Managing shareholder expectations: 97
percent of IROs do it
Face to face, phone calls,
email and other informal methods prove most popular, says NIRI
Almost all IR departments
work to manage shareholder expectations, according to new research
from NIRI, with 80 percent looking to set the financial performance
expectations of their investors.
May 9, 2013
Jeffrey D. Morgan, FASAE, CAE
President and CEO
National Investor Relations Institute
Managing Shareholder Expectations-2013 Results
determine the expectations of their shareholders through
informal methods (in-person, phone calls, emails), by
reviewing sell-side research, comparing company stock
metrics to peers, and perception surveys.
Respondents report attempting to set shareholder
expectations for company financial performance,
economic-related issues, product-related issues, regulatory,
and corporate governance-related issues.
regard to timeframes, the most common goals set were for the
current year (61%), followed by three to five year goals
(31%), two year goals (9%), and five years or longer (4%).
(Participants were permitted to select more than one
respondents reported that the near-term goals their
companies provide are more detailed and specific, as opposed
to the more strategic, broad, and general nature of any
long-term goals provided.
addition to metrics, respondents specified other information
provided in order to manage shareholder expectations
including qualitative findings, product strategy, marketing
information, and revenue.
CFO, and IRO are all (81% each) equally involved in
determining messaging for managing shareholder expectations.
Respondents provided specific activities that have been most
successful in managing shareholder expectations, and
identified activities to avoid.
respondents report attempting to manage shareholder
Read the full
Managing Shareholder Expectations-2013 Results
[available only to NIRI members]
About the National Investor
Relations Institute (NIRI)
is the professional association of corporate officers and
investor relations consultants responsible for communication
among corporate management, shareholders, securities analysts
and other financial community constituents. NIRI is the largest
professional investor relations association in the world with
more than 3,300 members representing 1,600 publicly held
companies and $9 trillion in stock market capitalization.
Founded in 1969, NIRI (www.NIRI.org
After informal methods of
managing shareholder expectations, which are used by 87 percent of
IROs, NIRI’s 2013 report
Managing Shareholder Expectations shows that reviewing
sell-side research reports is also popular, with 81 percent of IROs
using these reports to set investor expectations. Comparing company
stock market metrics with peers, and perception audits or formal
investor surveys are also used by 44 percent and 30 percent of
It’s not just IROs who
are working to set investor expectations, either: the CEO, CFO and
IROs are all equally involved (81 percent each) in creating company
messages used to manage shareholder assumptions. ‘Respondents report
attempting to set shareholder expectations for company financial
performance, economy-related issues, product-related issues,
regulatory and corporate governance-related issues,’ explains NIRI.
Most IROs (61 percent) look to manage shareholder expectations for the
coming year, while 31 percent set a three to five-year goal. NIRI
explains that respondents were allowed to choose more than one option,
with a further 9 percent focusing on two-year goals and 4 percent
looking ahead five years or more.
These timeframes affect the type of information companies use to
manage expectations, explains NIRI. ‘The near-term goals companies
provide are more detailed and specific, as opposed to the more
strategic, broad and general nature of any long-term goals provided,’
it says in a press statement.
‘Financial goals for growth and profitability are quite specific for
one year but further out the compound rates of growth and margin
expectations are in broad ranges,’ says one small-cap healthcare and
social assistance firm. ‘We discuss the long-term implications of
regulatory effects and the pros/cons of expected legislation on the
trajectory of the business.’
As well as the financial metrics used to set shareholder expectations,
NIRI says IROs also use qualitative findings, product strategy,
marketing information and revenue.
Respondent IROs also mention what to avoid when trying to manage
expectations: ‘Avoid using language that is ambiguous if you are
moving financial expectations,’ says one mid-cap company. ‘[Terms
like] ‘moderate’, ‘significant’, and so on do not work nearly as well
as specific ranges of potential outcomes.’
Another micro-cap company in the arts, entertainment and recreation
sector makes a simpler point: ‘When managing shareholder expectations,
you should avoid over-promising and under-delivering.’
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