It’s like the end-of-term report – they are the frontline in telling you whether you’ve done a good job or not. And who else tells the directors?
They might not feel constrained to be respectful; nonetheless they have a job to do. And that job is to decide whether to recommend their clients to buy, hold or sell your shares – and their firms get no commission on a hold. In order to do that they need to assess your prospects, to make a forecast. And part of their deliberations will be about how well management is doing its job.
The best way to deal with this is to help them with their forecasting.
You can get away with minimal disclosure – you won’t go to jail – but don’t expect the City to love your stock. They hate uncertainty, they hate weasels and they loathe a cover-up.
Far better to consider what they need to know. What assumptions will they make in their models? Guide them. How should they interpret the published results for the future? Tell them. What is the strategy for the longer-term? Share it. What are the problems? Come clean.
All this investor relations disclosure, of course, does not apply only to twice-yearly results days. There are one-to-ones, site visits, lunches and special presentations for the investment community.
There is the financial press and a continual PR programme. There are the routine publications – the full and half-year accounts, Stock Exchange announcements, corrections to draft analysts’ reports, the website. And the full range of small shareholder contacts including the agm.
For all this to be effective there has to be a consistent message – the hymn sheet from which the company always sings. The truth, the whole truth and nothing but the truth is a good maxim.
The City is often accused of short termism, but that’s only if you give them no long term to go on. Most fund managers are happy to invest for the long haul. Of course you’ve got to perform but you’ve got to get the message across as well, you’ve got to be open and earn trust so that people will understand when problems arise. And they will.
So when a teenage scribbler asks an embarrassing question, have the wisdom to realise that others are probably holding off from your shares from the same uncertainty. Don’t be piqued by his cheekiness. Realise that there is something that needs fixing back at the ranch.
- Neil Chisman is a director of several companies, a member of the Financial Reporting Council and a former finance director of Stakis and Thorn.
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