Forum Report: Fair Investor Access
Winning Investor Support of Long-Term Corporate Success
the global association of over 100,000 investment professionals and 135
affiliated professional societies that supports standards for Chartered
Financial Analysts, has published a report that continues its attention to
“short-termism in the public markets” with recommendations to guide a
corporate director’s responsibilities “as a proper long-term steward of
shareowner assets, a true representative of shareholder interests.” (See
the report’s Executive Summary; page numbers 1-2, PDF 7-8.) The full
report can be downloaded from this link:
Investor communication is an important element of the “Working Group”
panel* recommendations, with sections devoted specifically to “Quarterly
Earnings Practices” (page numbers 5-9, PDF 11-15) and “Shareowner
Communications” (page numbers 10-16, PDF 16-22). The following excerpt
from the Quarterly Earnings section (page number 9, PDF 15) is an example
of the panel’s view of director responsibility for communications to win
investor support of long-term management:
today’s markets, much of the investment management industry is impatient
capital, and after a decade of stagnation in investor returns, some
companies are not in a favorable position to tell investors to “be
patient.” Because of this situation, we asked the following question: At
what point do investors rightfully become impatient, and how do you manage
in the era of impatient capital?
of the answer to this question is better communication with shareowners.
One participant suggested that Visionary Boards need to make sure that a
company is looking at its shareowner list, communicating with those
investors for a reality check, and doing so on an ongoing basis. This
panelist stressed that this communication needs to be “a real relationship
and not one that only gets revisited in troubled times.”
Building relationships with short-term investors is seldom a productive
goal. However, communication with all investors is appropriate. Focusing
on relationships with the shareowners that have made a long-term
investment and can provide meaningful input on the long-term strategy of
the company is most effective.
of this communication will take place at the executive or investor
relations level. A Visionary Board, however, needs to ensure that such
communication is taking place and to participate in such communication
when appropriate and when it can add value.
Your comments on the report will be welcomed, now or as we consider many
of the same issues during the progress of our program for establishing
standards of Fair Investor Access.
GL – July 18, 2012
Chairman, The Shareholder Forum
575 Madison Avenue, New York, New York 10022
* Note that
the CFA Institute's "Working Group" panel members (report PDF page 43)
Margaret M. Foran, James Kristie and Jeffrey D. Morgan are also members of
the Program Panel guiding the Shareholder Forum's current attention to
"Fair Investor Access."