VICTORIA GEDDES, ECECUTIVE DIRECTOR

Getting feedback from investors and other key stakeholders is a given within the investor relations profession. Many companies will do this informally following a roadshow and some will undertake a more formal engagement process, including the Chairman, ahead of the AGM. So a view often expressed by companies is that their relationships with shareholders are strong enough to ensure frank and fearless feedback and independent surveys would not tell them anything they do not already know.

However, the reality will be that these conversations are often narrowly focused both in terms of who is asked and the subject matter discussed. They typically will not include former shareholders and not all fund managers and analysts feel comfortable speaking their mind, preferring to keep relations cordial in order to maintain open lines of communication with the company. Having conducted a number of perception studies for clients over the past fifteen years, we have found that companies are always surprised by some of the feedback they receive.

So what is an investor perception study?

It is a survey of a company’s capital markets audiences including current, past and potential institutional shareholders as well as sell-side analysts. Importantly perception studies are conducted by a third party, either by phone or face to face, and the responses are provided on an unattributed basis. This is crucial as it frees those participants who might otherwise feel uncomfortable delivering a strong message directly to the company.

The value of a perception survey is enhanced if it is conducted annually or every second year. Measuring changes in perception over time is one of the benefits derived from embedding such surveys into the IR calendar.  They are not small projects, typically requiring up to an hour of each participant’s time and will cover a range of topics including the company’s strategy, business performance, prospects for growth, communications, management strengths and weaknesses, quality of broker coverage, areas of competitive advantage, board performance, capital management and catalysts for investors to purchase stock.

What is an investor perception study designed to deliver?

Tangible measurement of the effectiveness of a company’s investor communications

•  the only metric that should be applied to an investor communications function is whether your target audience is hearing the Company’s IR message and to what extent

Insight into your investor audiences

•  identifies differences between key subgroups (owner vs. target, sell-side vs. buy-side, domestic vs. offshore) so you can better understand where gaps in knowledge exist

Analysis of your transparency and disclosure practices

•  uncovers key pieces of information that are not getting through and what might be impeding a better understanding of your corporate investor relations strategy

Alignment of Board, management and IR’s understanding of investor perceptions

•  accurately conveys the thoughts, concerns and perceptions of the investment community to the Board of Directors and management team to ensure that everyone is being communicated with effectively and hearing the same messages

A strategic tool against Activism

Traditionally it has been management teams conducting perception audits in order to ensure they are not missing any subterranean discontent or to check whether their messaging on strategy and growth is hitting the mark. However, today many Boards of Directors have also come to view an externally conducted perception study as a valuable tool to take the pulse of their shareholder constituency. It’s better to find out what the reasons are for any concerns before an event, rather than during a contested proxy battle or when the remuneration report unexpectedly receives a strike at the AGM. The growing trend toward shareholder activism, which we have been highlighting over the past 18 months, has resulted in Boards becoming much more interested in the IR function, and the role it plays in keeping Directors in tune with investor sentiment. An annual perception survey and periodic summation of feedback from one-on-one meetings goes a long way toward achieving this goal.

Best time to conduct a Survey

It is worth bearing in mind that there are only certain times of year when the target audience is available and has the time to devote to providing this type of feedback. If you take out results reporting months of February and August and 2-3 weeks on either side, together with public and school holiday periods, this leaves late April to June and October to mid-December to undertake this work. We allow up to 2 months to complete an assignment for a client. So if you are looking for some structured and comprehensive insights from the investment community ahead of the August reporting season and planning for the AGM, now is the time to do it