On Monday, we discussed the latent – and largely untapped – value that lies within most public companies, the employee-investor. The irony is that this group of shareholders is the easiest to reach, as they are already “invested” in the success of the organization and typically more than willing to engage with management on critical value-creating, including governance, issues.
Here are three simple steps you can take to expand your current IR program to reach your employee-investors more effectively:
Make employees a priority when it comes to company news
This may sound so obvious that it doesn't need to be mentioned, but you'd be surprised how many times employees are the last to learn about important company developments. By formally announcing news internally as part of a compliant disclosure sequence, companies ensure their employees benefit from the same information external audiences receive. For example, when specialty chemicals manufacturer Lubrizol announced it had been acquired by Berkshire Hathaway in 2011, Lubrizol's CEO proactively communicated directly with employees via a half-dozen 8-K filings and employee-only conference calls to ensure they were as well-informed as possible prior to heading into the shareholder vote.
Articulate the company's business strategy and value proposition
There is clear evidence that companies perform better financially when employees truly understand not only the business, but also management's strategy for the near and long term as well as the company's value proposition – what sets it apart from its competitors and what makes it attractive for investors. And, as Columbia University Professor Baruch Lev states in his book, “Winning Investors Over,” it is important to maintain a two-way flow of this information with investors. This is particularly important with employees, who can represent an important voting bloc during proxy season.
Translate complicated financial information and other “Street slang”
For obvious reasons, the language used in quarterly earnings releases, conference calls, and regulatory filings is typically geared toward a sophisticated investor or someone with a high level of financial literacy. Therefore, it is important to make this language meaningful for employees to ensure they have a proper perspective on the company's financial performance and strategic accomplishments. Additionally, in the context of new proxy disclosure standards, increased restrictions on pay practices, and “Say on Pay” advisory votes, communicating the rationale and structure of compensation plans clearly and effectively will play an important role in decision-making for all shareholders, including employees.
On Friday, I'll provide some examples of companies that do a good job of including employees in their investor relations communications plans and outreach. In the meantime, let me know if you're doing other things to reach this key investor audience.
Lisa Rose is senior managing director at Dix & Eaton. She can be reached at firstname.lastname@example.org.