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GE Reports – Investor Relations Branches Out

When it comes to communicating with shareholders, many IR departments walk a fine line between the demand for more insight from shareholders, and the concern of legal and regulatory issues.

One of the issues with additional communications on the Investor Relations page is that its very placement suggests a formal and authoritative nature. One company is eliminating that problem by communicating with shareholders and customers alike via a separate website with its own domain name. This is a corporate blog, clearly linked from the main investor landing page.

GE reports

GE Reports is hosted at www.gereports.com. The link from the main site is in itself commendable, and the benefits of the additional site are numerous. The site is not specific or limited to investor communications. Instead, the site provides GE with a forum to publish its take on virtually any matter that arises.

The beauty of this idea is that it allows GE to not only respond to issues raised by the media or others, but also to express opinions and ideas proactively. In this way, GE can comment on both potential trouble and potential success in a way that helps to shape the discussion on such topics.

While a good idea in general, our concern here is with the value of such a site to Investor Relations departments. This value comes in many forms, both overt, and implicit. For example, the top post on this day notes the upcoming investor meeting for GE Capital including the fact that both a webcast and the materials will be available online. Such information not only reminds both investors and non-investors alike about an important upcoming event, it also demonstrates the company’s commitment to its investors.

GE Reports Answers

GE reports

Perhaps the easiest way to see the enormous potential benefit of such an endeavor comes in the form of the Q&A that is posted regularly. The most recent had three questions posted. The first question was whether or not GE’s cash flow from operations minus asset sales is negative (and has been for years). I have heard this on occasion too. (I do not own GE stock, nor have any relationship with the company.) In the regular IR section of the official website, dispelling a rumor like this comes with some pretty thin ice to skate on. But here, a quick answer regarding GE’s cash flow is not only possible, but expected. (However, I am slightly disappointed that the answer did not directly answer the part of the question about asset sales.)

The next question asks about forecasting GE’s dividend after 2009. Again, this is a hot button issue that has many current investors nervous. The answer is a quick no, but more importantly it provides a link to a story about GE’s dividend, albeit the 2008 dividend. Such opportunities to steer investors in the direction of information that the company has already produced are tougher to come by on the more static IR pages since it requires anticipating not only the questions investors will have, but how they will be asked as well.

Good News

Finally, the GE Reports site gives the company the opportunity to highlight good news. Bad news is, as we all know, preferred by the mainstream media, and thus propagates on its own very well. Good news on the other hand is often considered “not news” and thus not disseminated on its own as well. A potential investor looking for how GE has been doing recently can read through multiple articles highlighting various company achievements and milestones. Of course, care needs to be taken to avoid becoming nothing but a cheerleading site, or investors and customers alike will quickly determine the site to be less useful for real information.

Best Practices

Obviously, setting up such a site isn’t something that is done on a whim, but this type of information source is clearly an advantage when done properly. Consider that press releases and regulatory filings cover much information, but to audiences who may not have the same interests as others. A report, or up to date information site like GE Reports can help your company reach yet another group of people. The upsides for both public perception and investor confidence are well worth the cost of looking into the concept further.

What Good Are Those IR Awards?

If you’ve ever found yourself off the IR awards list (or the short list, for that matter) your reaction was probably something along the lines of, “Well, they’re just beauty contests anyway and they really don’t signify much”.  I know, I felt pretty much that way when I practiced investor relations on the corporate side.  It seems there just were not enough trophies to hand out to all of the campers.  

Unfortunately, I’m here to tell you that there is actually academic research that shows that being nominated for investor relations awards can help your stock price.

In a March, 2008 working paper, Professor Richard J. Taffler of The Management School, University of Edinburgh, together with Vineet Agerwal, Angel Liao and Elly A. Nash authored a study entitled “The Impact of Effective Investor Relations on Market Value”. In their study they use nomination for IR Magazine’s “Best Overall Investor Relations” awards over a three-year period as an indicator of quality investor relations. Their study shows that firms that are seen as having effective investor relations, as indicated by being nominated for the awards, earn superior abnormal market returns both in the year of nomination and the year following the awards.

The part of the study that is of the most interest to me is the quantification the authors put on the abnormal risk adjusted stock returns earned by firms in the year following their nomination for an award. The results show that all nominated companies earned 80 basis points per month superior market returns. When you compound 80 basis points per month over a full year, the result is an excess return of 10%.

So while the awards may be a beauty contest, they appear to be one where there is genuine prize money at the end.

Investor Relations and Corporate Governance

When it comes to investing, knowing about what a company does, who its competitors are, and how its financials look are all critical factors.  But, there is another critical factor that any savvy investor will list right at the top, and that is the quality of management.

Judging managers on an individual basis is a process which must be handled by each individual investor.  There is no way to quantify the quality of a manager or executive in such a way that can be usefully published by the IR department.  However, there is something that Investor Relations can do to help investors determine how those managers can and should behave.

Corporate governance became a hot topic in the stock market meltdown following the bursting of the Internet bubble.  It is once again on the lips of many investors as revelations come to light about how many companies behaved during the recent sub-prime mortgage build up and how they reacted once it began to become clearer that there might be a problem.  Investors want to know: who is it that is running the company, how are they held responsible, and what rules guide their behavior.

The Qualcomm Investor Relations page contains the kind of information that investors are looking for these days.  Under the Corporate Governance section of the IR pages, there are several documents available for download and review by investors.  These documents include the Governance Principles and Practices of the company as well as the oft requested “Code of Ethics.”  Additionally, the same page also lists the membership, structure, and charter of important management committees.

Under the Audit Committee section, for example, an investor can learn exactly which board members are on the audit committee.  The investor can also read the mission of the audit committee (here as “Purpose”).  Even more detail is available such as the fact that the audit committee should meet at least four times per year.  If an investor feels this is too little, they can look elsewhere for their investment opportunities, but regardless of whether they choose to do so, no one will be able to later complain that they were unaware of just how often the audit committee was required to meet.

Then, the authority AND the responsibilities of the committee are laid out in full detail for the investor’s inspection.  Most companies have similar documents, but not all of them make them so easy for the prospective investor to find and view.  Such easy access to valuable information like this is a key goal for investor relations departments and websites.

It’s not just the Audit Committee.  The same information is also available for the Compensation Committee, the Finance Committee, the Governance Committee, and the Strategic Committee.  What is even better is that all of these documents are available in the investor’s choice of format.  Regular webpage (HTML) files are available as well as a PDF file download.

It is no wonder then that Qualcomm is able to boast of many awards related to its company and the Investor Relations department’s efforts to communicate openly and easily with its investors. 

Best Practices for Investor Relations

Look into getting similar information on your company website.  After all, most of the “mission” documents of these committees are already public information in some format in other locations. Putting them on your IR site shows your investors that you are serious about your communications with them and keeps them from having to dig all over the place to find these important documents.

Mobile Services for Investor Relations

Recently, I came across something interesting on the Bayer Investor Relations site, “Mobile Services.” Most people probably imagine an investor or potential investor sitting at a computer while viewing an IR website. After all, many of the documents that form the cornerstone of Investor Relations don’t lend themselves to being viewed on the tiny screen of a mobile device. Can you imagine trying to read a prospectus on your phone or PDA?

SMS or Text Messages

And yet, some things are very useful for the mobile investor. Bayer’s site for example offers SMS (text messages) for IR News and share price. While many IR sites offer email alerts, the use of SMS or text messages seems to be less common as of yet.

For every day use, there probably aren’t a lot of investors looking for a text message every time something gets posted, but in certain cases, particularly when an investor is waiting on certain information, a prompt text message might be exactly what they need.

There is some care to be exercised here. Regulators likely won’t consider the distribution of important financial information via text message as meeting the qualifications of public disclosure, so you will want the text message to go out at the same time or after the relevant disclosure is made in the company’s traditional public forum. On the other hand, an SMS message that arrives days or even hours after the release of the information elsewhere is likely to be regarded as poor service or insulting. After all, someone doesn’t sign up for quick instant notification only to be delayed in receiving the information.

Mobile View Website

As more devices become capable of displaying web based content, more investors will be looking up information on the go. Perhaps based upon a conversation at lunch, an investor will try and look up the IR page of a company between meetings, or somewhere else on the go.

Although the mobile devices industry is working on solutions for displaying full-scale content, nothing compares to having a page specifically formatted for mobile users. In fact, with a simple bit of coding, a page can actually detect if the visitor is using a mobile device, and if so, display the mobile page instead of the full page.

Bayer IR Mobile PageAgain, the Bayer website provides a nice example of this function. This functionality is not on the IR site alone, but rather part of an integrated mobile site interface accessible via www.mobile.bayer.com. Once accessed, the IR page is an easy click away. The information is easy to read and formatted so that the mobile user doesn’t require any tedious scrolling or searching around to find what they are looking for.

Also, knowing that the information most likely to be sought on a need to know now basis by mobile users is the stock price, the mobile page has been laid out such that the quote is right on top allowing any mobile user to quickly access the page, get the price and then keep moving, which is what being mobile is all about.

Best Practices

Launching a mobile site is a fairly straightforward sounding process. However, it will work best if it is part of your overall template or content management system. Tediously reformatting every posting for mobile viewing is not only inefficient, but error prone as well. A well designed IR site infrastructure, however, can allow each posting to get the mobile treatment with little or no manual intervention, usually through some non-page specific formatting such as CSS or other technology. Look to these methods for implementing a solid mobile viewable option.

As far as SMS messages go, the best option is to integrate them with other electronic delivery options you may already use. For example, if, like many companies, you provide email alerts, designing your SMS system to provide a snippet of the email alert would avoid duplicating efforts. Assuming your email alert system is already compliant for issues like timing, piggy backing your text messaging on it should keep it in line as well.

As always, the key is to provide relevant, timely information to investors. With a mobile formatted page and SMS alerts, there are two new ways to do just that.

Trick or Treat – Investor Relations Style

In the world of Investor Relations, no one wants to think of anything as a “trick.” Yet, as Halloween approaches, I can’t help but use the holiday theme. So today, we talk about IR Trick or Treat!

The Fun Size Snickers Bar Treat: The Investor Relations Society will be awarding their IR Best Practice awards next month at a November 25 ceremony. Several categories make certain that there will be a little something for everyone when the judge’s remarks come out. Check out the “shortlist” here: http://www.ir-soc.org.uk/index.asp?pageid=267

The Vandalized Neighborhood Trick: The recent financial meltdown has left no corner of the markets unscathed. Unfortunately, not all the bad actors will be punished, and several of those who have no blame will be scarred in some way by recent events. Let’s hope that all the financial maneuvering by various governments and central banks make things better soon.

The Snack Size M&Ms Treat: The IR Magazine 2008 Continental Europe Awards were given out in October. While the magazine does not release its findings and reasons to the general public in order to be able to sell them as a for-fee study, the results give IR departments world wide a place to look to see what good cutting edge IR looks like.

The Toilet Paper Covered Trees Trick: When things go bad, it is human nature to try and find the bad guy that caused them. When things go bad and the media is around, the first finger pointed is the last point reported. The media (and thus the politicians who crave their attention) have pointed their quick finger at “excessive executive compensation.” No one would disagree that corporate boards at some companies have become rubber stamps especially when it comes to CEO pay, but if we “fixed” executive compensation tomorrow, would that make everything better? Probably not. Let’s hope that the focus here doesn’t preclude thoughtful examination of other potential problem areas.

The Healthy Snack “Treat”: There is one in every neighborhood, that family that gives out carrot sticks or some other healthy snack to combat all that candy. No one likes to see the kind of mess the economy and markets are in right now, but the silver lining is a wake-up call to all investors, lawmakers, regulators, companies, and employees. Things can and do go wrong. Going out on a limb just because something “seems safe” is a recipe for disaster. Recent events should cause some of the hundreds of people I’ve seen laughing at good solid financial advice because they found the “secret” in some book or website to re-evaluate their financial situation and hopefully make moves to more solid grounding.

The Ratings Agency “Trick”: Those of us who work in the world of investing and finance have been wondering since day one what the media has just started noticing. How could all of these HIGHLY RATED investments just up and crash like this? What good is a rating or a ratings agency if they can’t see a train wreck this big coming? Hearings in the US Congress have been predictable, but people remember.

The truth is that at the end of the day, times are tough for the IR world, and they aren’t going to get easier any time soon. But, the good news is that there is a renewed focus on investor communication, especially from those companies who are eager to show that they are not in the same boat as others. Investor Relations has sometimes been slow to evolve usually due to regulation and uncertainty about liability. Now, with the focus on transparency and making sure investors are getting the straight story, maybe the IR industry will be able to leap ahead.

Dellshares One Year Birthday – Dell IR Blog Turns One

In two weeks, Dell’s leap into the world of Investor Relations blogging will be one year old. Birthday’s are always a good time to look back and take stock of how one has fulfilled their potential and goals. So, today, we take a look back at one year of Dellshares.

Dellshares Begins

On November 1, 2007, Lynn Tyson made the first post on the Dellshares site citing the founding philosophy of Dell that direct relationships with customers were advantageous. Also noted was that credible and relevant organizations were taking advantage of technology and the Web and there was no reason IR shouldn’t either.

The post laid out the goals and hopes for the new blog from the Dell Investor Relations team. The main goal was to not just push out information, but to also give perspective, context and meaning to that information. Another goal was to be able to have a dialog with investors by answering questions.

The biggest goal of Dellshares may have been the one that got glossed over at the end of the post. Michael Dell noted that “there are conversations going on about us all the time and we want to be part of those conversations.” The Internet, for all of its potential as a useful and widely available means of distribution information, is just as powerful at spreading rumor and innuendo. In the end, Dell was hoping that by giving information straight from the source might help color those conversations that are going on all the time with at least a dusting of the company’s version of the truth.

Also noted, were the “legal obligations” that would limit what could and couldn’t be said, and even when it could be said. However, the overall goal was to provide an additional source of investor information, and hopefully an improved source as well.

The Results

While Dell’s stock price is down from 29.70 on the day Dellshares was launched to an 11.99 closing price on October 23rd, hardly anyone will be blaming the Dell blog over issues like market conditions, and the sub-prime mortgage mess in the U.S. So, in what way should we evaluate the success of Dellshares? By using the goals that Investor Relations had for Dellshares when it was launched.

Dellshares archives show 29 posts in the past year. On one hand, that seems very low. On the other hand, a company can only comment so many times on its strategy and corporate moves. Considering, those 29 posts make an average of over 2 posts per month, one could say, that as a pure number that would be a passing grade.

However, what matters is what those posts were able to accomplish. Recent posts have taken on an “Oh, by the way” tone that doesn’t seem to convey that perspective and meaning that was hoped for. The 9/16 post is less than 200 words and says that pursuant to a March 31st announcement that Dell would be evaluating its ownership of Dell Financial Services, that they had decided to keep it. The perspective and meaning is exactly what is missing from the post. Compared to more meaty posts in December 2007, such a post is a bit of a disappointment.

Other posts though continue to show the promise for this form of communication. The posts made with the release of quarterly earnings data are particularly useful for those investors who don’t want to parse the standard press release, nor listen to a full conference call. These posts give Dell a way to highlight the same information they highlight for analysts on conference calls for retail investors.

Some of the best posts are those that make a comment on strategy as previously announced. These posts give a concrete example of where the company thinks it is executing on a defined objective. For example, the August 12, 2008 post describes the roll-out of a new line of notebook computers. It reminds investors that one of the company’s five strategic priorities is notebook computers, and explains how the new line advances that goal. The great thing about a post like this, is that an investor can read the post and decide if they believe the company’s move is the right one whether in terms of size, aggressiveness, or overall utility. If the investor likes the move, it can be a reason to invest. Conversely, an investor who feels that such a move is too small, too aggressive, or even ill-thought out, can avoid investment, or look to sell their shares.

One thing that does seem to have fallen by the wayside, is the objective of answering questions from investors. Since the first two months of the launch of Dellshares, there haven’t really been any posts directed at investor sentiment or questions. One wonders if other posts are tailored in response to such questions without directly mentioning that fact. Either way, it does seem that investor participation has gone away, with many posts in the last 6 months have just one or two comments, and many having zero.

The Year Ahead

For whatever success the Dell IR blog had, it did do one very important thing. It started the dialog on the feasibility and the wisdom of using such technology in the IR space. A major well known corporation like Dell launching such a venture gives it instant credibility and the IR space in general can be thankful for that. Let’s hope in the year ahead that Dell returns to Dellshare’s roots and once again attempts to add the elusive context and meaning to information, as well as re-engaging the shareholders in the postings.