IR Monitor – 13 November 2024

In this week’s newsletter:

• US CEOs fired more quickly over low stock prices this year, reports Reuters. 42% of S&P 500 companies replacing their Chief Executive Officers in 2024 had bottom-quartile returns as Boards become less patient with underperformers
• The unsung heroes of investor relations: non-execs do their best work in the shadows
• Corporate expense reporting promises investors more clarity: disclosures will break down large income statement expenses, reports Bloomberg
• Bored of hearing about Trump vs Harris? The word “election” came up on 100 earnings calls of S&P 500-listed firms between Sept. 15 and Oct. 31 according to CNBC
• Business uncertainty blamed for glut of profit warnings in the UK: 84 alerts were issued in Q3 with contract and order cancellations or delays cited as the key drivers
• And finally … a good company name is important to define your business and also to help impress the investors. So what does ‘Hot Mom International’ actually do?

This week’s news

US CEOs fired more quickly over low stock prices this year – Reuters

Boards of US companies are now seemingly quicker to replace underperforming top executives as there is less patience with poor stock performance. According to a new report from The Conference Board research group, 42% of S&P 500 companies replacing CEOs in 2024 had bottom-quartile returns, marking a notable increase from just 30% in 2017. Alongside this, the pandemic appears to have heightened the urgency for Boards to secure the right leadership, with external factors, including supply chain issues and geopolitical tensions, no longer seen as valid excuses for poor returns. Activist investors are bringing fresh scrutiny, pushing for changes that link poor stock prices directly to CEO tenure, according to Reuters. Despite this pressure, the report reveals that Boards continue to follow traditional recruiting patterns, favouring company veterans who are well-versed in the corporate culture and have shown loyalty to the organisation. The number of female CEOs has also reached a historical high, though they are mostly leading companies with less than $5 bn in revenue. 

NEDs: The unsung heroes of IR

Non-Executive Directors (NEDs) are the unsung heroes behind the scenes, providing invaluable support and strategic guidance to chief executives and their teams. Their work is about enabling success, ensuring that leadership shines whilst they work their magic in the background. While some may view NEDs as mere “decorations” or lobbyists, their role has evolved significantly over the past two decades to become more structured. As a result, NEDs are now more accountable to investors, who closely monitor their performance and decisions to ensure they are acting in the best interests of the company and its stakeholders. In his comment piece for The Times, Ed Warner, who sits on several Boards, highlights the path to becoming a NED is challenging, requiring persistence and a willingness to adapt from an executive role. Despite the difficulties, Ed notes the rewards come from driving the organisation’s success and making a meaningful impact, rather than chasing personal accolades. 

Corporate expense reporting promises investors more clarity

Investors will soon gain access to new details about significant costs impacting corporate income thanks to new expense disclosure requirements that have been years in the making. On Monday, the Financial Accounting Standards Board (FASB) introduced new rules requiring public American companies to disclose detailed expenses, including staff salaries, benefits, inventory purchases and depreciation costs. Beginning in 2027, companies will incorporate this information into their annual reports, followed by quarterly updates from 2028. As reported in Bloomberg, this change aims to provide investors with a clearer picture of corporate spending, helping them trace performance and project future cash flows. The new requirements address long-standing investor demands for transparency, allowing for better comparisons across companies. 

Bored of hearing about the election?

In the run-up to the US election, executives at America’s biggest companies were talking publicly with investors about impending policy implications – more so than in previous cycles. Citing a Factset report, CNBC reported the word “election” came up on 100 earnings calls of S&P 500 firms between 15 September-31 October. So far, the 2024 mentions count equates to the word “election” coming up on calls for approximately one in every five companies in the S&P 500. The general feeling of instability tied to this year’s election is shaping conversations amongst white-collar leaders on the potential impact of the outcome on their businesses. This cycle has appeared to engage a uniquely high number of leaders within corporate America.  

Business uncertainty blamed for glut of profit warnings in the UK

Business uncertainty is driving a rise in UK-listed companies issuing profit warnings, according to a new report. The Times reported that one in five UK-listed companies (19.2%) issued a profit warning in the past 12 months, the highest rolling percentage since Covid. The FTSE sectors hit hardest in the quarter were industrials and technology, with businesses in industrial support services and technology hardware and equipment issuing the most warnings. Contract and order cancellations and lower sales have reportedly affected business revenues, indicating broader issues at play. Ongoing geopolitical tensions and the anxiety around the new Chancellor’s Autumn Budget seemed to intensify uncertainty as companies awaited clarity. 

And finally … So what does ‘Hot Mom International’ actually do? 

Hot Mom International, a company with a peculiar focus on ‘hot moms’, is planning a mysterious IPO. The FT reports that the company has displayed its intention to go public in the US, in more ways than one. According to the filing, the group markets to hot moms aged between 22 and 65 who “pay attention to life-quality, love travelling and fashion, and have the desire to show themselves.” With a business model comprising beauty pageants, online stores and cultural tourism, the company’s operations remain largely unclear. It claims a decade-long history of successful beauty contests however concrete evidence on the company is hard to come by.  

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