IR Monitor – 10 July 2024

In this week’s newsletter:

• FTI appoints Oliver Williams as Head of its Strategic Communications Segment in the Middle East: the segment’s leadership in capital markets comms is exemplified by recent milestones such as Parkin’s record-breaking IPO on the Dubai Financial Market and Modern Mills Company’s historic IPO on the main market of the Saudi Exchange
• Proxy season results show support for ESG efforts continues to ebb. Only two climate-related proposals received majority support this year & no diversity initiative cleared 50%
• Blame shoddy audits on absent investors: high-profile company failures show audit firms are failing to scrutinise corporate accounts but shareholders are also falling short 
• Activist investors mount record number of campaigns but win fewer board seats globally as companies have fought back effectively, data from Barclays shows
• How to keep stakeholders informed on emerging events: a combination of maximising internal links and using external partners is key to keeping investors informed
• And finally … could AI wreck your business? asks Bloomberg. Executives have spent the last year and a half sermonising on earnings calls about how their companies will successfully ride the artificial intelligence wave. But these same firms have been quietly issuing warnings on the various ways that AI could actually wreck their businesses

This week’s news

FTI Consulting appoints Oliver Williams as Head of Strategic Communications in the Middle East

FTI Consulting’s Oliver Williams has been appointed as Head of the Strategic Communications segment in the Middle East, after several years in the London office. In his new role, Mr. Williams will lead the segment’s business strategy and support regional leaders on the firm’s expansion across the region to serve international clients operating in the market. The appointment of Mr. Williams supports FTI Consulting’s ongoing investment in the region, including the firm’s relocation to larger premises in Dubai, the opening of new offices in Abu Dhabi & Doha in 2023 and the establishment of an office in Riyadh, Saudi Arabia in 2022. The segment’s leadership in capital markets communications is exemplified by recent milestones such as Parkin’s record-breaking IPO on the Dubai Financial Market and Modern Mills Company’s historic IPO on the main market of the Saudi Exchange.

Proxy season results show support for ESG efforts continues to ebb – the FT

With the US proxy season wrapping up, the FT compiled recent voting trends and statistics. Shareholder support for environmental and social issues at US companies has waned for the second straight year, as high-profile campaigns waged by some investors have failed to gain traction. Following record breaking inflows into ESG funds in 2020, this proxy seasons paints a much starker image; only two climate related shareholder proposals received majority support at Russell 3000 companies. Both pushed companies to publish more information on their efforts to reduce emissions. As the culture wars in the US continue, no shareholder proposals related to diversity, equity and inclusion (DEI) have broken above 50% support this year. This signals a reversal in attitudes with progressive-leaning pension funds as well as Norway’s oil fund “essentially doing the same thing they have always done.” Meanwhile, BlackRock and Vanguard “are backing off. They are going back to being more passive on ESG.” 

Blame shoddy audits on absent investors: audit firms and shareholders alike are falling short

In a guest column for Breaking Views, Natasha Landed-Mills argues that few pillars of good governance are as widely ignored as audits. Auditors exist to provide a robust and independent check on companies’ accounts. That way investors can trust the numbers, allocate capital efficiently, and ensure remuneration is paid to executives for genuine performance rather than mythical returns. Efficient and stable markets depend on audits working well. However, this has not been the case with an Audit Reform Lab study finding that out of the 250 companies in the United Kingdom that went bust between 2010 and 2022, three in four audit reports failed to raise the alarm. What’s even more concerning according to Landell-Mills is that, even where there is plenty of evidence of failure, shareholders continue to reappoint the same auditors. Her solution: reduce shareholder absenteeism and update stewardship codes. Ultimately, while stricter requirements may be needed further down the line, this is an obvious place to start and the UK’s Financial Reporting Council (FRC) is encouraged to seize the opportunity and lead on this matter as it reviews the Stewardship Code later this year.

Activist investors: record number of campaigns but fewer board seats

Barclays’ data demonstrates it’s been a busy first half of 2024 for activist investors, who set a new global record with 147 campaigns, eclipsing the previous peak of 143 campaigns from early 2018. However, looking at success rates, the numbers are telling. In U.S. proxy fights, activists were successful in only 11% of cases, down from 65% during the same time in 2023. The Barclays data also illustrates how successful companies have been in fighting back against activist investors. According to Reuters, bankers, lawyers and investors have said the rise in activist investor activity may result in more costly battles over issues such as leadership changes, spin-offs and outright sales in the coming months. While veteran activists are still securing new seats on boards, others are struggling to convince fellow shareholders that their nominees have better strategic plans than incumbent management teams. In that context, the article notes that activist focus in the US may shift to the industrial sector…

How to keep stakeholders informed on emerging events – IR Magazine

In a recent IR Magazine Webinar, held in partnership with AlphaSense, several experienced IR professionals and capital markets experts discussed the strategies being used to help issuers stay on top of developments across industries, sectors and regions. IR Magazine distilled key takeaways from the event as follows: building robust internal networks is essential, embracing technology & AI is a must, taking note of sustainability as it still remains a concern amongst investors, honesty & transparency for IR teams, proactive monitoring and having early-warning systems in place, hoping for the best, preparing for the worst and finally… adaptability and agility! 

And finally … could AI wreck your business? Bloomberg asks the question

Executives have spent the last year and a half sermonising on earnings calls about how their companies will successfully ride the Artificial Intelligence (AI) wave. But these same firms have been quietly issuing warnings on the various ways that AI could actually wreck their businesses. Whilst AI has experienced a meteoric rise globally, the tech giants championing its advancement have also been sounding alarms about its potential dangers. From warnings that AI could be used to create disinformation during elections, to potential issues surrounding copyright claims, at least a dozen major tech companies have issued or updated AI-related warnings in financial filings this year. The warnings from big tech companies present a refreshing reality check on AI, a tool that poses unquestionable potential but needs to be used and harnessed in a safely controlled manner. The world’s most valuable company, Nvidia, has warned for instance since early 2023 that concerns over the misuse of AI could lead to restrictions on its products. The message? For those at the forefront of AI, it must be harnessed as a responsibly managed asset. 

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