IR Monitor – 14 June 2023

This week’s news

New ways to target investors outside of your region – IR Magazine webinar

Last week FTI tuned in to an IR Magazine webinar on how best to go about targeting international investors. The main takeaway – don’t! Or at least, don’t try international markets unless you know you have a solid handle on your domestic market, know exactly who your domestic investors are and know how your domestic messaging is being received. If all these provisos are met and you are keen to look further afield to diversify and gain access to more capital, the speakers then advise meeting in person in order to grow strong relationships, despite budget and environmental considerations.  They also warn listeners to research and familiarise themselves with cultural considerations – you don’t want a small mistake like using a culturally insensitive greeting to ruin your chances of getting a big investment. Despite the warnings, 91% of attendees declared an interest in expanding their international investor base.

EU eyes conflicts of interest crackdown on ESG ratings

New EU rules are set to be introduced to regulate agencies that rate businesses and investment funds on their ESG credentials. As part of a crackdown on “greenwashing,” agencies will be required to certify with the EU’s financial regulator and divest from any conflicting activities, such as consulting or offering insurance to the businesses they rate. Failure to address conflicts of interest could result in fines of up to 10% of annual turnover. The FT sees this latest initiative as step forward in countering greenwashing & ensuring private financial flows are directed towards genuine environmentally friendly activities. The proposal highlights deficiencies in the current ESG rating market and seeks to establish common rules to restore confidence. The regulation, once agreed upon by the European parliament and member states, will cover ESG rating providers in Europe and those from third countries operating in the bloc.

Dear CEOs: focus on profit not politics

In recent years, the shift from shareholder primacy to a stakeholder model has led companies to face political controversies and divided public opinion. Bloomberg argues that the stakeholder model, although well-intentioned, is inherently political and detrimental to both profits and society. Milton Friedman made the original case for shareholder primacy in 1970, emphasising the importance of maximising profits for the benefit of the economy and society. By prioritising profits, CEOs can avoid the complexities and trade-offs that arise when considering the diverse interests of multiple stakeholders. Moreover, shareholder primacy does not imply a lack of concern for communities or workers, as long-term success and reputation are closely tied to responsible business practices (a point which advocates of stakeholder capitalism are also keen to make). The opinion here is that companies should separate their political agendas from their core operations, focusing on profitability and allowing government regulation to address societal concerns. The article concludes suggesting that, by returning to a shareholder primacy approach, CEOs can avoid alienating customers and contribute to a more cohesive society.

The proxies: a celebration of substantial corporate perks

The FT has crowned this year’s winners of the Proxy Award – but they’re not exactly a cause for celebration. Among the winners are NeoGenomics’ CEO Chris Smith, who received $2.2 million in “relocation costs” and W.M. “Rusty” Rush, CEO of Rush Enterprises, who enjoyed personal use of a company ranch and aircraft, totalling $451,691. SmileDirectClub’s CEO David Katzman and COO Steven Katzman received millions in compensation despite the company’s plummeting stock performance. Elsewhere, Liberty Media’s CEO Greg Maffei split his aircraft spending across four companies within the group, totalling over $1.2 million. (“Environmental sustainability has implications for markets, and our investors”, says the Liberty Media website). The Proxy Awards do their bit in highlighting excessive compensation practices and raising necessary concerns about corporate governance and accountability.

LSE: losing race to attract listings?

London received some positive news in its efforts to attract companies to list on the stock exchange as Alasdair Warren, CEO of WE Soda, revealed his intent to list in London. This good news follows a tumultuous few months and Stéphane Boujnah, CEO of Euronext (a group of seven stock exchanges competing with London) was quick to criticise what he sees as London’s post-Brexit challenges. Boujnah cited examples of companies like Universal Music, which chose to list in Amsterdam instead of London, as reflecting the changing landscape. However, Charlie Walker, head of primary markets at the LSE, disputed these claims and reaffirmed London’s attractiveness to global companies, highlighting the access to international investors, capital, and liquidity which it offers. “Adding up volumes across the seven different exchanges which Euronext own and comparing them to the LSE is a bit like comparing the points Manchester City have with the next seven largest teams combined because they have the same owner,” he added in The Times.

And finally… Wall Street has a new phrase 

Alphaville has noticed something new and awful brewing in the world of investor relations – the rise of the phrase “double click” in company call transcripts. They have documented that this has been used 165 times on a twelve-month rolling average as of early June 2023. From asking questions on growth in Europe to cloud verticalisation, from security to gross margins, analysts have a new favourite phrase, it seems, and worse still it doesn’t appear to be going anywhere any time soon.

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