IR Monitor – 21 August 2024

In this week’s newsletter:

• Bigger bucks don’t guarantee a star. Would the UK market benefit from increasing chief executive wages? asks Alistair Osborne
• Yes, suggests Bloomberg (in answer to the question above). London’s IPO prospects are being tested by an executive pay gap
• Making the most of data during investor events: it’s becoming easier to connect event intelligence with other aspects of the IR programme, reports IR Magazine
• IROs arguably fret too much about being cast out of certain indices. They shouldn’t: Wall Street’s trash contains buried treasure, according to the WSJ
• Rethinking IR practices in a tech-driven world: even experienced CFOs can benefit from regularly reviewing and adapting investor relations strategies and techniques, suggests the WSJ’s CFO journal
• And finally … a true revelation to anyone working in IR. Academic research suggests that the key to better financial forecasting is a good night’s sleep

This week’s news

Bigger bucks don’t guarantee a star

The age-long debate on the disparity of pay amongst CEOs in the UK and the US reared its head again this week with the recent appointment of Brian Niccol as Starbucks CEO, with a whopping paypacket of $113 million (£88 million) to tempt him away from Chipotle. Yet, Starbucks’ recent poach was not just a stab in the dark. His predecessor, Laxman Narasimhan, had missed sales targets and investors’ expectations. Starbucks needed a Hail-Mary to save them, and Niccol’s appointment, which caused a 25% share price rise, might be the first sign of a new dawn. According to Alistair Osborne of the Times, “paying for performance should always be the mantra”, and time will tell if this recent hire will become an example of what paying for a great CEO can achieve.

London’s IPO prospects are being tested by an executive pay gap

We said that executive pay was all the rage right now… Bloomberg reported that research by the High Pay Centre think-tank showed that the average pay for FTSE 100 CEOs rose 2% last year to a record £4.19 million. That’s still pennies behind the 12.5% average increase that the S&P 500 CEOs locked in. Of course, that money is nice for the American-based CEOs, but it presents the City with a keen problem: the listings drought may be due to the lower compensation executives can expect in our City, while scrutiny on pay may be more lax in other markets. Linklaters hazard that pay is simply a factor rather than a determinant alongside voting rights, financial disclosures and listing reforms. But ultimately, there is a view that “balancing greater flexibility and trust in boards while maintaining strong corporate governance around executive pay could make London a more attractive location to list and grow.”

Making the most of data during investor events

Today’s hybrid, or solely virtual, investor events present companies with a wealth of data points ripe for the picking. Things like: attendee information; engagement metrics; click-through rates on shared links; feedback; sentiment analysis to online Q&As; geographical data and more are all proprietary data waiting for IR teams to gather and dissect. But recent research by IR Magazine found that only 25% of investor days include feedback surveys and only 6% use interactive polls. Event providers are more tuned in to the data potential that virtual meetings present and have now done away with siloed data-collection in favour of a single source of truth (without the need for cleaning). So how can you get started? IR Magazine recommends that companies consider making more of an emphasis on engaging with your audience online, be it through online Q&As or feedback surveys. 

Wall Street’s trash contains buried treasure

Index cast-offs, whilst they may not have the glitz and the glam of the S&P 500 or the Nasdaq-100, could serve to be a relatively under-the-radar area of profitability for investors, according to Rob Arnott and Forrest Henslee in the Wall Street Journal. The pair have unveiled a new stock index named NIXT, an index that invests in stocks that were recently removed from major indexes, such as the S&P 500. Stocks that are removed from the large indexes often have a price drop and have a tendency to drop off investors’ radar. The new NIXT index includes stocks that have been dropped for over five years with the bright idea that investing in these stocks as part of an index could still be profitable. Having been newly unveiled, time will tell whether the new benchmark proves to be an unearthed goldmine, or a non-starter. 

Rethinking IR practices in a tech-driven world

Some insights on how IR teams can optimise their strategies to achieve higher-level effectiveness are offered in the WSJ’s CFO Journal this week. First on the list is communication, and a recommendation that companies should post call transcripts following an earnings call or announcement as soon as possible. The article stresses that waiting too long “may be asking for trouble,” suggesting individuals within the company may fill the void with their opinion. The authors emphasise that choice of words matter, as controlling message delivery and keeping communication clear and consistent is key. Finally, keep discussions of any issues on an earning call simple and consistent. Communications should be built around a theme, as this is easiest to remember. Ensuring the message is simple helps investors and reporters digest information more quickly. The key take-away? Despite the likes of AI now integrated into earnings calls and public announcements, a simple but effective approach should still be the driver for IR-related events and strategies. 

And finally … the key to better financial forecasting is a good night’s sleep

A good night’s sleep could be the best investment of all, especially if you’re just starting out. New academic research suggests that those who operate in the financial markets perform better with more sleep. Researchers found sleep disruptions have a particularly negative effect on the information processing of analysts with less expertise (the juniors). Their findings suggest that sleep deprivation has a disproportionate effect on less seasoned analysts, so leaders, let your juniors get their eight hours!

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