Evaluating NIRI's IR website guidelines 2

IN PART one of this review, I mentioned that the US National Investor Relations Institute’s (NIRI’s) executive alert on investor relations websites includes a list of 14 Do’s and Don’ts for IR departments to follow. In this post, I review each of the guidelines and explain why I think they’re either good or bad.

The Good Guidelines

Provide direct contact information for the IR team. It would have been better for NIRI to say “individual IROs” rather than “IR team,” which is ambiguous. They also should have been explicit about the types of contact information to provide (personal email addresses, for example). Nonetheless, this is one of the good recommendations because the lack of direct contact information on IR websites is a problem we’ve highlighted on this site for several years. For a profession that is all about building relationships, it’s surprising that so many IROs are incognito online. Look hard enough and you will find sites where individual contacts are identified for every public-facing department at a company — except for investor relations. Frankly, this makes many IROs look like snobs who prefer to play golf with CFAs rather than answer questions from ordinary investors. This arrogance is going to be a bit of problem in the new era where a company’s reputation is increasingly the sum of the relationships that individual employees foster with their stakeholders. Of course, NIRI probably wasn’t thinking about that when they made this recommendation.

Carefully consider requiring users to register for certain aspects of IR sites as this may dissuade users from accessing these areas or avoid the site altogether. This has been a pet peeve of ours for years. It’s a stupid thing to ask people to register to access a conference call webcast, especially an archived one. Thomson Reuters need their big butts kicked for this because they use registration screens by default on their clients’ websites, but not when they distribute the very same webcasts to other websites, such as their StreetEvents site or Yahoo! Finance. This means that it’s easier for investors to access a webcast on one of Thomson Reuters’ websites or on one of their partners’ sites than it is on the website of the company that is footing the bills. Yeah, but I’m always coming down on Thomson Reuters and they’re the good guys, right? Registration is also required by Shareholder.com for RSS feeds, which I’ve already demonstrated is about the dumbest thing I’ve ever seen on IR websites.

Don’t use your FAQ as an information catch-all. Important messages can get buried there. For example, information on shareholder services warrants its own section. Good catch! Fully 68% of the IR websites in our survey have what we call fake FAQs pages. The questions are not actually based on real questions from investors and the answers are almost never reviewed after they’ve been written. How it works is this: You’re about to launch a new IR website and your vendor — Thomson Reuters, for instance — gives you a list of questions for you to answer. They might even provide model answers from another company. You then write your answers in such a way that you never have to update them. For example, in answer to a question like “when is your next earnings release” you provide a generic answer like “we regularly announce the dates of our earnings releases in our financial calendar,” with a link to the calendar. That way, you don’t really answer the question and you never have to actually update the non-answer. Of course, people can see right through this ruse. They know you’re not really interested in answering the questions they never actually had in the first place.

Make corporate governance documents and information prominently available. You might think that this recommendation isn’t worth mentioning given that it is so obvious and there are specific stock exchange and SEC requirements for corporate governance disclosures on corporate websites. But you’d be wrong. While there was a time shortly after the Enron implosion (remember that?) when almost every IR website had a prominent corporate governance section, that is no longer the case.

I’m not sure why companies are downplaying governance information today, but I can share a couple of anecdotes that might shed light on the situation. In one case, a very prominent large-cap company simply forgot that it needed a governance section when the time came to revamp its website. It wasn’t until I told them they had some regulatory obligations to consider that they hastily put it back, albeit in a less prominent place. In another case, a very well-known corporate governance section was moved out of the investor relations section of the company’s website and tucked away in the About Us section where investors couldn’t see it. The reason for this had nothing to do with investors not being interested in the information, but because the corporate secretary wanted control over the site rather than have it reside with the IR department.

Now these two companies are very prominent. Other companies look to them as exemplars. So once a couple of leading lights start doing something, other companies quickly follow their lead, not realizing that the companies they’re following didn’t make their decisions for valid reasons either. There’s a lot of monkey-see-monkey-do type stuff that happens on IR websites. The thing I always point out to clients in this situation is this: “If investors, the owners of the company and the folks who elect the directors aren’t interested in corporate governance information, who the hell is?”

Be careful of features that make too much “noise.” For example, a Web site that launches audio or video of the CEO upon each visit regardless of the number of previous visits will simply annoy the user. Carefully consider how such “bells and whistles” are implemented by making them user-directed or, as in this example, having the audio/video play only upon the initial site visit. I can think of one site that is probably among those NIRI’s reviewers are referring to (hint: the current chair of NIRI runs IR there), but “noise” isn’t a widespread problem. And rather than remembering that people have already viewed the multimedia, which technically can be done, it is simpler and more correct to have audio and video turned off by default and let people control the user experience. Still, I generally support this recommendation.

Include a page for fundamentals. While this information is often available, it is generally difficult to find in document files rather than in a more easily accessible format. By “fundamentals” I am assuming that NIRI is referring to a financial summary, which should be in HTML as well as PDF or Excel.

The Bad Guidelines

If linking to external resources (i.e. call transcripts, stock charts, etc.), be sure to identify them as outside the corporate site. You may wish to provide an intermediate screen that indicates the user will be redirected (see “Hyperlinks to Third-Party Information” in the SEC’s recent revised interpretive guidance on company Web site use). This is just wrong, and if it wasn’t then 70% of IR websites in America would be unusable because investors would constantly be clicking through disclaimer pages. The issue with third-party information isn’t about stock charts or call transcripts, it concerns things like third-party news articles, blog posts, analyst reports, etc. where an opinion about the company may be expressed by someone presumably independent of the company. It’s important in these circumstances that investors know why the company is providing the links and what connection, if any, there is between the company and the linked information. Also, intermediate screens or click-through disclaimers are not necessary, don’t absolve you of responsibility, and probably won’t be read anyway. The SEC’s guidance states: “We do not believe that the failure to use “exit notices” or “intermediate screens” should automatically result in a determination that a company has adopted third-party information.”

Avoid the appearance of inactivity by presenting an empty events calendar. An alternative practice is to combine upcoming with past events onto one page. I love this bit of bad advice because it’s encouraging IROs to cover up for not being able to plan ahead or keep their websites updated. Seriously, if you can’t post a list of upcoming events for the next six months or more, including the date of your next earnings release, then you have very serious reporting problems and the “appearance of inactivity” is probably the least of your worries. Either you provide a list of upcoming events or you don’t. But don’t try to make it look like you have a lot of events when you don’t. I’ve addressed this topic in greater depth in the post IR calendars say more than you think.

Avoid having the site launch new windows as a way of accessing content or functionality. This risks both annoying the user by cluttering their desktop, and creating discontinuity between the content which ought to be cohesive. This is too simplistic because there are many times on IR websites when content should open in a new window. For example, almost all links to non-HTML documents typically should open in new browser windows or be coded to open in their native applications. Smashing Magazine recently published an excellent review of the rules around new browser windows that you should read in full.

Use design elements such as dynamically expanding tree structures (think Windows explorer without the folder icons) that provide the user with a sense of place and which previews the content in each section. This just isn’t clear or useful, especially the bit about “Windows explorer without the folder icons,” which isn’t an effective interface for the web.  I have an inkling of what they trying to say, but in my experience it is best to show people rather than tell them. Navigation is the single most important and complex issue impacting the usability of IR websites, so offering vague advice like this is likely to do more harm than good. My advice would be to follow conventions on a large group of other sites or test the navigation scheme under a variety of scenarios. There is one bit of advice in NIRI’s statement that is good, and that’s showing people where they are within the site’s hierarchy. Unfortunately, this practice is being ignored too often in modern web designs.

Use common names for standard pieces of information in order to make them more easily identifiable to users. Such menu items as “Computershare Investment Plan” may be less meaningful to the uninitiated than “Direct Stock Purchase Plan.” This is not a big problem among US companies. If I had to compile a list of 100 things on US IR websites that should be improved, better labeling of content probably wouldn’t make the list. It’s a non-issue. And I actually think “Computershare Investment Plan” is clearer because it tells people the plan is administered by a third-party.

Use the IR Web site not only as a current snapshot, but also as an historical record of the company’s performance and a roadmap for where the company intends to go (to the extent the company discusses the future). This is another vague guideline that isn’t helpful. Do they want companies to provide deeper archives, and if so, for how long should different types of content be offered? And how exactly should companies provide a “roadmap for where the company intends to go’?” At its core, there is nothing wrong with this advice, but without specifics it’s too easy for companies to ignore.

Use a linked table of contents at the top of a page if posting a long HTML document. This is just about the lamest way to make a long HTML document navigable. These in-page links are what you get in SEC filings on Edgar. On IR websites, large HTML documents should be broken up into sections and be made navigable via a good menu, preferable on the left side of the page. And this might be one of those times when the information should open in a new browser window.

Provide access information to enable investors to communicate directly with the Board of Directors. I initially was going to include this one in the list of Good Guidelines, but I changed my mind. Why? Because it’s a farce. Directors don’t take seriously correspondence that investors submit via the company’s website. They really only listen when some big pension or hedge fund threatens to vote them out of a job. If directors really wanted to engage shareholders, they’d blog or participate in public shareholder forums. At minimum, they could solicit comments and questions on particular issues the way that regulators do when they are proposing new rules.

So that’s what I think about NIRI’s IR website guidelines. There are a few highlights, but mostly they are a disappointment. But what do you think? Am I too critical? Do you think NIRI’s guidelines will help to improve the quality of US companies’ IR websites? Feel free to contribute your thoughts using the commenting form below.

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