IR Monitor – 30th March 2022

This week’s news

The future CFO 

This year’s Raconteur Future CFO report published in The Sunday Times has argued that several factors have combined in recent years to allow finance chiefs to enlarge their sphere of influence. So much so, in fact, that the role could now be described as chief collaboration officer. This is because time-consuming financial tasks that once had to be performed manually are now being handled by automated systems which, in turn, has given CFOs more freedom to operate outside the accounting silo. While their role historically focused on compliance, reporting and financial management, CFOs must also serve as consultants and communicators. Using real-time data and analytics, they are providing insights into their companies’ operations, influencing their strategic direction. Most notably, between 2016 and 2021, the percentage of CFOs responsible for investor relations has grown from 44% to 64%.

Fifteen percent of IR professionals come from the sell side 

IR Magazine has delved into the data provided by the fifth biannual Global IR Salaries & Careers Report which has found that, although a corporate finance background is the most common route into investor relations, 15 percent of all those who work in IR have come to the profession from the sell side. Whilst 30 percent of all IR professionals have a corporate finance background, a quarter of all IR professionals come from the capital markets, with a background in sell-side research offering the most likely path into the profession. Interestingly, those who have been in IR for less than five years are more likely to have come from capital markets than those who have worked in IR for five years or more, indicating that this sell-side trend may be growing.

An unusual coalition assembles against the S.E.C. 

An unusual coalition of labour activists, professors, corporate law firms and hedge funds are pushing back against S.E.C proposals to change the rules around ‘swaps’, DealBook has reported.  Swaps are one of the ways hedge funds and other large investors build up positions in companies without making others aware of their interest. Under the S.E.C.’s new rules, investors who use swaps to build large positions in companies would have to disclose those trades within a day of making them. The S.E.C. has received more than 1,200 comment letters about the proposed rules, a sign of the depth of feeling about the issue. Complainants include activist hedge funds who use swaps and say that earlier disclosure would allow companies to use methods to block them from buying shares but also labour advocates who argue that the rules would make it harder for unions to use pension fund investment to push for changes.

London’s buyback bonanza continuing despite shakier conditions  

Rising costs and global volatility have done little to dampen cash returns for shareholders, as buyback plans announced in 2022 already exceed 2021 totals according to Investors’ Chronicle. Shell has announced the largest buyback programme of all, worth $8.5bn, making oil and gas companies the leading cohort of the trend. Yet, buybacks remain a contentious topic. Whilst they may reflect the success of a company’s current performance, and reflect conviction this trajectory will continue, the money could be invested to boost organic growth instead. As to whether the ‘buyback bonanza’ is here to stay, analysts predict the mood may be changing in the US after senator Elizabeth Warren and others have publicly criticized buybacks.

Going private appeals 

The Times has reported on the increasing number of UK listed companies being snapped up by private equity firms. Research by accountancy group BDO has found that the number of UK listed companies that were taken private has risen from five in 2020 to 19 in 2021. As calls for transparency, ESG policies and a clear social enterprise intensify, corporations are weary of scrutiny and thus look to the private market as an alternative to such pressure. A further contributory factor to going private is the improved reputation of private equity firms themselves, who may have been the villains of the corporate world in years gone by but, according to this article, are becoming increasingly seen as the white knights.

And finally … We are Not the Securities and Environment Commission 

In a statement entitled “We are not the Securities and Environment Commission- At Least Not Yet”, Commissioner Hester Peirce has outlined her vehement criticisms of the climate-related disclosure rules the U.S. Securities Exchange Commission proposed on the 21st of March. In a 3-1 vote, the SEC proposed rules that would require all public companies to disclose detailed information about their climate risks and strategies in annual reports and stock registration statements. Peirce was the only Commissioner who voted against the proposal, stating she believes there to be clear deficiencies in the breadth of regulation the proposal covers. The elements she states are missing include a “credible rationale for such a prescriptive framework when our existing disclosure requirements already capture material risks relating to climate change”. Ultimately, Peirce warns “we are here laying the cornerstone of a new disclosure framework that will eventually rival our existing securities disclosure framework in magnitude and cost and probably outpace it in complexity”.

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