A Review of IR Practices in Bahrain. Mohamed Sr. Isa
The first step investors and analysts do to get company information is to check companies’ websites (Silver, 2004). According to Investor Relations Global Rankings (2006), companies integrate IR website to their IR programs due to several reasons including:
(a)Assisting companies in complying with regulatory requirements,
(b)Providing timely information updates,
(c)Low cost of implementation and maintenance,
(d)Maximizing the valuation of companies’ shares and,
(e)Learning more about their investors.
It is highly recommended to have an easy to use website for all audiences especially shareholders and prospective investors (Silver, 2004). According to one survey, almost 90% of investors state that websites largely affect their perceptions about companies (Thomson Financial, 2006).
In addition, IR websites result in improved efficiencies through reaching more stakeholders in less time with less effort and could result in other operational cost savings.
In one survey, the authors found that companies in USA use internet based IR more than that of those companies in UK and Germany. IR websites are used for a variety of reasons including providing financial Statements, interim reports, publishing press releases (Deller, Stubenrath and Weber, 1999), share price, and IR contact information (Andersen, 2003). Deller, Stubenrath and Weber (1999) found that internet technologies were not fully exploited in USA, UK and Germany. Hence, there is a big scope for improving the applications of internet to enhance IR websites in the three countries. It worth noting that it was found that companies’ online reporting practices are heterogeneous.
On one hand, websites are advantageous in the fact that they are dynamic and their contents can be changed instantly unlike printed materials like Annual Reports and brochures. Furthermore, websites have no size limits whereas the printed materials have their own limits in terms of size and number of pages (Marcus, 2005). On the other hand, websites come with some specific challenges (Bhojani, 2006). For example, keeping websites up-to-date is challenging. Another challenge is to focus on design of the website and ignore the contents (Silver, 2004). In other words, companies are advised not to place the cart before the horse.
b. Online Annual Reports
Online Annual Reports or Electronic Annual Reports are becoming very popular among companies and investors. According to Computershare (2008a), a leading financial market services and technology provider for the global securities industry, companies are distributing electronic copies of their Annual Reports to their shareholders to achieve several objectives including timeliness of reporting, printing cost savings, the ability to search within electronic copies and saving the environment to some extent. When it comes to cost savings, Hewlett Packard saved USD 300,000 the first year it allowed employee shareholders to elect to receive the statements electronically (Kuperman, 2000). According to Computershare (2008b), more than 80% of its survey respondents have elected to receive e-Annual Reports.
Regulators can play a significant role in driving more companies to publish their Annual Reports online. The United Kingdom Government has already issued an Act, UK Companies Act 2006, that require all listed companies to provide their annual reports on their websites (Office of Public Sector Information, 2006). The Securities & Exchange Commission (2008) in USA had issued similar rules requiring all companies to file electronic copies of their annual reports.
Some companies took a further step on the tools used above. They started publishing online Video Annual Reports (VAR). They argue these reports help shareholders get a better feel about the company and they argue these reports will replace the printed annual reports in the coming three to five years because of the cost savings and the corporate branding opportunities they carry. However, some opponents to this phenomenon argue that recent surveys suggest that the majority of shareholders still prefer printed reports (Lowengard, 2008).
In the same line, few US-Based companies including Pike Electric, California Pizza Chicken and Ruth’s Chris Steak House started using the free YouTube.com service to publish their Annual Video Reports (Snider, 2008a).
c. Blogging
One internet-based IR tool that is becoming very popular is Blogging whereby individuals share information on designated websites. Many blogs provide commentary or news on a particular subject; others function as more of personal online diaries (Wikipedia, 2008b). The Australasian Investor Relations Association (2006) had already published guidelines for listed companies on how to use Blogs which clearly shows the growing interest of using Blogging to communicate with current and potential investors. IR Professionals can read blogs of investors, analysts or the public to gain new information and market insights; in other times to disseminate information (Metzeker, 2007). Blogging is heavily used in Sun Microsystems to reach their different stakeholders (Schwartz, 2005).
Some IR Professionals at Dell consider blogging a normal extension to the available shareholders communication tools. In fact, Dell has had an official launch for its IR Blog to the financial community. Moreover, they argue it serves as a two-way communication channel between the company and its shareholders (Snider, 2008b).
d. Webcasting
Webcasting is increasing in popularity in the IR arena (Harrison, 2008). Companies are delivering live or recorded shareholders meetings and other important announcements using their websites and other service providers to reach to a bigger audience. These webcasts can be either audio or video-based. Several IROs are of the opinion that investors should hear and see the management of their companies because this adds impact and credibility to management’s messages (Harrison, 2008).
In March 2008, General Electric Chairman and CEO Jeff Immelt hosted a live audio webcast for its retail investors where one million stakeholders tuned-in to the webcast. The webcast discussed several topics about GE, its 2007 Annual Report, the market and the outlook for the company. GE conducts over 350 investors meetings per year many of which are through webcasts (Snider, 2008c). Imagine what kind of logistics will be required to host one million delegates for a meeting!!
e. E-Proxy
We are living the e-era. The letter “e” is added to many familiar words denoting the use of the internet as a means of delivery. For example, e-Commerce refers to carrying commerce using the internet whereas e-Government refers to the delivery of government services using the internet such as visa issuance and utilities bills payment.
In the arena of IR, the letter “e” has been added to the word Proxy to form the term “e-Proxy.” Companies use e-Proxies to deliver Annual General Meetings materials to their shareholders instead of physical documents sent by surface mail. In most cases, the e-Proxy is made available through companies’ websites.
The e-Proxy provides companies with several benefits including cost savings on printing and shipping costs of materials. For example, United Technologies Corporation estimates that it saved around USD One Million on such costs (DeMars, 2007). Microsoft, Sara Lee and Pharmos, all US-Based companies, have all reported six figures savings of American Dollars using E-Proxies (IR Magazine, April 2008). In addition, companies are likely to see an increase in voting speed and more participation by shareholders. The US SEC reported that 10.7 million shareholders agreed to receive e-Proxy materials electronically and 88% of votes made in 2006 were made through e-Proxies (DeMars, 2007). These relatively high figures in USA are likely to been seen in other parts of the world in the near future.
It should be noted that the US Securities & Exchange Commission has already made it mandatory to make the proxy materials available on the internet with effect of July 1, 2007. (Securities & Exchange Commission, 2007).
1.7 Conclusion
Investor Relations (IR) refers to how companies reach out to the financial community in general and to companies’ respective shareholders in particular. IR emerged in the 1960’s in USA due to the great pressure exerted