Capital Markets & Investor Relations

IR Monitor – 30th November 2020

Investor Relations News

This week we begin by exploring what the decision to pay dividends means, before moving on to discuss how the average price of a one-to-one sellside analyst meeting has almost halved since the start of the pandemic. We turn to growing concerns over increases in capital gains tax, and the ramifications for large shareholders. We then look to the Adam Smith Institute and its case for shareholder capitalism against growing support for stakeholder capitalism. Then, we discuss the Financial Reporting Council’s criticism of companies for failing to take its Code of best practice seriously. Finally, we look at how companies are embracing old-fashioned technology to deal with Zoom fatigue.

This week’s news

A resumption of dividend payments signals the worst of the pandemic is over 

The onset of the COVID-19 pandemic in March prompted several large US companies to pause their dividend payments as they scrambled to hoard cash. Now, according to the Wall Street Journal, a number of companies are reversing their decision, signalling that they believe the worst of the crisis has passed. Mark Zandi, chief economist of Moody’s Analytics, said that multinationals are “beginning to exhale”. But, while the pandemic is certainly not over, it is clear that many businesses have learned to adapt and even thrive under the ‘new normal’.

Price of sellside analyst meetings almost halved by pandemic

A recent survey of fund groups with a combined $4.9tn in assets has suggested that the price fund managers are willing to pay for sellside research has fallen dramatically during the COVID-19 pandemic due to the shift to digital meetings. According to the Financial Times, the average price of a one-to-one meeting has almost halved since the start of the pandemic due to a perception that digital versions lack intimacy and offer less value. Fund managers are also paying out less for group analyst meetings, with the value of these interactions falling 35% since January. These findings underscore the intense pressure facing sellside research providers, still reeling from a shake-up triggered by Mifid II three years ago.

UK bosses rush to sell stakes over capital gains tax fears 

With the announcement of Rishi Sunak’s recommendation to increase capital gains tax (CGT) in line with income tax rates, some UK company executives are getting ready to sell down their stakes in businesses. Sunak would effectively double the cost of selling shares in companies and the Financial Times writes that city brokers and accountants have been bombarded with calls from concerned senior executives and company founders about higher taxes in relation to large retained stakes. Even though the review has not yet been enacted, several city financiers and accountants have spoken of their clients’ plans to bring the sales of their businesses forward, with a potential saving of 20%.

In defence of shareholder capitalism

The Adam Smith Institute hosted a webinar to defend shareholder capitalism against the growing popularity of stakeholder capitalism. Participants Michael Strain, Oliver Wiseman and Vivek Ramaswamy disagreed with the idea that a firm’s role is anything other than maximising profits for shareholders. Strain argued that a virtue of shareholder capitalism is its clear, singular objective while stakeholder capitalism has multiple, potentially competing objectives. He also disagreed with the idea that shareholder primacy leads firms to operate without restraint or care for the long-term, noting that firms operate within the law and often invest in the long-term for profitability. Ramaswamy argued that stakeholder capitalism empowers economic elites to decide society’s values; unelected billionaires like Mark Zuckerberg and Jack Dorsey get to remake the world in their image. Instead, he says, profit-maximisation limits a firm’s role and stops it overstepping into the realm of democracy. The panellists agreed that stakeholder capitalism is often a cynical marketing strategy noting that signatories to the Business Roundtable statement on purpose are often the most ruthless and least socially oriented companies.

UK watchdog calls out company ‘box ticking’ on best practice

Last week, Reuters reported that the Financial Reporting Council (FRC) had criticised companies for treating its Stewardship code of governance on best practice like a “box-ticking exercise”. The code was beefed up in 2018 to include issues like sustainability and engaging with customers. In a review of 100 of Britain’s top 250 listed firms, as well as some smaller companies, the FRC raised some concerns about “formulaic” reporting and inadequate explanations for why companies might be failing to comply. All in all, only 58 firms were reported to have full compliance with the code’s provisions, and companies were most likely to be culprits of non-compliance with the code’s recommendation that the Chair and CEO of a company should not be the same person. Sixteen firms failed to meet this standard.

And finally … Have we all had enough of Zoom?

According to panellists at the Corporate Secretary Forum in New York last week, businesses’ COVID-19 love affair with Zoom is starting to fray. IR Magazine quotes Caroline Koster from BGC Partners saying she was spending more time with the old-fashioned telephone to connect with people. Matt Geekie on the board at Graybar similarly told attendees he and other board members were looking to their phones for the next board meeting. But companies are losing their patience with more than just videoconferencing. Voya Financials in New York has had enough of PowerPoint presentations too. In fact, it has started asking some of its senior management to send round old-school, essay-like memos before meetings instead.


December 1: UBS, Global Real Estate CEO/CFO Conference (Virtual)

December 2: Credit Suisse, Annual Virtual Industrials Conference (Virtual)

December 7: UBS, Global TMT Virtual Conference (Virtual)

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