CIRI: Shareholder/Board Communications

Andy Burgess
Co-founder and President, Somerset Entertainment Income Fund

Beverly Topping
President and Chief Executive Officer, Institute of Corporate Directors

Investors are increasingly raising their disapproval with the board of directors. Transparency and exemplary disclosure is necessary. The IRO is the vehicle to measure the feelings from the shareholders. An IRO represents the voice of the shareholders. Information given can be used for strategic decisions. Shareholder activism is here to stay.

Tips to diffuse activist shareholders:

• Know who your shareholder base is and how to engage them.
• Thoroughly access your own shareholder base.
• Rethink how you plan to use the Internet to communicate to your shareholders.
• Don’t underestimate regular audits.
• Don’t rely just on the sell side to tell your story.
• Don’t underestimate the importance of engaging shareholders, employees, etc.

David Carey listed the type of information he provides to the board:
Weekly:

• Provide the board a short summary of trading activity for the week (ex: trading statistics, price performance, etc.)

Monthly:

• Monthly stock performance (comparison to peers), monthly trading statistics, IR activities (conferences, one-on-one meetings), analyst ratings

Quarterly:

• Same material as monthly plus:
• Ownership information (ex: who is selling/buying? If not buying/selling, why not?)
• Relative movement in key stock valuation metrics relative to peers (ex: P/E or cashflow multiple, price NAV)
• Sector outlook

Ad Hoc

• Electronic copies of analyst reports on your firm
• Electronic copies of particularly insightful or useful analyst reports on your sector/industry
• Information on any major legislative changes
• Include a short summary of the relevant material in the report and why the board should read it

Interesting note:
Out of approximately 80 session attendees only three people said they actually presented information to the board personally.