This article was first published in the July 2012 Singapore edition of Accounting and Business magazine.
Forty-seven per cent of companies do not make their IR contact information available in their annual report or on their website, while 56% do not disclose information about how their IR function is handled. Of those companies which do disclose it, the majority have only one person handling IR. And 63% of companies hold their annual general meeting in April, with 47% – 332 AGMs – squeezed into the last five business days of the month.
That last figure in particular, said KPMG Singapore’s head of markets Tan Wah Yeow, will potentially pose challenges to shareholders and directors with interests in multiple companies. ‘Companies should be encouraged to adopt principles of fair communication,’ he remarked.
His view was echoed by KPMG head of research Mak Yuen Teen, who led the study. Speaking at the launch of the study’s results in May at the Four Seasons Hotel, Professor Mak said that just as shareholders have voting rights in their companies, they also have information rights – but where voting rights are dictated by the number of shares one holds, the rights to information are under no such constraint.
‘[Shareholders] may have different levels of voting rights, but they all have the same rights to information,’ he said. Room for improvement
One of the study’s more surprising findings was that almost half the companies did not provide contact information on the person in charge of IR, whether on their website or in their annual report. Professor Mak said that based on his experience, even where companies provide contact information, further testing proved that in some cases the contact was not valid. ‘It’s one thing to disclose their IR contact information and another to make sure it actually works,’ was his observation.
On top of this, over 20% of companies that maintained a website either did not have an IR link containing relevant information or had a link that ‘brings you nowhere’.
Professor Mak reserved his strongest criticism, however, for the 9% of companies, mostly small-cap, which apparently did not maintain a working website at all. Some foreign companies have websites only in their local language, rather than in English, even though English is the business language in Singapore. ‘It’s kind of difficult to imagine a listed company not having a proper working website which is accessible to most investors,’ he said.
The reason for this patchy content can perhaps be found in the resource constraints faced by many small- and some mid-cap companies. The majority of large-cap companies have a dedicated officer in charge of IR, and out of those mid- and large-cap companies that disclosed the size of their IR team, more than half have at least two people handling IR matters. But small-cap companies, which run a tight ship, tend to leave IR matters to the CFO or corporate communications team who have other major responsibilities.
Small-cap companies are also significantly less likely to disclose information such as their share price performance and dividend ratio in their annual reports. And while the majority of them post information such as their latest announcements, the profiles of their directors and their results announcements on their website, over one-third do not. There are even a number of small-cap companies which do not make their annual report available on their website.
Cost-effective communication
A panel discussion on the study’s results turned up two key suggestions for companies that want to improve their stakeholder communications: leveraging websites and the media wherever possible.
‘Our website is the most cost-effective way to reach out to our audience, and it is a form of two-way communication as well,’ said panellist Esther An, head of CSR at City Developments (CDL). ‘We encourage them to contact us, and they can also engage us through email alerts which we use to send them information.’
Agreeing, Chow Kam Wing, executive director and CFO of Micro-Mechanics Holdings, said that his company’s website was the best way of reaching out to foreign investors. ‘We make use of our website in several ways,’ he elaborated. ‘We have an email alert; our IR page has all the reports and announcements; and we link to investor platforms.’
The media is also a very powerful tool for stakeholder communications, said Richard Dyason, general manager of the Securities Investors Association Singapore. ‘Looking at information which investors use to make investment decisions, media is the major portion of what retail investor’s use,’ he explained, citing SIAS research which found that over 70% of retail investors used the media as their primary source of information.
This is especially significant because of the high proportion of small shareholders – defined as those holding 10,000 or fewer shares of a company – in Singapore-listed companies. Making Stakeholder Communications Work found that this group makes up 52% of a small-cap company’s shareholders and 79% of a large-cap company’s shareholders on the average, making it imperative for companies to take them into consideration when communicating with stakeholders.
Beyond these two suggestions, however, the issue of constraints came up. While large-cap companies can hold roadshows, investor conferences and media and analyst briefings, these modes are generally ‘not realistic’ for small and mid-cap companies, said Professor Mak, and the panellists agreed with his assessment.
‘As a small-cap company, we cannot put too many resources into IR,’ said Chow. ‘IR is something we want to address; we want to sell ourselves, to let people know how good we are. But we are using investors’ money to do that. I don’t think it’s correct.’
And the resources required to meet investor demands are considerable, according to CDL’s An. ‘They want easy access to information, they want it accurate, they want to talk to the CEO, they want to talk to the chairman,’ she listed out some common demands. While CDL does its best to make the information easily accessible, fast and accurate, the effort is expensive at the very least, she said, going right up to the time spent by senior executives including the CEO and CFO. ‘When you talk about investment, I can’t put a price tag to it.’
Then again, this cuts both ways. Shareholders who do not receive sufficient information are apt to apply a discount to the company, observed Dyason. ‘Sometimes it can be quite steep,’ he added. ‘The key question here is, can we afford not to do this in today’s environment?’
A question of time
According to Making Stakeholder Communications Work, 73% of companies report their financial results quarterly, and this may in itself be a reason for lapses in the quality of stakeholder communications. For one thing, there is a clustering of results announcements, a situation that KPMG head of research Mak Yuen Teen compared with taking the train during rush hour. As with AGMs, shareholders in multiple companies may not have the time to review as many results as they would like.
‘Quarterly reporting is very, very taxing,’ said Esther An, head of CSR at City Developments (CDL) – not only for companies, but for the analysts who have to go through reams of financial results. ‘We have a wishlist, and one of the items on it is to maybe have quarterly reporting down to half-yearly, or one-third.’
However, she acknowledged, it may not be feasible to extend the reporting period either. ‘I think it is very hard for the authority to go back to six months. But if it were six months, it would be much easier for companies. The auditors would also have more time.’
Mint Kang, journalist