The UK's Investor Relations Society is seeking to put its members at the heart of the governance role according to a guidance consultation published this week.  The consultation is the Society's response to the FRC's own consultation on the UK Governance Code and the Stewardship Code.  Of particular interest to governance professionals will be Principle 2, 4 and 7 (see below).

It's clear that the intentions of the IRS are very well intended against current and emerging best practice. What is disappointing, however, is a complete absence of  acknowledgement for the role of the company secretary, the traditional route to the board used by engaged investors. Unless perhaps company secretaries fall under the category of "appropriate governance officers".

A disconnected relationship between IR department and the company secretary's office does not help informed engagement.  We know that getting the annual report and proxy mailing out is a mammoth undertaking, but going on holiday to recover ahead of the AGM creates problems. At the peak of proxy season investors and proxy analysts need fast, accurate information and clarification to ensure that votes are cast on a fully informed basis.  Our time horizons are closer to 2 hours before a publication or voting deadline, not two weeks.

Manifest's ongoing trawls through issuer websites show that whereas three or four years ago it was relatively straightforward to track down the company secretary's contact details, today that information has become obscured through generic information email addresses or call center telephone numbers. Busy people need gatekeepers, that's true but how this approach is supposed to improve investor dialogue is not readily apparent.

A recent theme of criticism levelled against investors has been a lack of joined up thinking between the governance team and the portfolio managers. if issuers want to see a stronger connection it needs to lead the way be ensuring that their own investor communications channels don't fall foul of that same disconnect. In that regard, the IR Society's consultation is both welcome and timely.

Principle 2. Companies should ensure that boards are provided with appropriate information in regard to the company’s investors:

IR teams will produce a report to the Board on a regular basis which includes: (inter alia) 

• significant changes in the share register, including shareholders who have recently sold or significantly reduced their shareholding, (where possible) significant strategic short sellers, and any noted activist shareholders; and any corporate governance issues raised by shareholders

Principle 4: Investor Relations teams should support members of the Board in their dialogue with institutional investors.

To do so, the IR team should (inter alia):

• Make themselves available as a ‘first port of call’ resource for institutional investors seeking  information;
• Ensure adequate contact with proxy advisors to gain insight into any investor concerns;

Principle 7. IR teams should provide assistance and support, where practicable, for all shareholders

The IR team will provide support to institutional investors in their monitoring of companies. This includes (inter alia):

• One on one meetings with the IR team, or as necessary facilitating meetings with members of the Board or other governance professionals;
• Making available public information through its website, press releases, webcasts, conference calls, in line with best practice.

Consultation closes on 7th May 2010.

Links

Investor Relations Society Guidance  >>