Tough new corporate governance standards are generating new work for investor relations firms in helping firms traded here and on U.S. exchanges meet the new requirements.
The demanding new environment has changed both the focus and the nature of the work that IR firms do, says Ernie Stapleton, president of Fundamental Communications Inc. in Toronto.
Investors are entitled to more, and more frequent, documentation, he says. Firms are also using external IR consultants to read the marketplace for them. "We do a lot of surveys of investors to see what they think, what they want to know and when they'd like to know it."
Mr. Stapleton says new rules have placed more importance on quarterly reporting, requiring more documentation and content development than ever before.
In the old days at quarter's end, he says, a CEO or CFO would speak loosely with a few analysts or institutional investors about a company's performance, often giving different messages to each.
Now CEOs are holding conference calls or Webcasts involving all investors at once, speaking initially from a prepared text, followed by a question-and-answer session.
"There's a real desire to speak to all the investors at once to provide a consistent story and clear message, so everyone hears the same things at once," Mr. Stapleton says.
IR firms help prepare the script and identify likely questions, he says. Firms with in-house IR staff often use external consultants to handle extra workloads and to offer an outsider's perspective on issues.
One of the hazards of this increased disclosure is a tendency by some companies to spew out volumes of information to cover all bases. This tends to annoy investors who prefer "quality disclosure written in comprehensible language" -- something independent IR firms help provide, he says.
Investors are also asking for personal information about each director, says John Lute, president of Toronto IR firm Lute & Co. Companies that don't have corporate governance policies are asking investor relations firms to help develop them, he says.
John Sadler, managing director of Genoa Management Ltd. in Toronto, says IR firms are working harder to help small-cap firms develop corporate messages and act as matchmakers with potential investors.
So many investors have turned their backs on publicly traded companies and parked their funds in income trusts that Toronto-based The Barnes Group recently created a separate investor relations division dedicated exclusively to income trusts.
Principal Marianne Godwin, a chartered financial analyst, says the division's goals include helping income trusts improve the quality of their communications with institutional investors and preparing trust clients for legislative changes felt to be looming on the horizon.
Helping trusts understand what information investors want to know and providing it in a timely and understandable manner will give them a competitive advantage when it comes to attracting investors, Ms. Godwin says.
© The Globe and Mail
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