In another case, an IRO ‘speaks in platitudes and is either ludicrously guarded or doesn’t know anything.’
9. Salesy hype
Accusations of spin have been on the wane in recent years, but they’re still being heard. ‘Glorified salesmen. All they do is pitch the positives and hype their results.’
In the case of one company, the IRO is great but can’t stop her CEO from advertising the company’s products for the first 45 minutes of quarterly conference calls.
The pitfalls here are unambiguous: setting expectations too high then missing creates a ‘major credibility issue.’
Managements are despised when ‘they tell you what they think we want to hear instead of what’s truly going on.’
Quote. ‘Thieves.’ Unquote. ‘Nuff said.