IR Monitor – 9th February 2022
Investor Relations News
This week, we begin with the art of financial communication and why it is no longer enough to report statistics; investors want the bigger picture from D&I to compliance policy. We then move to executive pay which is hitting headlines this week on account of bigger CFO bonuses across the United States. In fairness, earnings across the US have been very respectable so far as John Authers of Bloomberg points out in his look at the outperformance of the corporate sector. Next up is analysis of another sensitive topic for the Investor Relations Officer: directors’ dealings. Here, the Investors Chronicle has been examining the purchases and sales processes of insiders. We go on to explore whether PR and IR professionals are fully aligned. Finally, we ask whether the IRO is better off as a saint or a sinner.
This week’s news
Financial communication post-Covid: the new role of IR
IR departments must equip themselves with new communication strategies according to IR Magazine last week. The rise in corporate governance discourse has enhanced the role of non-financial communication- diversity, pay and climate change policies are all now features of a company’s equity story. On top of this, compliance procedures have forced IR professionals to develop a solid understanding of legal concepts. According to this particular view, IR managers can no longer just be focused on share price; they must prepare for a new wave of investors who want the corporate story as much as the investment one.
Bigger bonuses lift CFO pay as companies rebound from pandemic
Remuneration for Chief Financial Officers increased by 16% at large U.S. companies in 2021, as reported in The Wall Street Journal. The findings, by employee-benefits advisory firm Mercer, show that the median figure for annual cash bonuses paid to CFOs was $1.2 million in 2021. This 36% spike reflects the stronger earnings of many companies after they were able to bounce back from the pandemic in 2020. In 2022, exec pay is expected to increase by a more muted 4.4%.
Beating expectations isn’t what it used to be
Investors developed an implicit (and arguably illogical) expectation to be surprised in the post-Covid 19 economy, according to John Authers (writing for Bloomberg). Investor relations departments clearly know how to purposefully set lower targets so that they can ‘beat expectations’ on the big day of results and, as a consequence, the private sector appears to be significantly outperforming. But that no longer impresses so much, the way investors see things. On this interpretation, chief executives are so often talking down their prospects, partly out of self-preservation, that it becomes difficult for investors to get excited. In Authers’ view, executives should be focusing more on reassuring investors about the supply chain issues which are an increasingly alarming problem within the global economy.
What we can learn from insiders’ buying and selling
In this personal observation piece for Investors Chronicle, directors’ dealings in company shares are analysed by Steve Clapham. Executive buying or selling is always a sensitive topic for the Investor Relations Officer.. The purchase of a small amount of stock by an incoming Chairman or CEO is usually pretty meaningless Clapham suggests – such individuals haven’t been at the company long enough to have a properly informed view. However, instances of the CEO and CFO dealing in the same way are greater signs of comfort. Executive selling is more often the information-rich transaction. Weighing past performance when evaluating a director’s sale remains paramount here. The article concludes by urging a tightening of the regulations around disclosure of directors’ dealings more especially in markets outside of the UK.
Are PR & IR working closely enough?
Following Unilever’s multiple reputational crises over the past few weeks, PR Week has questioned whether Public and Investor Relations professionals are working together closely enough to manage corporate reputations. It is suggested that the PR and IR functions should be seen as two sides of the same coin as both functions are outwards facing and both serve the same purpose – to communicate effectively with the outside world. Understood this way, organisations need professionals who understand both disciplines and who can balance the interests of a range of external audiences.
And finally … should the Investor Relations Officer be a saint or a sinner?
This is actually a harder question to answer than it sounds. DIY Investors are quite clearly moving against the trend of ESG investing according to The Telegraph. With two in every three pounds going into ESG funds in November 2021, contrarian investors have turned conversely to ‘sin stocks’ – companies screened out of ESG funds – to protect their savings from market volatility. Stocks such as Imperial Brands and British American Tobacco, along with alcohol-maker Diageo, have risen up the ranks of the most popular holdings according to Interactive Investor. Such stocks have been excluded from ESG funds because of the addictive nature of tobacco and alcohol, but it is precisely this quality that makes them more reliable investments as “Sin stocks hold up better when times are uncertain. They are more predictable than most industries – you know people will drink and smoke whatever the economic conditions.”
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