CIRI: Opening Keynote Address with Micheal Roach from CGI

Michael E. Roach
President & CEO, CGI Group Inc.

Building positive relations with the public is not as easy as it used to be. Today financial markets characteristics are: short-holding periods, record date capture, massive stock lending, etc. Companies need to target the right potential holders that align with the company’s long-term goals. Michael believes: “The strategy without execution is hallucination.”

The quality of financial reporting matters and will attract investors. Companies need to be accessible to potential investors and provide the feedback and street views to their employees, especially the CEO and CFO. Michael stated: “If you don’t measure for success, you get failure.” CGI may have the only IR department that is ISO certified. They also believe in balancing the interests of employees, shareholders, and owners, which would mean no management bonuses when the company’s performance is down from the shareholders’ point of view. Over the last 15 years CGI has grown their revenue 15 times, and increased their employee base 26 times. The IR team needs to understand the strategy but more importantly the operations.

Create an environment in which employees enjoy working together and as owners build a company they are proud of. At CGI, 80% of employees are shareholders. Every dollar they put in, the company matches it. Turnover rate in India is 13% and 50% of the employees are shareholders. Every year a shareholder meeting is held including employees and shareholders. The most important asset is the talent and capability of CGI’s employees. People do not want to work in an environment where they are told what to do and/or how to do it. Without the company’s multiple voting share structure CGI would not have grown internationally. Companies need to focus on the long-term in order to create long-term value.

Q&A
1. How much resistance do you get from the new investor about the structure of the business?

Not much. It is very emotional for people and not very fact base. The junior guy in the room usually brings up the question. When you ask them about other multiple voting share companies, they realize there are many. CGI is able to add incremental value and do the right thing. The company has never had to use the class B shares for any voting activity since they became public.

2. How is the current economic impact affecting CGI?

CGI’s business cycle is counter- cyclical. A good piece comes from outsourcing with 55% recurring. When the economy tightens the CEO and the board re-examines what is strategic and what is core, and more gets moved from the back room to the front room. Where other companies spend 25% of their time on the service front for example, CGI spends 100% of their time.

Interesting note for IT service companies setting up in the far east:
More money has been lost though poor project management than has gained on labor arbitrage.