At a recent IR Magazine think tank, one of the key takeaways was related to transparency in investor relations. The magazine reported that “IR experts re-emphasised the importance of clear communication and never being in a position where ‘you want to say you’re doing something that you’re not’.”
Investors look to the issuers in which they invest to be honest and open with them during their interactions to help them make the best-informed decisions about where to place their capital. This article explores this topic of transparency, using shareholder communications examples to illustrate how issuers can earn the trust of investors.
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Your shareholder communications are your direct route to talk to investors. They are your chance to share the ‘one source of truth’ with them. In a world where rumours and misinformation can spread quickly, the value of that direct interaction cannot be underestimated.
When you are transparent, you control the narrative and can provide context and solutions to issues that might arrive. This is not the case if an investor hears information about your business on social media or the industry press.
In order for your direct shareholder communication to be valued by investors, you must be truthful at all times. If your audience does not feel it can trust your communications or senses that you are hiding something, it could turn to other news sources over which you have no right to reply.
Transparency is also the cornerstone of ESG communication. Investors are wary of greenwashing from companies purposefully obfuscating their reporting on environmental matters to appear more responsible and sustainable. Being able to prove that your environmental, social and governance non-financial reporting requires shareholders to trust your communications.
There are many effective methods to communicate with shareholders. Here are some examples and the reasons why they should form part of your IR strategy.
| Element | Effectiveness |
| Annual reports | Provides an opportunity not only to report on financial performance but also to give context for the results and engage investors with the activities undertaken over the previous 12 months. |
| Proxy statements | Communicating with shareholders about how they can vote at AGMs, as well as information on executive remuneration and other important topics, is essential for transparency, helping inform their decision-making. |
| Investor relations websites | Your IR website is a central location on which to host all the relevant information your investors need. It is easy to access and can encourage further outreach with carefully planned calls to action. |
| Shareholder meetings | When shareholders have the opportunity to meet your executive team in person or at a virtual meeting, it allows them to gain direct and transparent answers to their questions. |
| Social media | With an estimated 5.85 billion people expected to be using social media by 2027, it is the ideal place to engage your shareholders with bite-sized information. |
| Press releases | Press releases help issuers direct the news agenda and give their side of the story to the industry press and the mainstream media, too, in some cases. |
| Direct mail | Although we live in a digital world, some investors appreciate receiving physical documents in the post. Direct mail allows you to create targeted campaigns to engage these shareholders. |
| Crisis communication | The aim of crisis communication is to reduce the risk of uncertainty when something goes wrong. Your crisis communication plan helps you provide transparency and reassurance to investors as soon as possible. |
| Conferences and roadshows | Meeting investors during non-deal roadshows and conferences signals that the company and its management value meeting investors so much that they will dedicate time in their schedule to interact. |
| Site visits | Inviting investors to site visits helps shareholders gain an insight into the workings of the company, its products and its supply chain. They show openness and transparency, as well as helping improve CSR efforts, according to research. |
You have to earn trust with your shareholders rather than expecting it as part of the status quo. And the way to achieve this is to implement policies and procedures that determine how and when you will communicate with your investors. Regular communication builds a connection that shows that the organisation values the investor and fostering trust.
Your communications schedule needs to strike a balance. Too few interactions and investors may feel disengaged, which will prevent them from forming that trust bond. But too many engagements and they can become overwhelmed and ignore what seems like clutter in their inbox.
Another key element in building trust and credibility is ensuring that you respond to shareholder questions and feedback. This creates interaction and shows the investor that you are listening to them.
Dedicating time and effort to accessibility in your communications broadcasts a strong signal that you are dedicated to transparency. And there are a number of different ways in which this accessibility manifests. Here are some examples:
- Using plain language that speaks directly to your audience. They want to understand what you are saying and absorb the key points as quickly as possible. They do not have time to read through vast tracts of florid prose and try to decipher what you are saying.
- Avoid technical jargon and buzzwords. Although your investors will have researched the industry, they might not be as versed in the insider language as those who work in that sector every day. With the rise of retail investors, this is ever more important.
- Consider shareholders with disabilities when formulating your strategy. This can range from using alt text on social media images so that blind investors can understand what you have posted to ensuring that the venues you use for shareholder meetings are accessible to wheelchair users.
Scheduling periodic virtual meetings with key investors is another way to increase accessibility to the organisation.
Shareholders have a vested interest in the performance of the business and how it affects their investment. This is why this is an essential area in which to concentrate your efforts if you want to be transparent and increase trust.
You should provide updates on the organisation’s financial performance, developments and other key information in good time so that they do not have to search elsewhere for the details. This prompt disclosure shows your commitment to keeping investors informed and up-to-speed.
As well as being timely, your outreach must be open and not just concentrate on the positives. Including the risks and uncertainties shows transparency and builds trust. You can also then communicate the measures the organisation has in place to mitigate risks and navigate turbulent market conditions.
Displaying your share price on your IR website is another route to keeping your shareholders informed about company performance. Use My Share Price Live to customise the display of your share price and provide the information your investors need in an easily accessible format.
Make the most of the “mirror effect”
Imagine you are holding a mirror in front of your shareholders, registering their movements and observing their reactions to better understand and predict their behaviour. This is the “mirror effect”.
An issuer’s interactions with investors can provide an opportunity for companies to collect feedback from them, often obtaining valuable insights and shareholders’ informed opinion on industry trends and the competitive environment.
Leverage technology
Displaying your share price is also an example of how to leverage the available technology to engage your shareholders. It acts as a resource that they can find easily on your IR website, allowing them to dig down into the detail of the analytics to keep them informed. This transparency is essential when engaging investors.
Another way that technology can facilitate transparent shareholder communication is through ensuring your website and social media are updated on a regular basis. These are effective touchpoints for investors looking for information, so you should ensure they are as useful and valuable as possible.
Allowing visitors to sign up for electronic meeting notices also streamlines the process of communicating with shareholders about forthcoming events.
- Spanish bank Santander introduced a virtual shareholder service allowing shareholders to request a virtual meeting with its IR team. The issuer encourages investors to ask questions and make requests through this virtual service channel.
- Unilever is committed to presenting its sustainability strategy in detail for shareholders to analyse. In its sustainability reporting centre, it explains its reporting standard, goals, rankings and ratings and historical performance data.
- Addressing negative feedback must be handled sensitively. Listen to the opinions and respond constructively, demonstrating that you will take their thoughts on board.
- Engaging diverse shareholders is challenging, especially as retail investors make up more of your investor profile. This means that you have to utilise a variety of platforms to share your message.
- Adapting to new communication channels is a reality of the life of an IRO in the modern age. New platforms and ways of engaging are being created all the time, meaning that you have to stay ahead of the game and adapt to use the channels that your investors feel most comfortable with.
- Communicating bad news, such as an unsuccessful earnings season or a lowering share price, must be handled proactively. You should be honest but also explain the reasoning behind the results and the steps the organisation has taken to rectify the situation.
FAQ
The investor relations team handles the majority of shareholder communication within a company. At investor roadshows and other shareholder meetings, the chair, CEO and CFO are likely to interact with investors.
Electronic communication is now the default for many people and shareholder communication should reflect that. Emails, social media, messaging apps and other digital platforms deliver messages straight away and allow for enhanced interaction between the organisation and its investors.
The board is accountable for shareholder relations, and it should oversee communication strategy to ensure the organisation is effective in its outreach.
ConclusionThese shareholder communications examples and best practices show the importance of being transparent in your investor relations outreach. To create a bond of trust between issuer and investor, you should discuss both the good news and the bad, as well as relevant information on activities within the company. Use a wide range of media to ensure your communications are as accessible as possible and remember to listen as well as address your investors. Simple tasks, such as displaying your share price on your IR website and allowing investors to use it to discover performance data, feed into this transparent approach to IR. Use My Share Price Live to add your share price data to your website in a customisable widget right now. |
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