Health Care Companies’ Unhealthy Attitude to Online Investor Communications

By Dominic Jones

AS A GROUP, big health care companies have the weakest overall performance when it comes to communicating with investors on the Web.

The sector has the lowest average score out of the 10 sectors we track in our 134-point survey covering more than 525 of the world’s biggest companies.

In the rankings we released yesterday, only two out of 49 of the world’s biggest health sector firms made the cut to be recognized as having top-quartile IR websites.

Two companies stand out

The UK’s Smith & Nephew plc and Germany’s Celesio AG are setting the standard in the sector. Both companies give the strong impression that they are trying. They want to tell their stories. They want to give investors the information they need to make educated decisions. And their sites give the impression that management is confident and credible.

That’s not to say they don’t have problems. Smith & Nephew has great content, but its site is convoluted and hard to navigate. Celesio on the other hand has quite good usability, but there are gaps in its content.

TOP SITE: Smith & Nephew plc addresses the needs of all its investor audiences, from prospects to current shareholders.

Both companies also don’t stand up well against the leaders in other sectors. Smith & Nephew, which is the highest scoring health care sector firm, ranks 49th globally. Its score is 74% lower than our current top ranked company worldwide.

Just below the leading duo is a group of six companies that also seem to be trying. With a bit more tweaking and a better understanding of what different types of investors need from IR websites, these companies probably could have made the cut.

However, beyond this group of eight — the two leaders and the six that are bubbling under — things fall apart fast.

Sloppy site management

We found a lot of examples of sites that haven’t been reviewed in months. In one case, it’s clear the company hasn’t given its site a comprehensive once-over in two years.

Many more companies are clearly determined to do as little as possible on their websites. Their sites are primarily document repositories, designed to need as little review and updating as possible. This leads to boring, inefficient sites that take up a lot of users’ time without actually imparting the information they need.

People visiting these sites and seeing what we saw will be left with negative impressions of the companies. They may interpret poorly managed sites as the company being sloppy, lacking management expertise or simply not being interested in communicating with investors.

Inept site management is not unique to the health care sector. Many companies in other sectors have similar problems. In my view, they all stem from companies failing to put the proper resources and procedures in place to manage their websites.

Unhelpful disclosure practices

On average, the health care companies in our survey are much less transparent and forthcoming than companies in other sectors. Often, their disclosure practices make it difficult for prospective new investors to form a useful picture of the companies.

For example, 35% of the companies we reviewed did not have a record of their most recent conference call available. A larger number (64%) did not have records available from their recent non-earnings presentations on their sites. And 90% did not provide transcripts of their conference calls, a much-prized convenience for investors.

A large number of health care companies, particularly the US-based ones, have very short archiving periods for presentations. In several cases, presentations are archived for just one week.

These companies are making it extremely difficult for prospective investors to get up to speed to make an investment decision. As a Thomson Financial survey found earlier this year, presentations are key content. They are essentially sales pitches which often explain the company’s investment merits from management’s perspective better than anything else available from the company.

	TOP SITE: Celesio AG presents a credible and professional image of itself to investors through a well-managed, easy-to-use site.

Short archiving practices for conference calls and presentations also end up favoring big investors over individual shareholders. This is because individual investors often are not able to actively follow companies’ IR events and disclosures and may miss important details if they visit sites after information has been removed.

Other areas of weakness for health care companies generally are annual reporting and quarterly/interim reporting. Most companies make little effort to improve the usability of their annual and quarterly disclosures, while quarterly announcements are often less comprehensive than those of similar-sized companies in other sectors.

Ignoring key audience groups

The health care companies we reviewed generally do worse than average at providing information and designing their sites to meet the needs of their various audiences. Sites often are skewed to the needs of narrow segments of the investor population.

Health care sector companies are weaker than all other sectors for how well their sites communicate with prospective investors. They do little to explain their businesses and their strategies. Coupled with the shallow presentation archives of many companies, this makes it very difficult for new investors to be able to learn about the company and its future prospects.

The main emphasis at most of these companies is on complying with regulations and servicing sell- and buy-side analysts and investors, and even then not very well.

Compliance is not communication

If there is one take home message from the health care sector companies we reviewed, it’s that these companies are mostly consumed by compliance cultures.

Some may say this is not a bad thing and should be expected in such a heavily regulated sector. But it is bad when it comes at the expense of communication effectiveness and investors being able to adequately inform themselves.

A total focus on compliance leads to an almost absolute adherence to minimum standards. It hinders communicators at these companies from delivering information in better, more effective ways that can both improve access for all investors and reinforce companies’ reputations with their stakeholders.

The two companies we have recognized for having World’s Best IR Websites in the Health Care Sector are proof that health care companies can do better. They just have to want to.

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