IR Monitor – 2nd November 2020
Investor Relations News
This week we begin by discussing Twitter CEO and co-founder, Jack Dorsey, who is facing criticism from investors in regards to his management style. We then revisit the decision by U.S. regulators to shelve a controversial plan which would have allowed hedge funds to keep their stock investments secret. We also explore how City short-termism may be here for the long run and how this may even be a good thing. We also pick up on Legal & General’s advice not to award bonuses for companies that have cut their workforce during the pandemic. Finally, we look at how activist allegations have painted a different picture of wealth management business St James’s Place.
This week’s news
Investors unhappy with Dorsey’s laissez-faire approach
Twitter CEO and co-founder Jack Dorsey has found his management style once again called into question by investors after a 21% drop in the share price on Friday. Two weeks ago, millions of Twitter users found themselves unable to access links to New York Post stories relating to Joe Biden’s son, Hunter Biden. The Wall Street Journal has suggested that Mr Dorsey was absent in all of this. Earlier this year, the activist hedge fund Elliott expressed discontent with Dorsey’s ‘laissez-faire’ approach to management and lack of attention to Twitter. The activist has also placed one of its directors on the board reflecting its concern with Dorsey’s dual responsibilities between Twitter and Square Inc. Here is Dorsey himself at an investor conference earlier this year: ‘I have enough flexibility in my schedule to focus on the important things, and I have a good sense of what is critical on both companies’.
A win for transparency advocates
The Securities and Exchange Commission is apparently now shelving a controversial proposal that would have allowed most hedge funds to keep their stock investments secrets. Bloomberg reported that the U.S. regulators had intended to change rules so that only fund managers who owned at least $3.5 billion in equities would have had to disclose their holdings, significantly up from the current $100 million threshold. The Commission received over 2,200 letters opposing the changes, with discontent being voiced even by two major hedge fund lobbying groups. In response, the agency pointed out that the $100 million trigger has not been updated in over four decades and, even if the current proposal is scrapped, it will have to be revised.
The case for short-termism
The Times‘s David Wighton has contended that short-termism in investment is not always negative. He cites Mariassunta Giannetti, a finance professor at Stockholm School of Economics, who found that companies with a short-term approach responded better to foreign competition following tariff cuts between 1981 and 2011. They introduced more new products, made more acquisitions and filed more trademarks, turning speed into competitive advantage. Often short-termism is a sign of business myopia but at times, the article argues, it may be the mark of agile and responsive organisations.
Job cuts? Forget hefty bonuses
Legal & General Investment Management has advised companies not to pay executive bonuses if they have taken government funds, cut jobs or scrapped dividends during the pandemic. According to The Times, the institutional investor plans to vote against pay reports during next year’s general meeting season if company boards ignore its guidance. The group has also asked to avoid awarding large share incentives to executives, since a quick post-pandemic bounce would potentially blow the bonuses’ value out of proportion.
Mourning the loss of “touch & feel” IR
After months of social restrictions and mounting Zoom fatigue, investors have begun longing again for live events. IR Magazine has gathered the opinions of investor relations experts, showing that the initial enthusiasm for virtual corporate access has been fading. While digital solutions may be appealing to those with families and unable to travel frequently, they can hardly substitute for in-person site visits, operations tours and bespoke field trips with management. In the words of Adam Borgatti, Senior IR VP at Aecon, the post-Covid world will miss such ‘touch and feel’ events.
And finally… which organisation has 120 staff job titles that begin “Head of”?
Greek mythology reports the story of the giant Briareus, a formidable monster with fifty heads and one hundred arms. This is hardly a match for St James’s Place, the wealth management business whose staff include over one hundred and twenty people with titles that begin “Head of”. The Evening Standard has recently picked up on the company’s trouble with activist investor Primestone, which has bemoaned excessive staff pay and the firm’s “bloated” organisational structure. As the article notes, the abundance of lavish titles befits a sector, like wealth management, that is often built on aspirational messaging.
November 3: Numis Travel & Leisure Conference: – OTAs leading the travel recovery (Virtual)
November 9: Raymond James Insurance Symposium (Virtual)
November 9-11: Credit Suisse 29th Annual Healthcare Conference (Virtual)
November 9-13: UBS European Conference (Virtual)
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