Thoughts on Making Investor Perception Surveys Earn Their Keep
It may sound self-serving coming from IR consultants who offer investor perception surveys – but I do believe there is much merit in using an experienced third party to conduct such research. The reason is that many investors are reluctant to provide negative feedback to management teams out of fear that it could harm their relationship and negatively impact their access to management for questions, updates, etc.
Using a third party that enforces the anonymity of respondents – and makes this clear to investors being surveyed – can help elicit more constructive responses about all aspects of the Company, from management’s competency, corporate governance and even the IR program and effectiveness.
The perceptions are reported in a general way – as coming from “Institutional Shareholder,” Sell-side Analyst Covering the Company; Sell-Side Analyst not covering the company; etc.
Of course, many investors are very free in expressing their candid views – and want their comments associated with their name (and likely have regularly expressed their opinions to management in the past) – so for some percentage of investors, this third party approach is not necessary.
Additionally – most perception surveys focus on the key investors in the stock and analysts covering the stock – but identifying issues that could be affecting those who have not yet initiated a position or coverage – is probably more important than those who are already “converted.” The nature of the questions is also critical as choosing between 1) Strongly Agree; 2) Agree; 3)Neither agree nor disagree or 4) No Opinion – when the asked to respond to the statement: “XYZ Corp. is clearly focused on financial discipline and shareholder returns” provides little room for value-added perception gathering!
Finally, it makes the most sense to report perception research to the board of directors so that they can assess the key issues affecting the company’s share price without a C-Suite filter (easier said than done in many cases).
A closed circuit perception study – where critiques are fed back only to those responsible for the IR effort – will tend to lead to no meaningful adjustments – and is, therefore, a likely waste of time resources rather than a productive exercise.
I know this sounds a bit cynical, but unfortunately, in our experience, companies that can benefit most from perception research (and making the adjustments that the research identifies) also tend to be those that are less likely to bring IR perception issues to the Board for consideration.
Given the importance that investment community perceptions have on equity valuations, it really does seem to be worthy of regular board discussion – but from our experience – primarily in the realm of small caps – this is not an issue of much Board level focus – until it’s too late and the activists are knocking at the door. We’re always happy to speak to Companies about our perception survey work – and how to optimize the ROI from the effort.
David Collins Managing Director Catalyst Global 212 924 9800