Establishing effective investor relations

Navigating shareholder and investor relations in a high pressure, fast-changing business environment forms a critical part of running a listed business – and comes with a plethora of challenges and opportunities for management to develop lasting strategic communications plans.

The inaugural Business Day Investor Relations & Strategic Communications Conference, hosted at the JSE this week, aimed to thrash out these issues with business leaders to give a deeper understanding of what organisations and shareholders require for a symbiotic relationship. “On the whole, it’s not difficult to manage relations with investors: business leaders need to be honest and consistent in what they say,” said Adrian Gore, founder and CEO of the Discovery Group.

Though that might seem simplistic, Discovery Group CFO Richard Farber agreed that the investment community, by and large, understands that there are certain aspects of the business that cannot be disclosed, and that it is a professional relationship coupled with respect on both sides. Honesty, combined with a clear and consistent message, is predominantly what shareholders demand of the relationship.

Within that framework, Gore noted, the role of constructive criticism cannot be undermined, as it adds value and can be used to improve the organisation’s business strategy. Companies that are able to respond to productive, intellectual criticism – while maintaining a balance between being patronising and using legalese that the majority of shareholders will not understand – are those that can maintain positive investor relations, even during a crisis.

There can be no better example of the importance of strategic communications during a crisis than in the volatile mining industry. Ongoing labour issues, among other problems, have plagued the sector since 2012, when the Marikana massacre led to widespread strikes and unrest. What the incidents have taught mining and business leaders, said AngloGold Ashanti’s senior vice-president of investor relations & group communications, Stewart Bailey, is to engage with shareholders and media regardless of what is unfolding and that there can be only one version of the truth.

“Experience illustrates better retention of key shareholders who are well-informed through crises,” Bailey explained. “Shareholders don’t want to avoid risk, they simply want to know how it is being managed.”

RMB Morgan Stanley’s Howard Penny agreed that shareholders and analysts alike are simply trying to understand the organisation’s story in order to make the wisest investment decisions.

What hampers good decisions is when one has too little information, so company management providing shareholders with relevant business and financial information is essential. “We live and operate in a risky environment with no guarantees, so it’s in the interests of organisations to be as open as possible in order to drive confidence in shareholders that the company will be able to respond to crises and disruptors,” said  Kim Bromfield, senior executive of corporate & public sector reporting at SAICA.

The big take-out: The key to sustainable investor relations is a clear, consistent and cohesive message from the company to shareholders, participants said at the inaugural Business Day Investor Relations & Strategic Communications Conference.