Canadian IR websites underutilized, study finds

CANADIAN investor relations departments are failing to take advantage of web technology to communicate essential information and provide services to their investors, a study commissioned by the Canadian Institute of Chartered Accountants (CICA) has found.

As part of a broader review of corporate reporting, a study group comprised of accounting and investor relations experts evaluated 113 leading Canadian companies’ investor relations websites against a range of content and technology criteria. They found that “the use of technology to communicate with investors and other stakeholders is still at an embryonic stage.”

Chaired by Jerry Trites of Zorba Research, the study group says in its 213-page discussion draft that the most important conclusion is that companies are generally not using their investor relations websites as a distinct communication medium to convey information to their stakeholders.

24 types of essential information

As part of the survey, which was conducted in late 2007, the researchers assessed how well companies were using their IR websites to disclose 24 types of essential information outside of their annual reports.

They found that only eight of the 24 essential information items were provided by more than 10% of the companies, while four were not found at all.

Highlights from their analysis include:

• 98% disclosed information about share data;
• 78% disclosed their corporate mission;
• 66% provided information about products, services and markets;
• 32% included a corporate directory;
• 7% listed their financial and operating objectives;
• 4% compared their performance to their objectives;
• 4% provided an outlook section on their site; and,
• 3% provided details of company ownership and control.

Technology use lags

As part of the survey, the study group also evaluated how well companies use technology to communicate with investors and others. To do this, they used criteria from the CICA’s Corporate Reporting Awards (CRA) for electronic disclosure, which I helped to formulate several years ago. The study group found that:

• 63% link to investor presentations;
• 44% use webcasts for a president’s message or executive presentations;
• 43% offer “document request” feature;
• 21% provided e-mail alerts;
• 13% provided information in videos, photos, MP3, podcasts and interactive graphics;

The researchers surveyed how companies were presenting their annual reports online and found that most “are simply a replication of the paper annual report.” They found that:

• 96% of the companies posted their annual reports in PDF format;
• 38% of the PDF annual reports used the “bookmarks” panel to support navigation;
• 32% or 36 companies posted some or all of their annual reports in HTML; and,
• Of the HTML reports, only 10 had a search feature and 9 used “novel features” like pop-up graphics, glossaries, and animation.

Recommendations for improvement

Overall, these findings are very similar to a study we published of the S&P/TSX 60 large-cap companies in December 2005, which suggests that there has been little if any progress for online investor relations practices in Canada in recent years.

The study group makes specific improvement recommendations for Canadian companies, stressing that websites are now “the primary and definitive means of communicating information about a company.”

They say website content should include:

• The most recent annual report, clearly distinguishing audited and unaudited information;
• The most recent interim report, clearly distinguishing audited and unaudited information;
• Current year financial highlights and summaries, including key performance measures;
• Any significant regulatory or legislative developments that may affect the company;
• Current share price, updated regularly;
• A calendar to inform website visitors of upcoming events;
• An email alert capability to which visitors can subscribe;
• Webcasts/transcripts of presentations;
• 5 to 10 years of archived financial reports;
• Share price and market capitalization histories;
• Memorandum and articles of association; and,
• An archive of press releases.

The study group suggests ways to improve navigation on company websites, and area that has long been a bone of contention with investors in a variety of surveys over the years. They recommend the following best practices:

• The investor relations homepage should be one click away from the company homepage;
• A site map and a search facility should be available;
• Navigation tracking should be provided, such as using different colors for visited and unvisited links;
• File download times should be minimized and downloads properly marked;
• Links should indicate if they are internal to the company website or lead to third-party sites.

The report says that no Canadian company included in the website survey met all of the CRA criteria for 2007 and that “many have room for improvement.” They recommend that Canadian companies look to online reporting leaders such as Nexen Inc, Potash Corporation of Saskatchewan Inc., TELUS Corporation, BCE Inc, and Petro-Canada for inspiration.

Overall, the report is a valuable addition to the literature on online corporate reporting and does a good job of pulling together much of the prior research in the field. You can download the complete discussion draft in PDF at http://www.cica.ca/crs

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