IR Monitor – 9th November 2022

This week’s news

Insights from leading institutional investors and proxy advisors

At a breakfast panel hosted by FTI Consulting in Dublin, experts from BlackRock, Fidelity, Glass Lewis and ISS came together to discuss the key themes they see companies facing in the next reporting season. Top of the agenda for all four parties was the cost-of-living crisis. According to panel participants, companies will be expected to explain what they have done in terms of wage increases for employees, one-off support, or non-financial benefits in their remuneration reports. In the same vein, increases in executive salaries this year will be subject to increased scrutiny, and remuneration committees should be prepared to come with strong arguments. The experts also commented on the lack of needed expertise on Boards of large companies, with few Boards sporting experts in Cybersecurity, Climate Risk and Capital Transformation despite the increasing importance of these issues in the futureproofing of firms. The panel emphasised that all stakeholders should be considered in the next round of reporting, from employees to shareholders, and that Board overview and responsibility will be key, with a particular focus on the Chairmen and whether expertise is aligned to the targets they will be overseeing in the coming years.

Mastering the investor presentation

Crystal clear communication and proactive use of digital tools are crucial to the effective delivery of a presentation, writes IR Magazine. For a company, the focus must be on answering the needs of the analysts and investors and keeping things simple in doing this. Here, catchy visuals and actionable tips can play a role. Be mindful of who is in the audience and always think two steps ahead of everyone. Harry Shah explains the ‘so what?’ structure: ‘When you look at what’s going on around you and the macro trends, think about the headwinds and the tailwinds. So what? How is your company and your strategy affected by that?’ Tailoring presentations to show investors that the company’s financial model is based on the wider market opportunities could gain IROs an edge.

The path to a soft landing runs through corporate earnings

Jonathan Levin from Bloomberg observes that – more than halfway through third-quarter earnings season in the US – projections of a looming economic apocalypse still aren’t reflected in corporate outlooks, as many stock-market bears expected. One explanation is that C-suite smooth talkers are simply managing expectations so as not to set off a cascade of negative sentiment among
investors and analysts that makes a horrible year even worse. Another, more hopeful, explanation is that we are genuinely coming in for a soft landing. Levin attempts to reconcile both explanations. His advice to investors: “Even if you think you’re being manipulated by corporate executives, it may well be in everyone’s best interest to let it keep happening”.

What the boards of all companies should know about ESG trends

Harvard Law School Forum on Corporate Governance has published an article aiming to provide an understanding of what boards of all companies should know about ESG regulatory trends in Europe. In the EU, an impressive body of regulation has been developing over the last few years to ensure social and environmental transparency of large companies. Now, more than ever, it is important that businesses comply with sustainability obligations, many of which are set to come into force from January 2024. These include extended ESG disclosure requirements, the establishment of the first ever “green-list” by the European Taxonomy Regulation, as well as a more inclusive and better-enforced due diligence legal regime undertaken by the European Commission. As highlighted by the article, these developments will have a knock-on effect, resulting in a greater number of people dedicated to ESG in companies, an increase of directors and management liability, the rise of mission-led companies, as well as greater sharing of value within companies.

A revolution in shareholder democracy is coming

The New York Times has written on BlackRock’s decision to give investors even more of a voice in the boardroom. In a letter to his clients, CEO Larry Fink writes that a “revolution in shareholder democracy” is growing. For its part, BlackRock will expand a program that lets investors in its funds choose how they vote in corporate elections, in a recognition that shareholders “don’t want to sit on the sidelines.” While the next generation of investors will “increasingly demand to be heard,” according to Fink, he concedes that giving investors more say could make the business of running a publicly traded company messier than ever. Giving shareholders more say may force companies to adopt ever more political campaigns to reach a more expansive base of voting investors.

And finally… Save Simpson’s Tavern

“Irrespective of any internal connection . . . I support in my role a fair playing field and open dialogue with any company I invest in. Others may have different priorities.” So writes an apologetic fund manager to Giles Coren at The Times, in connection with the “rogue landlord” which has forced the closure of Simpson’s Tavern. London’s oldest and most celebrated chophouse, Simpson’s has traded at 38½ Cornhill since 1757. It is the tavern which inspired Charles Dickens and now it needs the ghost of Christmas yet to come. Readers of the IR Monitor can join the campaign to save Simpson’s here.

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