African Investor Relations » IR Tips

Demeaning your shareholders

AfricanisCool — Wed, 08 Jun 2011 06:07:05 +0000

African listed company executives generally want nothing to do with smaller shareholders. Dealing with smaller shareholders who are ignorant and poor is costly and a “waste of time”. There’s another slant however. An innovative view that should be considered by any listed company given the way the Internet is changing this world. Please see the interesting article below on how to engage your shareholder base in a respectful manner.

These shareholders that are “irrelevant” and a “waste of time” are human. They have feelings, emotions and can communicate with other humans about the way companies and brands treat them. This communication is enhanced by the new technological era to the extent that this communication can go global in seconds. In short companies cannot categorise shareholders as shareholders, they are people with many interests in the listed company in which they are a shareholder. Call them “stakeholders” people that are:-

Interested that the company is acting responsibly in the community – this is more important in Africa where the degree of difference in wealth is very high
Interested in the services and products offered by the company – Africa’s markets are competitive
Interested in their dividend – African retail shareholders are almost singly focused on their dividends
Interested in companies paying taxes and employing people – this is related to the first point above

The article below, on how listed companies in the USA use a free Google open forum to solicit questions from shareholders at the AGM is an innovative tool that could be used by listed companies in Africa to communicate with shareholders (stakeholders) responsibly. But there are some key questions on how to structure this interaction effectively. There are three key issues that a listed company executive needs to consider when structuring an initiative like this:-

Is the forum public or private?
Are forum participants identified or anonymous?
Is the forum limited to shareholders or anyone?

Here are the answers to how to structure your online shareholder forum (a summary of what Dominic Jones says below):-

The forum should be public
The forum participants should be identified
The forum should be open to anyone – shareholders are not identified as such, they are identified has humans interested in your company. Unclassified or tainted by perception.

Here are extracts of insight from Dominic Jones, world leader in online IR from the article below:-

“Small shareholders have no incentive to participate in the forum because they will perceive that anything they say will not be taken seriously. This is because everyone is classified by the size of their shareholding. They’re not people, they’re just a holding size. …………. it reflects their worldview where everyone is just an account. Social media, of which shareholder forums are one form, is about people interacting with people.”

How about anonymity?

“ anonymity is not conducive to serious discussion on forums. Usually, people who are anonymous have something to hide and are less accountable for what they say. It would have been much better not to show holding ranges and instead allow users to create a profile and identify themselves, if that is what they wanted. Anyone who chose to be anonymous would not be taken seriously by other participants”

Check out Google moderator here. This is an excellent tool for African listed companies to combat the apathy in dealing with their shareholders. Think out the box, do something different and innovative that will double up as some seriously good PR.

But why should a listed company executive bother with an initiative of this nature?

Humans are human. They will hold the listed company in high regard – their corporate reputation improves, shareholders products and spread the word.
Foreign investors will appreciate this – they get to be heard – and get an excellent feel for what’s being said about the company. It is more than likely that they as foreigners have not had interaction with management and this may be a welcome channel to communicate
Its good corporate governance and will result in some good PR
The feedback that you receive might actually help corporate strategy

If you are in anyway skeptical about the foundation upon which this article is written then ask yourself why listed companies and corporates worldwide are engaging stakeholders directly with Facebook and Twitter etc.

Here is Dominic’s article below:-

Attributed to Dominic Jones, IR Web Report‘s founder and an online investor relations consultant.

A GROWING number of companies are using the web to give their shareholders opportunities to pose questions to directors and executives at their annual meetings.

Since many shareholders are unable to attend meetings in person, the move by companies to use the web could help to reengage apathetic retail stockholders in the annual meeting process. At many U.S. company meetings last year, less than 5% of retail shareholder accounts participated.

Google Inc. (NASDAQ: GOOG) recently opened a forum for stockholders to submit questions and vote for other shareholders’ submissions. The most popular questions will be put to the board and management at the company’s annual meeting on May 7.

To filter the questions, the Internet giant is using Google Moderator, a free application that it has long used for internal meetings. The White House used the same application for a Town Hall with President Obama last month.

Anyone with a Google account is able to submit and vote on questions for the company’s annual meeting.

One of the least tech savvy companies, Warren Buffett’s Berkshire Hathaway (NYSE: BKR.A, BKR.B), broke with tradition this year to include an Internet component for its May 2 annual meeting. The company asked shareholders to email questions to leading journalists, who will choose which questions to ask at the meeting. A draw will also be held for shareholders in attendance who want to ask questions.

In the UK, Barclays plc (NYSE: BCS) included a form in its online annual report for investors to submit questions to the company. They are alsoinvited to email questions to be asked at the meeting. Similarly, UK-based insurer Aviva plc (LON:AV) provides an online form for shareholders to submit questions for its upcoming meeting.

For several years, International Business Machines Corp. (NYSE: IBM) has invited shareholders to submit annual meeting questions online and thenpublished answers after the meeting. It is doing the same thing for its 2009 meeting on April 28. Exxon Mobil Corp. (NYSE: XOM) has followed a similar process for the past two years, but does not post answers to questions online.

`”Your View” is a main section in Barclays’ online annual report.

As we were first to report, this year Intel Corporation (NASDAQ: INTC) will become the first company to permit live voting at its annual meeting via the web. Shareholders will also be able to ask questions online during the meeting.

Last week, Intel launched a closed shareholder forum, which is built on the Investor Network platform of Broadridge Financial Solutions (NYSE: BR). I suspect Intel’s forum will be a flop because it is not public, because it demeans retail shareholders, and because it’s not clear what investors are signing up for.

Of all the approaches companies are taking, I like Google’s the most. It’s open, transparent and relies on the crowd to determine which are the most important questions. Best of all, any company can use the same approach for free.

Finally, let me just place on record that inviting questions from shareholders who are unable to attend the annual meeting is not new. Australian companies such as BHP Billiton and Commonwealth Bank have long included a printed question card with their meeting materials for shareholders to mail back to the company.

“Doing” annual reports in Africa. It’s not for sissies

AfricanisCool — Tue, 31 May 2011 16:06:57 +0000

Life is pretty easy in the First World. Good food, restaurants, lots of staff, public transport, good governance, rock concerts, high standard of living and all those things. In these environments reside pampered investor relations practitioners, ones that come up with nice, fluffy IR tips. Tips full of cliches. In Africa, however there are real men, dealing with real issues, fighting a fight that pampered IR consultants have forgotten long ago.

What’s the difference between between the two? I outline some soft annual report tips first, then the tips from real men, recommendations containing the stuff that counts in Africa.

Cliche 1: “Use one voice” – collaborate an effective report including contributions from a wide range of operating and reporting focuses. Ensure you pull together a document that speaks in one voice including all management and the information it reports. Deliver consistent messaging.

Cliche 2: “Shorten it” – Repetition isn’t needed. Give investors more of what is important, such as strategy, cash flow, acquisitions, and debt and market conditions.

Cliche 3: “Highlight the real and relevant” – Reflect the culture of your organisation, its purpose and values. Set a tone showing the true nature of your company such as straight to the point or quirky. Engage your audience with what you are thinking providing relevant information which allows for clear assessment of business performance and various segments.

Cliche 4: “Connect the facts” – Show your audience the big picture, put performance in context. Include your company’s goals and how you plan to achieve them. Your business model is important. Try Integrate genuine, meaningful reporting on important information to stakeholders and society. Mean what you say.

Cliche 5: “Use backbone” – Half or more of annual report content is non-financial information and narrative. Therefore provide a backbone by structuring it around four narrative elements: market overview, strategy, value drivers and performance.

Cliche 6: “Be creative and take risks”- dare to walk the narrow line between consistency and change. You can improvise or adapt narrative techniques or elements used by others so long as they fit your messaging platform whilst providing meaningful content.

Cliche 7: “A credible and memorable story is the goal”. You simply can’t afford to give a weak, confusing and complex message. You need a compelling story linking business strategy and key performance drivers.

Cliche 8: Build investor confidence with credibility.

Now then to the African situation, deep and darkest Africa. Here you get rugged, thick skinned practitioners that are tough and weather beaten. The sort that have to sleep next to the printing machine that prints the annual report to get the job done. The sorts of annual report preparation tips these African Annual Report cowboys come up with are as follows:-

Rugged African annual report tip 1. The final changes from the client are NEVER the final changes. So don’t get upset.

Rugged African annual report tip 2 The simplest of pieces of information required are sometimes the most difficult to get hold of. Like the ages of directors, logos of the audit company.

Rugged African annual report tip 3 Use a professional photographer throughout the year to accumulate a good portfolio of pictures – these may be used for your website, marketing material and annual report. Obtaining a professional portfolio of a few hundred pictures can take less than a day. But good photographers are like honest politicians in Africa: they are either hiding or dead.

Rugged African annual report tip 4 The most important part of any annual report is the profile of the director that’s reading it. If a director says they have “vast” experience in whatever they do. Don’t accept it. Only God’s influence is vast. Directors’ experience cannot be.

Rugged African annual report tip 5 What may seem to be acceptable pictures of corporate events for your annual report etc. will not be. Bad quality rules. Plus people die, get fired for stealing or may want compensation for appearing in your annual report. Consider each picture carefully before it is published in your annual report . Is what you are looking at broken or stolen, is the employee still employed ? What is in the background of the picture, a fence, a dead dog? Budget time for photo-shopping out all the little things that would be deemed to be inappropriate in investment circles.

Rugged African annual report tip 6 Without a high level person signing the annual content off, errors and delays will creep into (or remain) the system. The person doing the final review needs to be involved in the annual report preparation on a day-to-day basis. If these high level client employees treasure their weekends, or have a family or a hobby, forget them. Hand it to the FD or accountant, they are used to hard work and long hours. People from the marketing department are used to long sleep in on Sundays after the “long” promotion event the day before.

Rugged African annual report tip 7 There is a tendency to use the Word document as a reference point for changes up to a certain point. Then the document is converted into the typeset document that will ultimately be printed by the printing company. The changes are marked up on the typeset copy and the “track changes” feature is not possible. This creates a whole new dynamic on tracking changes to the annual report text. If you have involved a director or member of senior management outside of the country, emailing a 25 meg annual report tool and fro can be a mission – especially on dial up. Use sendspace.com or a similar online tool for the transfer of large files. This needs a decent internet link – good luck finding one south of the Sahara.

Rugged African annual report tip 8 Get a typesetter that is prepared to live with you without complaining about hours or the number of changes or rounds of changes to the annual report. If the wife complains, get a new wife.

Rugged African annual report tip 9 Don’t assume that just because your typesetter is good there will be no errors. The word document that you hand over is converted into text and then reformatted from scratch. This is an intense and time consuming process and errors creep in. Trust no-one. I have yet to meet a designer that understands widows and orphans on a document.

Rugged African annual report tip 10 DO NOT EVER check the content of your typeset annual report to the original document just by reviewing it. Get two staff opposite each other and call it over word for word, bracket for bracket. You will be amazed what errors can creep in or you can miss with a cursory review. All marked up changes need to be ticked off once done. Deduct US$100 for every physical tick not marked off.

Rugged African annual report tip 11 Despite the fact that auditors are extremely finicky about their figures in the annual financials section they can be lax about submitting a decent logo and letterhead. Sort this out early. Kill all the most basic things early. When an auditor suggests that the underlining under a total should be bolder, don’t laugh in their face. Laugh behind their back. They are sensitive people.

Rugged African annual report tip 12 Cancel the CEO’s leave before you even start the annual report design and project management. These guys run whenever things get hot.

Rugged African annual report tip 13 Never assume that your auditor is available on the third day past your deadline to review your annual report immediately. They are always busy doing something else and will generally add a day or two to the timetable. If you laughed at his emboldened underline comment, don’t expect sign off for a week.

Rugged African annual report tip 15 Never stick to any deadline, prepare to miss every one and have a back up for every one. Don’t trust anyone to stick to a deadline. Be a man. Don’t associate with people that get upset about these things – when they are shouting at you, say quietly, John Wayne style “how do we resolve the problem?”

Thanks to IRWebReport for the “sissy” recommendations which we summarised quite considerably above. Actually, all of the tips above are relevant it just seems like there’s no time to look at annual reports as strategically as the First World does. With limited time and budgets and resources and serious practical barriers its easy to lose focus on the high level stuff. The focus is providing the raw basics and just getting the job done.

Online investor relations FAQ Part 3 of 5 parts

AfricanisCool — Thu, 03 Feb 2011 03:38:03 +0000

This is the third part of a 5 part trilogy that covers some of the common questions we get from clients / prospective clients. Just straight talk. No bull.

Please could you kindly elaborate on the corporate actions; what does this mean?

Corporate actions are any notifiable event to the stock exchange in terms of the stock exchange news.

With regards to investor communities; could we have this set up and with us doing the communication with the investor directly?

Everything we do in our products means we are acting for you, with you at all times. If you implement our solution you will build your own online investor communities. We will never send any communication out without it coming from you. If you have the right content the investors will come and register and then this is a licence to communicate with them directly.

We provide you with coverage to our communities – (ie the people using www.africansens.com and www.africanfinancials.com) they see your profile and if they are interested they come and register on your website and then they communicate with you directly. They become your community. As your annual reports are already on www.africanfinancials.com and corporate actions on www.africansens.com all that is missing is your ability to identify who is interested in your company. This happens when they visit your website.

Can you make a secure section on our website?

Yes we can make a secure section on your corporate website within our software, password protected, for specified pre-approved persons, to go in at any time, to see what you have put online.

For press release adverts etc of cautionary and results; these will still need to incurred as is a requirement of the stock exchange to publish in the papers; how is this being dealt with your clients that are listed on the stock exchange?

Most stock exchange rules say that you have to publish hard-copy. Our other clients have no choice but to comply with this. Fact is that the Internet is far more effective for the far more important shareholders and far less costly. In other markets publication electronically is acceptable and so companies can save money. At the moment therefore its good progressive practice to use electronic communication as its now expected by investors in most markets.

The savings come in when you release non-regulatory company news releases online and not in hardcopy. Compare what we charge to the cost of a single page in the newspaper and there’s no contest in terms of getting news out widely and effectively. This difference becomes bigger when internet penetration rates are high.

South African arrogance in African capital markets

AfricanisCool — Thu, 27 Jan 2011 00:27:58 +0000

There is the oft-repeated assertion, never formally, of South African arrogance in African capital markets. The deep pride that is felt by African capital market regulators and the perceived possible “threat” that SA, the Big Brother, may undermine achievements now or in the future may be unfounded. What is absent is a common vision from all capital market regulators. The African Stock Exchanges Association is an example of a White Elephant. I know that competition amongst vendors for trading platforms etc. is fierce in African markets with the “Indians” versus the “Africans”versus the Europeans. This is normal, healthy, competition but perhaps its finances that underline who works with whom. The fact is this most African stock exchanges have yet to implement a world class information dissemination platform i.e. an Edgar type platform. There was an initiative (Project Thusanang) to enable the JSE system to be used by some regional markets that came to nought. It made perfect sense some years ago. So why are African markets so far behind in immediate, broad and non-exclusionary investment data dissemination? I don’t know. What I know is that the model of governance in South Africa needs to be replicated in a few African markets. Take for example the achievements of the Institute of Directors in South Africa in their corporate governance appraisal tool. This is good stuff that can be modified for African markets but not much is happening to adopt it Africa-wide. The same could apply for SENS platform of the JSE and replicating this in African markets. African markets have to get past rent seeking tendencies, adopt shareholder education initiatives and contribute to a more informed market. I have regurgitated the GAI initiative of the IODSA below as another reminder that prejudices aside the South Africans can add value. The King Report on Corporate Governance in Southern Africa, 2009 (King III) together with relevant legislation, sets the standard and principles for corporate governance in South Africa. Now you can measure your company’s performance with a ground-breaking online tool from the IoDSA.



The Governance Assessment Instrument (GAI)
To expand our offering to you the IoDSA has developed an automated web‐based tool that serves as a measure and enabler of good corporate governance structures, policies and procedures. The GAI can assess,
Implementation of King III Assessment of implementation Reporting on application of King III and other relevant governance standards.





How the GAI works
The GAI assessment criteria are based on the principles, recommendations and provisions contained in King III, Companies Act and JSE Listing Rules. Answer sets, which are appropriately weighted, are provided for various assessment questions. Once the assessment is complete, the GAI generates reporting that includes,
An overall result A traffic light indicator and dashboard per assessment category Narrative reporting.



Who can use GAI
The GAI consists of customisable modules to cater for various types of companies including,
Public Companies Large Private Companies SME’s Non-profit Organisations Government Departments Major, National and Provincial Entities	Municipal Entities Municipalities Non for Profit Organisations Owner Managed Companies Retirement Funds Widely Owned Companies




The future for your company with GAI
Over time the GAI will establish standards and a statistical benchmark for different sectors and industries. The result – the GAI will become an enabler of transparent, credible and measurable reporting for your company.



How to get GAI
To register for access to the GAI, choose one of the following options,

Option 1 – Obtaining user license
Complete registration form and forward to gai@iodsa.co.za


Option 2 – Registering for trial of product
Complete registration form and forward to gai@iodsa.co.za, indicate trial version




GAI Pricing
GAI pricing ranges from R180 per month to R1900 per month depending on the entity size and industry.



Annual Discount
An early settlement discount of 10% of the annual value is offered for annual payment. Pricing is available on request.



Founding partners
The IoDSA would like to thank the GAI Founding Partners for their financial support and pilot feedback in the development of the GAI.




Current subscribers
For a list of current GAI subscribers, click here.


We look forward to improving your corporate governance practices with the GAI.

Hey CEO… do you have an insider trading policy?

AfricanisCool — Fri, 21 Jan 2011 13:17:54 +0000

Do executives of listed companies actually care about what they say to whom and when? Standards of regulation and oversight in African markets are lower than in international markets so why should listed companies in Africa care?

If they want to build a reputation with foreign investors they should. Show that they understand and regulate the dissemination of information internally. Does your company have an insider trading policy to regulate trading in your shares and information on your shares? If not, a sample policy appears below. If you do, compare it to this. Also check what your stock exchange rules say.

If this does not apply to you then think about what the policy is trying to achieve and see if there is something that can be added that is relevant to your company.

It shall be in violation of Group Policy to trade The Group Shares based on possession of Material Non-public Information.

Application of Insider Trading Policy

The Policy applies to all Directors, Management and employees of The Group who are in possession of Material Non-public Information (as defined below). In addition, the Policy applies to any person who may have Material Non-public Information of The Group, including consultants, contractors, and family members of The Group employees. These groups of people are sometimes referred to in this Policy as “Insiders”.

Any person who possesses Material Non-public Information regarding The Group is an Insider for so long as the information is not publicly known. Any such person can be an Insider from time-to-time based on his/her possession of Material Non-public Information, and would at those times be subject to this Policy.

Definition of Material Non-public Information

Material Non-public Information is information that has not been publicly released by The Group and which is material to The Group’s business. Information is material if there is a reasonable likelihood that it would be considered important by an investor when making an investment decision about The Group. The Group’s half year financial results are one example of potentially material information. Thus, if an Insider is in possession of any such financial information at or near the end of a fiscal reporting period, and prior to public announcement, they should not trade in The Group’s Shares.

If an Insider is in any doubt as to whether they are in possession of potentially material non-public information they are obliged to contact The Chief Executive Officer, who is responsible for STOCK EXCHANGE compliance for clearance prior to trading in The Group’s Shares.

While it may be difficult under this policy to determine whether particular non-public information is material, there are various categories of information that are particularly sensitive and, as a general rule, should always be considered potentially material. Examples of such information may include:

o Financial results

o Projections of future earnings or losses

o News of a pending or proposed merger or acquisition

o News of the disposal of a subsidiary o Impending bankruptcy or financial liquidity problems

o Gain or loss of a substantial customer or supplier

o New product announcements of a significant nature

o Significant product defects or modifications

o Significant pricing changes

o Share splits

o New equity or debt offerings

o Significant litigation exposure due to actual or threatened litigation

o Major changes in senior management.

Either positive or negative information may be material.

Trading on Material Non-public Information

Insiders are prohibited from purchasing or selling shares of The Group until the third Trading Day following the public disclosure of that information, or until the information is no longer material.

Insider Trading Liability

Any Insider, who purchases or sells The Group’s Shares based on Material Non-public Information regarding The Group, will be liable for disciplinary action and summary dismissal.

Individual Responsibility

Every director, manager, and employee has the individual responsibility to comply with this Policy. The guidelines set forth in this Policy with respect to the definition of Material Non-public Information are guidelines only, and appropriate judgment should be exercised in connection with any trade in The Group’s shares. An Insider is prohibited from purchasing or selling The Group’s shares even if he or she planned to make the transaction before learning of the Material Non-public Information and even though the Insider believes he or she may suffer an economic loss or forego an anticipated profit by waiting.

Material Non-public Information Regarding Other Companies

This Policy and the guidelines described herein also apply to Material Non-public Information relating to other companies, including The Group’s customers, vendors or suppliers. All employees should treat Material Non-public Information about The Group’s customers, vendors or suppliers with the same care as is required with respect to information related directly to The Group and should not use this Material Non-public Information to trade in the shares of The Group’s business partners.

Tipping

Insiders shall not disclose, or provide “tips” regarding Material Non-public Information concerning The Group or any of its customers, vendors or suppliers to any other person (including family members). As noted above, anyone to whom such a tip is given automatically becomes an Insider.

(B) POLICY AGAINST SHORT SALES

No Director, manager or employee of The Group, and no member of the immediate family or household of any such person, shall, directly or indirectly, (including through an entity in which they are beneficially interested) sell any shares of The Group that such individual does not own (a “Short Sale”).

Pre-clearance of Trades

The Group has determined that all Directors, and Managers should refrain from trading in The Group’s shares, even during the Permitted Trading Window (see below), without first complying with The Group’s “pre-clearance” process. Each Director and manager should contact the office of the Chief Executive Officer, who is responsible for STOCK EXCHANGE Compliance, prior to any purchase or sale of The Group’s shares. The Group may find it necessary, from time to time, to require compliance with the pre-clearance process from certain employees, consultants and contractors other than, and in addition to, Directors and managers. The Chief Executive Officer will refer the application for pre-clearance together with a recommendation thereon to the appropriate approving authority which is:

• in the case of managers, the Chief Executive Officer himself

• in the case of Directors, the Chairman of the Board

• in the case of the Chairman, the Board of Directors

Permitted Trading Window for Directors and Managers

Directors and managers of The Group may only purchase or sell The Group’s shares during the Permitted Trading Window (subject to pre-clearance in accordance with section IX above).

The Permitted Trading Window is the period in any fiscal reporting period commencing at the close of business on the second “Trading Day” following the date of public disclosure of the financial results for a particular fiscal half year or year and continuing until one fiscal month prior to the end of the next fiscal reporting period. A “Trading Day” is defined as a day on which the Stock Exchange is open for trading. If public disclosure occurs on a Trading Day before the market closes, then the date of disclosure shall be the first Trading Day following the public disclosure.

If public disclosure occurs after the market closes on a Trading Day, the first Trading Day shall be the day following the date of public disclosure. It should be noted, however, that even during the Permitted Trading Window, any person possessing Material Non-public Information concerning The Group may not engage in any transactions in The Group’s shares until such information has been known publicly for at least two Trading Days, whether or not The Group has recommended a suspension of trading to that person. Trading in The Group’s shares during the Permitted Trading Window should not be considered a “safe harbor” (A provision in securities law that excuses liability if the attempt to comply in good faith can be demonstrated), and all Directors, managers and other persons should use good judgment at all times. Notwithstanding the Permitted Trading Window, Directors and managers may not trade in the company’s shares at any time when The Group is trading under a cautionary announcement. The safest period for trading in The Group’s shares, assuming the absence of Material Non-public Information or a Cautionary Announcement, is probably the first thirty days of the Permitted Trading Window. The purpose behind this suggested “Self-Imposed Trading Window” period is to help establish a diligent effort to avoid any improper transaction.

Notification of trades in The Group’s shares by Directors and Managers

Directors and managers are required to notify The Chief Executive Officer of all transactions in The Group’s shares undertaken by them or on their behalf. Such notification should be received no later than 24 hours after the transaction has been effected and should disclose the following information:

• date on which the transaction was effected

• nature of the transaction

• number of shares transacted and the price at which transacted

• nature and extent of the director’s or manager’s interest in the transaction. Information on transactions by Directors in The Group’s shares will be disclosed to the STOCK EXCHANGE in accordance with the STOCK EXCHANGE Listing Requirements.

Definition of Manager

For the purposes of this policy “Manager” is defined to include all manager grade staff, secretaries of directors, and all finance department staff of grade Officer (or equivalent) and above.

Africans do not wear shoes…..

AfricanisCool — Thu, 30 Dec 2010 07:29:33 +0000

Africa’s capital markets are not big enough for listed companies to justify employing full time investor relations officers to actively craft long-term investor relations strategies and engage investors on an ongoing basis etc. In Africa the FD and CEO is the IR officer, when needed. Which is not often. In Africa the issue is about information dissemination. There’s not enough of it.

When we talk to listed companies, multi-national ones, they point out indirectly, that their corporate reputation is worth less in Africa. These large multi-nationals state that they have only listed on an African stock exchange out of a sense of “good corporate citizenship” (this really means that the company is a foreign one and needs “local” ownership to protect itself politically).

The executives of these multi-nationals point out that the cost / benefit ratio for their companies can be negative as there is “no money” perceived in investor relations. This is a very basic response. These comments are from executives who fly First Class to and from Europe, the extra costs of which could establish a basic yet progressive online investor relations function, one that showcases brand, and actually implements good governance practices.

This is where these larger companies have forgotten (one has to assume that they have at least heard of IR) the basics. “Our IR is primarily focused on those who wish to invest in the London market, as this is where we are most likely to gain anything.” No mention of shareholders’ basic rights and, more importantly, no mention of progressive corporate governance practices which should underline the brand they represent. The fact is African companies need more information published online than other markets because the market structures are inefficient.

Some comments we receive directly from senior executives-

- we (AIC) are perhaps “ahead of our time and that the markets in Africa are not ready”.

By collectively not doing anything, executives ensure Africa remains a market whose status will always be “behind” and “not ready”. It’s the famous story of the Bata shoe representatives asked to go into Africa to assess the prospect of selling shoes to Africans. The first one returned saying that African did not wear shoes and so the prospects of selling shoes was poor. The second said that Africans did not wear shoes and so the potential was huge. The same scenario exists in online investor relations.

“we have a website” . Yes and its terrible and out of date.

“our IR (or absence thereof) is handled by our holding company”. Not so. Not possible. It should be handled in accordance with good governance practices and the laws of the country in which the subsidiary is incorporated.

“we already have an investor relations function: our annual report appears online”. The publication of an annual report online does NOT constitute a complete investor relations function.

Director and regulator ignorance in the face of technological innovation online globally means that Africa is falling further behind the rest of the World.

Making basic investment information available online is about corporate governance and information dissemination, not IR in the traditional sense.We are bringing change to African markets one company at a time.There are a few signs of hope, some directors (with grey hairs) are sending me messages from their iPads and some directors are saying “just do it”. They don’t have the time to become informed, but they do know that the Internet is the way forward.

Online investor relations FAQ Part 1 of 5 parts

AfricanisCool — Sun, 12 Dec 2010 23:40:00 +0000

This is the first part of a 5 part series of FAQs we receive from clients. From the horse’s mouth.

In order to manage shareholder communication and proxy information on line and immediately distributed to shareholders and analysts; -our concern is that some of our shareholders do not have email addresses/internet access/computers, how is this then managed outside of our company?

Listed companies have a corporate governance obligation to use all means available to it to communicate with shareholders. No method of communication is perfect. This obligation funnily enough is not enshrined in law and this is one reason why it does not receive the attention of directors.

The website, printed copy, adverts, SMS, search engine optimisation etc are all media through which these messages can be delivered. In the modern day the costs of doing some of these can be negligible e.g. emails. On the other hand, in the modern day the postal system, especially in Africa, is very inefficient and costly.

Many shareholders (especially retail shareholders) own their shares through “nominees”, so never get their shareholder voting or other material. The option of using new media enhances shareholder governance and this benefits corporate reputation if company combines communication with corporate brand.

So there’s no one best way of communicating it’s a mixture of a number of ways in a manner that cost effective and gives shareholders what they need.

In short there’s nothing you can do about those investors that do not have access to email or computers. The efforts of a listed company to communicate with their shareholders are therefore two-fold:-

BOTTOM UP – your company sends information to your shareholders in your shareholder list at a particular point in time. This is not fool proof because of nominees and inefficiencies in the postal system.

TOP DOWN – any shareholder, whether they be registered in nominees or directly can come to your website and make educated investment decisions and obtain timely and comprehensive information to support these decisions.

Between the top down and the bottom up approach your company will have most bases covered.

Benchmark your corporate website traffic

AfricanisCool — Tue, 07 Dec 2010 00:14:10 +0000

Do you monitor your website traffic? If not you should. It’s a valuable indicator of your possible return on investment. I saw a listed company recently in the mining sector. Over US$50m market capitalisation and over 5,000 shareholders. Their monthly website traffic was a massive 71 hits. Given that head of IT checked it daily you have to deduct 22 working days from that, making traffic 49 hits a month or just over 1 a day.

In online investor relations the number of hits is not important. It’s who is hitting your website that is important. If you have comprehensive information online and you get your information out first then you can be sure that your traffic includes the world largest emerging market fund managers and others. One hit can therefore make a difference.

I thought I would summarise our website traffic and provide some basic guidelines for you to compare yours to. Obviously if you are in a different sector, country etc. then the stats that I show may not be relevant to you. Internet penetration in your country may be lower or higher than the countries in which our clients reside. But the stats I show below may be relevant or at least provide some sort of benchmark. We start off firstly with overall country statistics. We have clients in 4 countries and remarkably the average statistics for each are very similar:-

Now we move onto the same statistics but for the number of visitors per month. Here there is greater differentiation:-

Looking at traffic (no. of visits) by sector the statistics are again variable with the telecoms, hospitality, schools and agro-sectors showing the highest traffic. Our clients mostly have pan-African operations or dominant in the industries in which they operate and some of them have large shareholder bases. These parameters should be taken into account. As you will see from other posts of mine the feedback we receive from our clients websites is a good mixture of commercial and investor related, so to use the number of shareholders as an indicator is necessarily correct. Our message is provide an open communications channel and they will come. All sorts of people will come.

Moving to the number of visitors by sector the stats pretty much mirror the visits. Again the utilities, telecoms and diverse agro-businesses all attracting good traffic.

Strategically companies and listed companies should try to capture the identity of this traffic and build an online community over time. This grows into a strategic resource, but the process takes time, so those companies starting sooner than the rest will be ahead of the game in the future.

The other key take away is to monitor what goes on. If you have bad traffic stats then there’s a problem with your content. If you don’t have the ability to identify traffic to your website then you should start. Speak to someone whose business it is to monitor these things.

Sorry one last thing, if your SEO is non-existent then you can have the best site but no-one will know. SEO is not something that is just done. It’s an intuitive process done by experts to ensure that you come up the ranks in Google et al.

Deleting analyst presentation investment data is wrong

AfricanisCool — Wed, 01 Dec 2010 05:29:55 +0000

It’s a common scenario in Zimbabwe for listed companies to have a nice and cozy investment analyst presentation. Then not provide the analyst presentation online or in hard copy to investors. Some companies that do make their information available online delete certain pages of the presentation before they do this. In most cases the key issues discussed in the Q and A session are not disseminated either.

From the CEO’s perspective this is a cop out – tell them everything and then go through the presentation post the event to delete the stuff that is sensitive. Mmmmm…. why not do it at the beginning of the presentation?

Are the brokers efficient at disseminating the information released at analyst presentations. No. Do brokers sell their analyst research online i.e. not make it freely available. Yes. There’s a gap in making information available efficiently to the market and it needs to be addressed.

This is bad corporate governance and is indicative of the absence of a formalised disclosure policy at Board and senior management level. It is also indicative of the absence of disclosure practices regulation in Zimbabwe’s market or at least the awareness of regulation. If the information is only good enough for some and not others, then it should not be good enough to publish at all.

Companies should identify the information that is sensitive, delete it from the presentation in advance and draw up a list of things NOT to say at the analyst presentation and the drinks afterward. Share this list with the management team. It’s basic enough. It’s the right thing to do. It’s good corporate governance.

Kenyan directors are not maintaining a reputation for high standards of business conduct

AfricanisCool — Mon, 22 Nov 2010 04:12:02 +0000

The duties of Directors will be set out in law when the new Kenyan Companies Bill is adopted into law (not anytime soon). In the interim, Kenyan companies are in no-man’s land with respect to how they are to communicate with shareholders. Kenyan directors are not acting in the interests of shareholders, they are not promoting the success of the company and they are not maintaining a high reputation for business conduct as a result.

Here is some text THAT WILL BE PASSED INTO LAW in the future. It states pretty clearly what directors should do. I further consider the implications of not implementing progressive shareholder communications practices in light of this legislation by way of a few questions:-

Duty to promote the success of the company

(1) A director of a company must act in the way he considers, in good faith, would be most likely to promote the success of the company for the benefit of its members as a whole, and in doing so have regard (amongst other matters) to—

If Directors do not spend say US$10,000 a year in ensuring that their shareholder proxy materials are widely available to shareholders, is this acting in good faith? If money is an issue how does the Board determine what is a reasonable amount? Since the dropping of the requirement to distribute hard copy annual reports is it reasonable for listed companies NOT to apply any of the savings (many hundreds of thousands of US$) to alternative means of communicating with shareholders?

(a) the likely consequences of any decision in the long term,

If for the sake of a few dollars thousands of retail shareholders (and possibly institutional investors) are alienated in their right to receive shareholder information, will this have positive or negative consequences for the company in the long term? The consequences in the short term are that shareholders are demanding their “book” (annual report) direct from the offices of the listed companies. Disturbing management. How does a listed company “guess” how many annual reports to print? Should directors consider the commercial benefits of communicating with shareholders progressively as a means of obtaining some return on their investment?

(b) the interests of the company’s employees,

Is it in the interests of employees to have all of the information available to investors in order that investors make educated investment decisions available to them? If employees have the same access to the information that shareholders do will this instill a sense of belonging and motivation?

(c) the need to foster the company’s business relationships with suppliers, customers and others,

Does the manner in which a company treat its shareholders and investment community impact its overall reputation in the market?

(d) the impact of the company’s operations on the community and the environment,

(e) the desirability of the company maintaining a reputation for high standards of business conduct,

Could the absence of good shareholder communications affect a company’s reputation for high standards of business conduct?

(f) the need to act fairly as between members of the company.

If the information needs of the institutional investors are considered over those of retail in shareholder communication practices could this be perceived to be or actually be treating members of the company unequally?

African Investor Relations » IR Tips

Demeaning your shareholders

Related Posts

“Doing” annual reports in Africa. It’s not for sissies

Related Posts

Online investor relations FAQ Part 3 of 5 parts

Related Posts

South African arrogance in African capital markets

Related Posts

Hey CEO… do you have an insider trading policy?

Related Posts

Africans do not wear shoes…..

Related Posts

Online investor relations FAQ Part 1 of 5 parts

Related Posts

Benchmark your corporate website traffic

Related Posts

Deleting analyst presentation investment data is wrong

Related Posts

Kenyan directors are not maintaining a reputation for high standards of business conduct

Related Posts