We recently attended the 11th MEIRA Annual Conference and Awards 2019 along with IR professionals from the middle east region as well as from across the world, as far as Sydney! Not just senior IR leaders, but stock exchanges and regulators were in attendance. The theme was IR Matters: The Age of Engagement.
An opening welcome by Andrew Tarbuck was then followed by an insightful glance into the regulators view by Dr Obaid S. Al Zaabi, CEO Securities and Commodities Authority. They have mandated that all listed companies should employ an IRO to support the CEO and CFO, helping to outline the strategy and outlook. According to him, the aim of these initiatives is to:
- Increase critical mass
- Increase liquidity and,
- increase transparency and corporate governance
IR Matters. It is a challenging and changing marketplace with a widening stakeholder base i.e. employees, public environment. And the regulators are fully behind the importance of this profession.
Representatives from the buyside compared the strengths and weaknesses of IR in the region. The unanimous view was that there is a very wide spectrum on quality with a few companies that do a very good job of IR, and recognise the value of IR. They expose their operational leaders and management teams to the investor community to give comfort to the buyside around control of the business. The areas for development highlighted the necessity to provide information to everyone equally and fairly – not just to majority shareholders. Investors also benefit from;
- Knowing when companies are going to report so the advice is to make financial calendars public on websites.
- Conference calls – everyone should be able to join including retail and institutional shareholders, and debt holders. Put the transcript and recording of the call on the website.
- Effective presentations with sophisticated data – share more information
How has IR changed over the last 10 years from the perspective of the buyside:
- Lots of IR people reaching out directly to the buyside
- Multilingual to tap into local markets
- In the past, IR appeared “conference shy” but now we are seeing many more IRs attend conferences to help share their story and investment case
- Technology – a lot more can be done to attract a wider investor base. Technology allows you to “mass market” the same communications to more people
Overall, the financial crisis in 2009 prompted companies to communicate more.
Nothing beats face to face meetings and investors want to understand the longer term strategy, how the business operates on the ground – particularly important for global businesses where investors may only know of a fraction of it. The most unbiased dialogue is when the buyside meet companies directly – and not through the sell-side so that is their preference.
Unsurprisingly, the debate moved on to sustainable finance and the buyside were asked how important they regard Governance and how active they are around it. Richard Lee, Senior Portfolio Manager at Emirates NBD Asset Management said that in the near future, activist investing is quite challenging in this part of the world. However, if he sees a company with questionable governance, they would address it with management. If management don’t act upon it, they will walk away as they will not be able to get comfortable. There are approximately 1,600 listed companies in the region so there is a lot of choice. He reiterated that the job of a corporate is to treat all investors equally with fair and timely disclosure to everyone. The “Governance” is an area that most investors and companies are familiar with. The “Environmental” and the “Social” requires a lot of work and something they are moving towards but the region doesn’t feel ready for this yet.
There are now more than 170 policies covering ESG globally, and more securities and stock exchanges are being indexed by MSCI. Investors are therefore requiring more disclosure and there is government support through initiatives to push sustainable finance in the Middle East region. It is not advisable to wait till the law is mandating disclosures on ESG. If a company is doing great things, be proactive about disclosing it. In summary:
- Be more transparent as most sizeable companies have policies in place and do lots on ESG
- Take more initiatives – grow gradually step by step
- This is very important for foreign and global investors, and rating agencies
The Middle East is on a journey. Unlikely to be good at “E”, “S” & “G” at the same time so move forward at the right pace for the business. There is leeway to demonstrate strengths while acknowledging areas for development but you must tell the story about why you are doing what you are.
There are huge benefits to companies to embrace diversity. HSBC showcased some great initiatives they have done in the region including moving office space, forward thinking on flexible working - all to increase employee productivity. Overall engagement and morale have increased.
DFM was one of the first government entities to have embedded equal pay for male and females. DFM helps to promote diversity at companies listed on the exchange through a number of excellent initiatives:
- They have impressively put a quota out there to have 20% of UAE quoted companies with women on boards.
- DFM ensures that boards get briefed on the importance of ESG and diversity.
- They have launched an “e-board” where people electronically apply for board positions and DFM track it. Everyone can apply irrespective of background or social class.
Currently 4.5% board representatives in UAE are women. And 24% of companies on DFM have at least 1 woman on the board.
In summary, diversity is more than just gender. We must celebrate achievements – and take responsibility as change depends on us. Good diversity drives productivity. Diversity is about inclusivity, about identity of a company and IR is at the forefront of this in helping disclosures.
The discussion turned to careers in IR and this session was moderated by Carter Murray’s Debbie Nathan. Some very interesting findings and highlights of the IR Practitioners Report 2019 were discussed with the panel.
IR is a relatively young and new profession in the region.
- 60% of IR professionals in the region have only been in IR for 1-5 years.
- 50% have moved in to IR from other functions within the same business
- This is clearly very exciting for the region and will open up huge amounts of opportunities
And how do we attract “new entrants” into IR from within the region?
- University partnering to educate more on IR at the entry level
- International shadowing programmes where you can do an “exchange” to train up talent in a more developed IR region
- Grad programmes/internships
- MEIRA – allows sharing of best practice, training courses and exams
41% of respondents have the CIR, up from 28% 2 years ago which is another very encouraging sign.
Another key, and very reassuring highlight from the report is that 81% feel that management and/or the board value IR. Despite this, however only 31% had regular access to the board and 37% said they have no access at all
It is essential that the board understand IR, are kept in the loop through regular reporting and face time - it was suggested that it could mandatory for board members to be shareholders to align interests and increase support for IR.
A further interesting stat from the report showed that 55% of respondents spend less than 10% of their time travelling, and a further 21% spent between 10-20%. So in aggregate that means over 3/4 of professionals are travelling less than 20% of their time. To access global pools of capital, and as more companies in the region open up for foreign investment, it is important that there is more face to face investor contact.
In summary, salaries have increased, team sizes have grown and generally there is a more optimistic feel around the growth of the profession - and we expect this trend to continue as markets open up, international interest grows on the back of index-inclusion and a general appreciation of what the regional markets can offer investors.
The day concluded with a session on the future of IR and Redwan Ahmed at DP World reiterated the importance of a consistent IR calendar. IR’s job is to look ahead to make sure you have the right tools. Look ahead where the capital is that you want to attract.
Andrew Tarbuck, MEIRA Chairman noted that there are a lot of companies operating at very high levels – on par with Japan, New York and London. That is perhaps the top 5-10 companies and then it drops off a cliff – so looking out to the next 5-10 years we want to see good, high quality IR as a normal way of life for companies and engaged in critical matters.
The Middle East is on a curve and it is a region that can move quickly. Regulators move quickly so there is an advantage. There are lots of pioneers but the value of IR needs to be more widely recognised – we need to spread the message!