Home » How We Think » Street Talk » Corporate Social Responsibility
In honor of yesterday's Earth Day celebrations, I thought I'd put a topic on the table that's long been on my mind.
I'm really tired of hearing people say "But investors NEVER ask me about sustainability!" In fact, it's now replaced "Ummm... actually, I can't go to our prom with you because I don't think I'll be in the country that weekend." as my all-time least favorite answer.
For some reason, you can't say the word "sustainability" to [most] IROs without them hearing "oh my gosh, that's so much work... I'll have to completely revise my IR messaging + seek out all new industry conferences + totally revamp my investor targeting efforts..."
Why is that?
Research continues to show the overwhelming impact intangible assets have on valuation. This recent Bloomberg story is spot on when it says "non-financial data is material." When you expand the information you disclose to provide investors with better visibility on the financial contributions of your new products, you don't scrap your ongoing targeting efforts and start over. Similarly, when you begin educating investors on the leverage your brands creates for your pricing model, you don't immediately cancel all of your industry conference commitments. So why would creating better visibility on your sustainable efforts and, where possible, how they enhance financial/operational results cause such an apocolyptic chain of events?
Brothers and sisters - it's time we got our minds right about sustainability as it relates to investor relations. It's time we see it as another differentiating intangible asset and not some mystical concoction that will transform your company into something completely unrecognizable.
Bottom line: if you wait until an investor asks about sustainability, it'll be too late.
There was an interesting post recently on the TAI blog about the top five shareholder concerns in 2012. The post was inspired by an interview with the iconic Nell Minow in Corporate Secretary magazine.
According to Nell, the top five concerns includes such things as executive compensation ("At most companies, investors don’t seem to care - shareholders approved 98% of the executive pay packages in last year’s say-on-pay votes," countered TAI) and quality of board/individual directors ("... in 2011, 45 directors received less than 50% of the votes cast, out of thousands standing for election," noted TAI). The author of the post also offered that Nell's list should have been:
-
share price appreciation
-
corporate cash balances
-
share price appreciation
-
share price appreciation
-
share price appreciation
A tad extreme but point well taken. I agree that shareholders - like voters - tend to be swayed by their wallets at election time. That said, I can't believe that the list of five really boils down to just those one and a half things. From where I sit, shareholders are paying close attention to Board composition and quality but I would suggest that the focus here is really more on the director selection/succession criteria process than the individuals themselves. I also believe that there is more of a growing interest in sustainability than TAI is acknowledging. That said, my sense is that most investors are more interested in it as another intangible asset like new product innovation, R&D, etc. rather than looking for which company is doing the best in a particular CSR initiative.
What do you think of these lists? Does the answer lie somewhere in between or do you have a completely different list in mind?
Brothers and sisters... we have gathered here today to talk about the power of the letter!
When handled properly, this power can galvanize people, shape perceptions and manage expectations. This power knows no geographic boundaries. This power knows no technological limitations.
This power comes from inclusion, not exclusion... from looking ahead, not looking down... from aspiration, not recollection... the power of the letter comes from building, not from justifying.
Do you have this power?
If you have to think about it for more than a few seconds then you probably don't. And that's a shame because the power of the letter is within your grasp... shoot, for many of you, it's within your control.
Click here to learn how you can capture the power of the letter. Remember, more investors will read this piece than will meet with the CEO in a given year. Therefore, it is critical that this section of the annual report be crafted carefully to maximize its potential impact.
Last week, I sorta felt as though I was taking my life in my hands when I dared to "debunk an American myth" and question the true strength of today's emerging IR tools. Refreshingly enough - and much to my relief - many of you agreed (guess I can cancel my request for Witness Protection).
Let's indulge that notion for a moment, shall we? Let's say you're self-actualized enough to admit that your IR content is not as strong as your IR tools. Would you know where to start the rehabilitation? Obviously, if your core investor messaging is so bland that it could apply to any company in any industry, a major re-work is in your near future. But let's say for the sake of argument that that's not the case. Let's say your core investor messaging is actually pretty good but it just hasn't been refreshed as recently as your IR toolkit has. In some ways, this is a harder problem to address.
One way to think about it is to view the task as a home improvement project... it's an expansion (read: adding to the sound foundation), not a makeover (read: gutting the structure and starting over) ... make sense? As you well know, I could go on and on about analogies... let me know if this home improvement analogy doesn't cut it for you. Here are a few ways to expand (read: improve) your IR messaging to ensure it's as strong as the tools with which you use to diseminate it:
-
Innovation – Every company claims to be innovative, but how many can prove it? By establishing a consistent and accurate metric and reporting it to investors (e.g., a vitality index that captures the amount of revenue generated by products launched over the past three to five years), you will be able to more fully leverage this important value driver.
-
Use of Cash – With balance sheets restocked with cash, investors are anxious to understand how these dollars will be deployed effectively to spur growth and drive value. They want to know what criteria the board and management are using – and over what timeframe – to determine the best uses of the cash to generate value.
-
Governance – Investors consistently rank quality of governance as pivotal to strategy execution and shareholder value creation, and they expect transparency around a variety of governance issues. Succession planning is a key area. Investors are also becoming more acutely focused on the qualifications of each director and want to understand how each contributes to the company’s strategic growth plan.
There are a few more ideas included in this piece that we just issued. Anything else you'd add to this list? Anything on this list you'd avoid?
The good folks at Report Watch by e.com have just issued their 2010 Best Annual Reports piece. Interesting view of the world of annual reports from this London-based “organisation” - definitely worth clicking through when you have a moment.
This was my first year serving as a judge for this report and I can honestly say I was completely blown away by the quality of annuals I saw - from content to creativity. These were true investor education pieces… these companies were using their annual report to assert their distinct value proposition… these reports were strong and proactive pitches to the investment community… these reports were built to make an impact, not meet a compliance… these reports also contain rich CSR content that global investors seek… take a look at the report and see for yourself.
I will tell you this - after reviewing the books I reviewed - I find it hard to believe the talk of the printed annual report going the way of the Betamax is anything more than just that - talk. Be interested to hear your thoughts on this report and annuals in general.
Given all the chatter on Twitter about the SEC requiring every company “to disclose the impact that business or legal developments related to climate change…”, I thought I’d ask you what you thought about all this.
I have long thought IROs that avoid influencing their company’s disclosures on corporate social responsibilities (or CSR for those Alphabet Soup fans) are missing an opportunity to shed light on an important intangible asset at the very least and shirking a fiduciary duty at worse.
So - tell me - is the intertwining of CSR and investor relations an example of worlds colliding or simply nature taking its course?
I am always surprised at how many IROs are so willing to stay uninvolved in their company’s CSR communications and reporting. (Confession - I’m more surprised by how many IROs want nothing to do with the drafting of the proxy or major SEC filings, but that’s a topic for another day.)
Perhaps this recent news of significant investor pressure being applied to GM, Boeing and others to distance themselves from the U.S. Chamber of Commerce due to the Chamber’s position on climate change will be the wake up call that these IROs need.
From where I sit, IROs that leave CSR to someone else are leaving a lot to chance… and potentially putting their valuation in harm’s way.
