By Barry Hutton, Senior Vice President, ICR
The concept of an investor perception study is familiar to most IROs, C-suite executives and boards. Yet, the true value of a well-designed and optimally executed perception study remains a mystery to many of the corporate leaders it’s able to help the most.
The common misconception typically is, “I already talk to the Street regularly, so I know what our investors think”. Which leads to the question, “If I had a third-party perception study done what value would it add?”
As a strategic communications and advisory firm, ICR has executed hundreds of perception studies. Almost without fail, each one uncovers an aspect of the company story – or the Street’s perception of the story – that management did not realize impacted its stock performance. This is the insight that empowers the IRO and drives significant improvements across the IR program.
The perception study provides the IRO with influence to the C-suite/board
A third-party perception study provides the IRO with significantly greater influence with the C-suite and board because it overcomes three important limitations of normal-course-of-business investor conversations:
The perception study is a catalyst for improving the IR program
In a typical conversation, investors and analyst will generally “play nice” to avoid offending the company or risk losing future access to management. Meanwhile, the Street’s true concerns are whispered to analysts and investors. This leaves the company with little opportunity to understand or respond to underlying issues.
As the perception study is conducted by an outside agency, opinions can be anonymous and the Street is free to provide very honest and candid feedback. As a result, the company gains very direct and actionable information that can drive meaningful improvement to the IR program and, over time, the performance of the stock.
Just as companies regularly conduct independent, third-party customer (even employee) satisfaction surveys, so too should they with investors.
A few examples:
It’s hard to imagine an investor or analyst giving that critical feedback directly to company management. Yet, it’s clear that these are the perceptions – real or not – that actively work against the company’s effort to achieve full valuation. Real and valuable change can only occur after the company recognizes the true extent of the investor sentiment.
The perception study increases the company’s shareholder responsiveness
Today’s environment is filled with increasingly frequent shareholder activism and contested proxy votes. These are external and non-core business problems, but they can seriously damage the ability of management and the board to run the company effectively. To avoid these pitfalls it’s absolutely critical that the management team and board are viewed as responsive to their investors. Conducting a perception study is one way to demonstrate the company is genuinely interested in hearing what investors think and fulfilling its fiduciary responsibility to properly serve shareholder interest.
Increasingly, companies are filing proxy documents that describe their IR programs including which executives participate in what type of events. Additionally, they specifically point to the “voice of the investor” when making certain IR program changes, such as: “Many investors have asked for more transparency regarding our progress. So we’ve included additional operating metrics in our press release and investor presentation.” This indicates that they’ve listened to the financial community and responded accordingly. This clear shareholder responsiveness can influence the company’s corporate governance record, its proxy vote and board member elections.
Collectively, ICR has worked with over 500 companies throughout their lifecycles and transformations; providing IR, capital markets and PR services. Members of the senior team have worked as sell-side analysts, institutional investors and internal IROs. This enables ICR to truly understand the Street’s perspective while also recognizing the needs of the company. By reaching an understanding and achieving a balance between all audiences, ICR’s perception studies help IROs to gain valuable insight into the Street. This insight gains influence with management/board, drives meaningful change and signifies shareholder responsiveness.