RECENTLY, I stumbled upon a 22-page brochure published by Thomson Financial offering advice to companies on how best to use the Web in their investor relations programs. For a marketing piece, the booklet is good, but one thing in it really caught my attention for the superficial thinking it betrays.
According to the booklet (PDF 695KB/22 pages), one of the 10 best practices for IR websites is that companies should not link users away from their IR websites. This, according to Thomson, is because you run the risk they won’t come back to your site and that they will find inaccurate or misleading information.
Thomson Financial says you want to “retain control of your message.” If people stay on your site, “you have the opportunity to learn more about your investors for example: what are they accessing and downloading, who’s signing up for e-mail alerts or listening to your webcast.”
While the folks at Thomson Financial dish out some good tips, their advice in this particular case is simplistic and should not go unchallenged. Companies that follow Thomson’s advice will be doing both themselves and investors a disservice.
Here’s why:
Good outbound links help investors make better-informed decisions.
It is impossible for any one IR website to be the definitive source of investment-related information on a company. So, providing links to credible sources of additional information on the company and its industry can help to improve investors’ understanding and help them make more informed judgments.
Links to independent industry sources can provide a wealth of non-partisan information to help investors be more informed.
If you are targeting investors outside of your home country, providing links to sources of information on your local market, industry and regulatory environment can be extremely helpful. If you operate in a highly specialized or technical industry, it can be helpful to provide links to outside information resources that explain your technology.
It is best when IR websites provide links to government agencies, non-profit organizations and competitive sources of information over which the company has little or no influence. These links are much more credible than ones over which the company can exercise influence or control.
A recent survey of retail investors by UK-based Real World Investor found that individual investors value independent perspectives on a company and its industry far more than companies’ own information. In fact, 80% said they trust information on financial portals more than information on a company’s own website.
An investor based outside of the UK might find the links Barclays provides invaluable in understanding the regulatory and competitive landscape the bank operates in.
Good outbound links make your company appear more transparent.
Writing in a 1999 column on the trustworthiness of websites, world-renowned usability expert Dr. Jakob Nielsen, makes the point that “not being afraid to link to other sites is a sign of confidence, and third-party sites are much more credible than anything you can say yourself. Isolated sites feel like they have something to hide.”
Indeed, we would go so far as to recommend that companies provide links to the websites of their competitors. Why? Because competitors are relevant sources of information directly related to the company. Because a company that does so will demonstrate credibility better than any amount of words ever could. And because investors are probably going to look at your competitors anyway, so why not be the one to facilitate the process?
Paper giant Stora Enso provides links to its competitors' websites. Companies which link to competitive sources exude confidence.
Good outbound links can support your arguments.
Linking to sources that provide independent support for your arguments, projections and assessments makes what you say more credible than if it is just your own opinion. This is the first guideline of Stanford University’s Web Credibility Project, the leading research authority on factors which influence the credibility of websites.
As they say: “You can build web site credibility by providing third-party support (citations, references, source material) for information you present, especially if you link to this evidence. Even if people don’t follow these links, you’ve shown confidence in your material.”
No amount of crowing about having good governance practices is as effective as citing third-parties who can verify your claims, as CIT does in this example.
Outbound links give you insights into what investors want to know.
Thomson says you don’t want to link people away from your site because then you can’t track what they’re looking at and using. That’s only partly true.
Outbound links help you find out what information people are looking for that is not on your site. You can set up your outbound links so you can monitor which links people are using most often. With this information, you can then decide whether you should provide the information to improve the value of your site.
The additional insight this provides is possibly more valuable than anything you can learn from keeping people on your site. Besides, companies don’t use site traffic data properly anyway. But that’s a topic for another article…
There is no way to control or keep people on your site.
The Web is designed as a user-controlled medium, which is one of its attractions. Users decide where they go and what they want to see, and there is very little you can do to control them.
Indeed, any attempt you make to inhibit users’ free movement, such as through tunneling techniques or URL grabbers, is just going to impinge on users’ freedom and make your company look bad for trying.
So why don’t companies link to third-party sites?
Given the benefits that outbound links can provide to companies and their investors, why do so few companies link to external sources of reliable information? There are three main reasons:
1. Insecurity:
Because they lack confidence in their own ability to be persuasive, communicators want to avoid giving others the ability to influence what people think about their company.
2. Legal concerns:
Fear of potentially running afoul regulators or being sued by shareholders often leaves IR communicators scared to provide access to external sources — even when they believe the information is in investors’ best interests. The reality is that the legal risks are minimal, especially if companies follow common-sense precautions.
3. Bad advice:
IROs often take advice they receive of outside vendors for granted, particularly when it comes from big companies like Thomson Financial, which one would assume are well informed. Unfortunately, the advice from these vendors usually is painted by the vendor’s own agenda or by generalities that don’t apply to everyone.
Linking to third-party content is likely safer than the widespread practice of including vendor content on a site itself.
Thomson Financial — and any website content vendor — for that matter, has a vested interest when it comes to what content companies include on their IR websites. It’s not in their interests if your company uses content that they don’t control or make you pay for. For example, instead of paying firms like Thomson for SEC filings pages, companies can set up usable SEC filings pages on their sites for free by providing links to predefined search results on the SEC’s Edgar database. This is not covered in any vendor’s literature, for obvious reasons.
In fact, linking to third-party content is potentially less risky than adopting third-party content on the site itself, as Thomson Financial and others want you to do. This is why companies like BellSouth, Costco and Intel (see below) warn users that they are leaving their sites when they link to pages hosted by vendors like Thomson Financial and others.
Before users can access a stock chart on Intel's IR website, they have to accept this disclaimer. Strictly speaking, this is best practice under the SEC's guidance, but few companies follow this approach because it is cumbersome and of dubious value because investors don't read disclaimers anyway.
What the lawyers say
The truth is that most links to third-party sites are permissible, even beneficial. Furthermore, companies with no ill-intent who are nervous about linking away can lessen the risks by providing a prominent notice to investors which:
- Makes it clear to investors that they are leaving the site;
- States if the company had any role in preparing the information;
- Clarifies whether the company endorses or vouches for the information; and,
- Explains why the company is providing the link, e.g. as a convenience to investors.
This information can be provided on an “exit page,” a suggestion of the U.S. Securities and Exchange Commission. Users who click on external links can be redirected to the exit page and then have to click on a “continue” link to go to the relevant external Web page.
You will find more information about exit disclaimers and outbound linking in the Securities and Exchange Commission’s interpretive release on the use of electronic media.
In a legal memo in June 2005, Laureen K. Kuzur, Attorney in the Nashville office of Baker, Donelson, Bearman, Caldwell & Berkowitz, PC, states that “risky practices that a company should avoid include selectively providing hyperlinks so that information accessed is not representative of available information, and selectively establishing and terminating hyperlinks to third-party Web sites depending on how favorable the linked information is to the company. Additionally, screen layouts that disproportionately influence a visitor’s decision to view particular hyperlinks through the use of different color, type face or size suggests that the company has adopted the hyperlinked information to which the company is drawing investor attention. Note that the SEC has also stated that when hyperlinked information is framed or inclined, there is greater risk of investor confusion.”
She goes on to encourage companies to “be careful, not afraid,” to regularly review their sites and to “never include reports of financial analysts, or hyperlink to analyst reports. If the company wants to list analysts who report on the company, all securities analysts should be listed — not just those who issue positive reports on the company.”
When and how to use outbound links
Some of the best IR websites make extensive use of outbound links. These companies are demonstrating a real interest in helping investors to make informed judgments.
If we’ve convinced you of the merits of outbound links, you might be inclined to rush off and begin adding outbound links to your site. Not so fast. Throughout this article, we have deliberately used the term good outbound links. That’s because there are good and bad ones, and much depends on the context and specificity of the outside resources you link to.
Here are some guidelines for providing outbound links on your website:
Link to impartial, reputable sources.
It is hard for companies to provide an objective perspective on their business, industry or their competitors. While investors will appreciate the insights a company has into its industry, they will value information from an impartial perspective more. Government sources, industry associations, nonprofit organizations and the media can be good sources of information.
It's impossible for companies to provide objective insights into the abilities and personality of their executives. GE's solution is to provide access to profiles and interviews in well-known publications like the Financial Times and Business Week. Not only are investors provided with useful objective insights, but the CEO is made to look confident and comfortable in the public eye.
Provide links that are relevant to the referring page
Pages of general outbound links are less useful than targeted links that relate to the content of the referring page. For example, if your site includes a discussion about the company’s industry fundamentals, provide a few well-chosen links to third-party sites that track industry-wide statistics. If the page is about corporate governance, provide a link to the relevant corporate governance requirements of exchanges where the company is listed.
Adding a page to your site with a list of general links to other homepages is rarely useful unless you have a reason for doing so. If you want to provide a list of useful third-party links on a single page, explain why you’re providing each link. This will help people know what they are getting into before they follow a link.
Telecommunications firm TDC explains why each link on its IR links page is relevant to investors. Avoid pages of general links unless you can explain why each link is being provided.
Deep link to pages on third-party sites
If you want people to find a specific page on a third-party site, don’t dump them on the homepage and expect them to find their way from there. Be precise by providing deep links to relevant pages on the third-party site. For example, if you’re linking to a credit rating agency’s site because you want to help investors understand the agency’s ratings system, link to a ratings definition page rather than to the main homepage. Targeted links save people time and improve the user experience of your site.
Some companies have a policy which bars deep links to pages on their sites. They permit links to their homepage only. Unless the information you’re referring people to is on the third party’s homepage, it’s best not to link to such sites at all. See below for more on linking policies.
On its Market Outlook page, Paper firm UPM-Kymmene provides deep links to industry paper shipment statistics on the Association of European Publication Paper Producers website. This saves people the time of having to find the information themselves if they were to start from the association's homepage.
Write links that identify the owner and describe the content
Informative link text helps people better assess if they will benefit from what the external site provides. This helps to avoid users being disappointed in what they find, and then thinking less of your company for sending them on a wild goose chase.
Well-written links tell people who owns the external site and what content they will find on the landing page. For example:
Related Link:
U.S. Securities and Exchange Commission — Executive Compensation: A Guide for Investors
If the document is in a non-standard format like PDF or other media, write this into the description of the link. For example:
Related Link:
U.S. Securities and Exchange Commission — Executive Compensation: A Guide for Investors (PDF 200KB, 11 pages)
Regularly check your site for broken links
A reality when you provide outbound links is that the page you are linking to might be moved or it could change without notice. You don’t want people to follow a link only to find out that it doesn’t work because this will reflect negatively on your site and imply that you are not managing it properly.
As we explained in Avoiding linkrot on your website , you can check your site’s links daily using link-checking software, but you should also manually inspect all outbound links weekly. This is because the link-checking software will tell you only if a link is broken, not if the content on the page you are linking to is still relevant.
Check linking policies
Generally, there is no legal requirement to get permission before linking to a site. However, some companies have policies that don’t allow you to link to any page except their homepage. They do this because they want to control (that word again!) the experience of people visiting their site.
These policies are counterproductive because they discourage people from sending traffic to the site and can lead to lower search engine rankings. Companies that have these policies don’t deserve your links, so don’t bother with them if you can help it. You will find most sites’ linking policies in their terms and conditions or copyright pages.
Finally, remember that the whole point of providing links to external resources is to help investors obtain a variety of facts and opinions to help them make more informed decisions. It’s a principle IROs can adapt to their own circumstances. When it comes to making decisions about their IR websites, they’d do well get a variety of perspectives instead of taking the advice of Thomson Financial — or ourselves — at face value.
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