The value of good communication
Investor relations is a relatively young profession in Hong Kong, but this month’s In Profile candidate is a Chartered Secretary who has played a major role in building the profession over the last decade. This month, CSj talks to Dr Eva Chan FCIS FCS(PE), Council Member of the HKICS, Head of Investor Relations at C C Land Holdings Ltd and Founding Chairman of the Hong Kong Investor Relations Association.
Thanks for giving us this interview, what attracted you to investor relations work?
‘Investor relations is mainly about communicating with people and that fits my character well. I like the fact that I am continually learning from the people I talk to, and I have always seen this as an interesting job.
Once I moved to C C Land and started to specialise in investor relations, I quickly realised that there are a lot of misconceptions about this work. My previous job had been as a CFO for a listed company and I received a lot of phone calls from my friends when I moved to C C Land telling me about CFO jobs. They thought that my new job was a very junior position and I had only taken it because I had no better opportunities. That was when I realised the degree of misunderstanding about the roles and responsibilities of the investor relations position.
Actually the investor relations profession in Hong Kong is relatively young. When I started at C C Land, which was only eight years ago, people had very little knowledge about the profession and would still mix up the ‘IR’ and the ‘PR’ functions. I wanted to do something to promote the status of investor relations in Hong Kong so I set up the Hong Kong Investor Relations Association. We started with six people and we now have more than 400 members. We still have work to do, but the awareness of the investor relations function has improved a lot.
Eight years ago, for example, less than 10% of listed companies had a formal, dedicated investor relations position, now many do. This is an important indicator that boards and management recognise the importance of this work. They know that their cost of capital depends on whether they have a good relationship with investors. These days, listing candidates cannot do without an investor relations officer. Often sponsors will make it a requirement for listing candidates to have an experienced person in this role.’
So what has changed – what do you think led to this better recognition for investor relations work?
‘The critical change was in 2005. In that year we had the biggest IPO in Hong Kong – that of China Construction Bank. The bank’s market capitalisation was over HK$100 billion, at a time when most companies listed in Hong Kong were worth less than $10 billion. Back then you could be in top 50 companies if you had a market cap of about $7 billion, but today if you want to be in the top 50 companies you have to have a market cap of over $100 billion.
Another factor is the influx of institutional investors into the Hong Kong market. Before 2005, most investors here were retail investors. Institutional investors are managing other people’s money and have much more rigorous procedures to go through before deciding to invest. These procedures will usually involve visiting their potential investee companies and talking to the management. So, as more institutional investors have entered the Hong Kong market, the requests for management meetings have become much more common. Companies recognise, therefore, the need to have a dedicated person to handle this work.’
Were company secretaries handling investor relations work before the position of the investor relations officer became more common?
‘Yes, the company secretary or the CFO would often be responsible for investor relations and these two positions were often combined. In fact, when I started working as a CFO I actually had three capacities, those of CFO, company secretary and investor relations officer. Having a dual CFO and company secretary was quite common back then, and this is still quite common in small and mid-cap companies.’
Did you feel overstretched handling these three roles?
‘It was really stressful. Particularly since that was before company announcements could be made online. At that time, we still had to make company announcements via the newspaper. So after the board meeting on the company’s results announcement, I had to proofread the announcement and make sure it was correct before the newspaper deadline. We often had to work on that until 2am. Once that was done, I would start on my presentation for the meeting with investors the following morning.’
Am I right in thinking that in Mainland China investor relations are still a big part of the board secretary function?
‘That is one of the main differences between the role here and in Mainland China. For Mainland Chinese companies, the board secretary is the speaker for the company. Therefore, investor relations work is carried out by the board secretary. I have worked for a Mainland Chinese company where I was responsible for both the board secretarial and the investor relations work. I was spending about half my time on investor relations, so this is a very important function of the board secretary.’
Did your Chartered Secretarial training give you a good foundation for your career?
‘The company secretarial training is a good all-round training– you have to study law, accounting, administration, corporate governance – and this certainly helped to get me started.
I graduated from the City University of Hong Kong with a Bachelor of Arts in Accounting and started work in the company secretarial department of a company that had just delisted. I knew it was a good professional qualification to have, so I decided to sit for the Chartered Secretarial exams. Once I had become qualified, I started working in the company secretarial department of a listed company. I continued to study, however, and I eventually took the certified public accountant (CPA) exams. I then moved to the accounting department of the same listed company and, having got the required accounting experience, I qualified as a CPA.
The company secretarial training gives you many different opportunities. Many HKICS members get a second professional qualification and go on to become a CPA or a lawyer. I encourage more young people to get into this profession, especially now that corporate governance is becoming more important.’
Senior company secretaries often emphasise that it is important to have good communication skills if you want to make a success of the company secretarial career – do you agree?
‘Yes. Being a good company secretary is not only about doing all the documentation and the compliance work, you need to know how to work with and communicate with the board of directors, as well as the internal departments and the different external stakeholders. The important thing is for company secretaries to look at how they can contribute to the board of directors. This is the value they bring, this is how they help listed companies to build a good image in the capital market and in public. So it is an important function.’
Do you think the access to the board which company secretaries have is also important for investor relations officers?
‘Ensuring that investor relations professionals have access to the board is something I want to promote. Often the investor relations department is under the finance function, but this work is not only about finance, it’s also about corporate strategy. I report directly to the CEO who is also the vicechairman. If you are not reporting to the chairman or the CEO, you will just be getting second-hand information. In this scenario, how can you know the whole story and how can you deliver the right message? If companies really recognise the importance of investor relations then they should have their investor relations officer reporting directly to the chairman or the CEO or the business decision-makers. The point is whether the investor relations officer can get immediate first-hand information from the senior management team.’
What changes do you see ahead for investor relations professionals?
‘I think there are a lot of opportunities for investor relations professionals in Hong Kong. Hong Kong is now one the largest IPO markets in the world and the Hong Kong capital market has become very international. The fund managers I knew 10 years ago in Boston and London have moved to Hong Kong.
The closer links with Mainland China market will also be an important factor in the years ahead. With the launch of Hong Kong-Shanghai Stock Connect, just overnight, Hong Kong companies are facing additional 100 competitors for investment funds. When the Stock Connect is extended to Shenzhen, they will be competing with Shenzhen companies too.
We will see increasing numbers of Chinese companies coming to list in Hong Kong, and I think we will also see increasing numbers of Chinese people taking up key positions in companies – including CFOs, company secretaries and investor relations officers. The same applies to the investors. In the past, most fund managers were English speakers but now they are often Mandarin speakers.’
Has new technology had a major impact on investor relations work?
‘New technology is having an impact, mostly in terms of new communication platforms, but most investors still prefer face-toface meetings. The various social media platforms can help extend your reach – one message on WeChat can reach 100,000 people. We use WeChat as a communication platform, together of course with the company website. But the growth of social media has also presented challenges for companies. When you have a crisis, if you do not respond immediately you are risking significant damage to your reputation.’
Have you seen more interest from investors in corporate governance over the course of your career?
‘Yes, investors are more focused on corporate governance and corporate social responsibility (CSR) issues. Corporate governance is an important issue for long-term investors – they have to trust management to handle their money over a longer period of time. We are also seeing investment funds in the market which invest solely in companies with good CSR. I think there will be more emphasis in this area in the years ahead.’