Good Practices for Effective Investor Communication – Management Guidelines

Good investor communication and Street perception are imperative for good leaders. A well thought of strategy delivered effectively can greatly enhance how the markets view a Company. I have listed out some key points which Managements should adhere to when communicating with the investor community.

• Expectation setting and management is critical for leaders. It is better to avoid making statements which can be misconstrued as guidance and create an unwarranted set of questions in the future. Valuations are managed by expectations and the leadership commentary is where the Street looks for it.
• Transparency and complete information are critical so leadership should provide as much information as possible. However, you should avoid making statements that may need to be retracted or changed in the future especially on performance in the future beyond the point where there is current visibility.
• Carefully craft the message or response to cover all aspects and specifically state issues where we do not wish to comment or there are disclosure clauses. In the absence of a coherent response, you may lose control of the story as others fill in the missing pieces, thereby creating misperceptions.
• Set realistic, achievable, and believable expectations, and express them in carefully chosen words. This kind of reliable communication reinforces your credibility, which should go a long way in your relationships with analysts and investors. 
• Communicate with conservatism. Don’t make ambitious claims and then fail to live up to them, especially when it comes to guidance. That will be very difficult to recover from and you may be pushed to a corner during investor meetings.
• Avoid releasing unnecessary or immaterial news through communication channels.  By including superfluous information, you run the risk of burying your core message and distracting your audience.
• It is important to fix the level of granularity we wish to communicate and keep it consistent across all modes of communications – Investor decks, calls, press releases and investor meetings. If additional information is to be given, it is best communicated as part of publicly accessible information such as at an Earnings Call. You must state critical disclosures publicly to protect yourself in future one-on-one meetings.
• If it’s material bad news, it is better to communicate it in the form of a structured statement and should be announced as soon as all the facts are known, based on Management’s evaluation of the situation.
• It is recommended to present an action plan for fixing or moving beyond the problem, including a reasonable time-frame and milestones. Ideally, unless plan is already underway, avoid committing to a time frame which you are not confident of.
• If any guidance is to be given, it is preferable to give annual over quarterly guidance to manage expectations better. One can use forward looking strategic concepts in moderation as credibility is greatly impacted by the Street’s perception of the Management team’s strategic plan, as well as its historical performance
• Investors and analysts will try to get a response out of the Management by making certain statements / suggestions. It is important to identify them for what they are and do not answer all questions. Investors are trying to evaluate you, your execution and your ability to grow your business in the future by asking these questions.
• Give precise and in-depth answers but keep it brief. Sometimes, if you speak too much on an issue it gives a signal that you do not know how to succinctly communicate or are unsure of your response.
• While commenting on macroeconomic or industry factors, it is important to help investors understand what factors are in your control and what factors are beyond your control. When factors beyond your control are impacting business results, investors will want to know what plan B is for delivering value in spite of a challenging backdrop. It is advised to formulate a tailored response and use the same points across all communication channels
• It works in your favour to comment on all issues identified as part of the opening communication. It creates a positive impression that Management is aware of investor concerns and does not shy away from discussing them upfront. It also creates a platform for better utilization of time by avoiding repetitive questioning.
• Do not comment on stock price movement, valuation opinions etc. State clearly that it is not your place to comment on the market and the discussion should be limited to the business.

The views and opinions expressed in this blog are those of the author and do not reflect the official policy or position of any other agency, organization, employer or Company.