Archive for August, 2010

Clarity, clarity, clarity

August 10, 2010

They don’t give Pulitzer prizes for earnings releases. Or annual reports. Or conference call scripts. But if public companies were to be judged on efforts to communicate with investors, the judges’ list of criteria would surely include clarity. The top three standards might be accuracy, timeliness and clarity.

This is the stuff of investor relations. And after all, investors do judge companies’ efforts to communicate – in the market.

I was reminded of this core mission for IR by a collection of articles on CEOs in the third-quarter issue of NYSE Magazine. In one piece Bill McNabb, Chairman and CEO of Vanguard Group, is asked what today’s shareholders want most.

McNabb talks about the nexus between governance and financial performance. Institutional investors want structures that keep management accountable, he says, because they want companies to execute well. And then he adds:

Shareholders are looking for CEOs to have an increased focus on clarity; they want to be able to understand the numbers and put them into perspective.

A lack of clear disclosure means higher risk for the investor, McNabb says:

The less clarity around off-balance-sheet activity, the higher the hurdle rate for the investment manager to get comfortable with what’s going on at a company.

As an IR practitioner, I would say our job is to be clear rather than to bury people in numbers or legalisms or “sunshine in a bottle” optimism. The goal is for investors to understand the business, its performance and market position.

Clarity – I like that!

© 2010 Johnson Strategic Communications Inc.

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What’s your investment identity?

August 9, 2010

The CEO of Abbott Laboratories, Miles White, comments on the interplay between corporate strategy and long-term investor relationships in an August 6 interview with Investors Business Daily.

Asked about ABT’s record of increasing dividends each year for 38 years, cultivating a diversified medical product line that lacks “pure pharma” sizzle, and following the slow-but-steady approach to growth, White says this about his shareholders:

The company’s had an investment identity of reliable growth with dividends, a combination of growth and income.

It used to be called a stock for widows and orphans. Those things became a hallmark that investors seek.

If you want to maintain investor allegiance to your management philosophy, you have to pay attention to the identity that attracts investors to your stock.

Our identity attracts long-term investors who want reliable growth and reliable income: The dividend is part of that.

My point isn’t that every company’s investment identity should be the same as Abbott’s. But gathering intelligence about who our shareholders are and what they value makes sense. Aligning strategy at the CEO and board level to serve these shareholders, whether their style is to bet on tortoises or hares, makes sense.

I like White’s statement that he is expanding Abbott’s presence in emerging markets to provide growth to continue to raise the dividend each year, because widows-and-orphans style investors value that. (Note that 68% of ABT shareholders are institutional widows and orphans – they need care and feeding, too.)

For investor relations people, the mission is to communicate core messages that align with the strategy – so IR attracts investors who like our investment identity.

© 2010 Johnson Strategic Communications Inc.