POWER TO THE PEOPLE
Corporate websites can offer much more than on-line annual reports, as many finance managers are discovering.
By Elizabeth Fry

Jackson Tai may not have invented the Internet, but he certainly has embraced it. As CFO and investor relations head at Singapore's DBS Bank, Tai understands that investors want timely and relevant information and they want it on-line. A click on the dedicated investor relations section at dbs.com.sg offers the basics - annual reports, interim results and board announcements. It also offers share price performance, credit ratings from S&P, Moody's and Fitch, as well as reports on corporate governance, risk management and even the operations of the bank's back office functions.

As Tai knows, the rise of the global investor and the US push for fair disclosure laws has made managing the flow of information critical to attracting equity. And as promised, the Internet is the great equalizer. "Investor relations," explains Tai, "is about communicating equally with all stakeholders. By directing the information, we can build a two-way market on opinion."

In Asia, providing deeper and better service to analysts, institutional and retail investors through on-line investor relations (IR) is coming of age. In Hong Kong, 63 percent of major companies have a corporate website, and 83 percent in Singapore, according to a recent global survey of web-based financial reporting by the International Accounting Standards Committee (IASC).

The growing expertise and technological know-how of international retail investors," says Singapore-based Curtis Montgomery, CEO at on-line investment analyst firm Wallstraits.com, is driving companies to respond to their expectations. "On-line IR has a democratizing effect," says Montgomery. "Many analysts and fund managers in the US fought against it. They wanted to be the filter that took the information to the public, that is, their favorite members of the public."

Finance executives, however, have a different agenda. Singapore Airline's vice-president of finance, Ng Sim Hee, says the company issues its latest financial information to the public at the same time it is e-mailed to analysts. "Anyone can get their hands on the data," says Ng. "There's no discrimination between big or small investors."

Not every company, though, has embraced transparency or on-line IR to that degree. Just 30 percent of Hong Kong companies and 37 percent in Singapore provide the basic minimum of financial information on-line, states the IASC, which surveyed the largest companies in 22 countries. Only 20 percent of the sites in both markets allowed downloading of HTML annual reports.

Why? For some finance executives, an IR site is seen as too expensive or too risky. According to those who know, however, it needn't be. While it's important to be aware of the costs and potential pitfalls, analysts agree that the web is a useful tool to build awareness, provide a corporate focus on the issues a company considers important, and build a loyal shareholder base. It's so effective, in fact, that on-line IR may put some fund managers and analysts out of business.

Clicking with Investors

In the meantime, the best analysts and fund managers had made corporate website surfing their first order of business. Take Singapore-based Lim Jit Soon, Salomon Smith Barney's head of research. He spends about 30 percent of his time gathering information on-line for the five companies he covers personally. That said, Lim admits that increased transparency may have a downside. "Simultaneous disclosure laws in the US (which force companies to provide all investors with the same information and are likely to be adopted in Singapore soon)," says Lim, "will obviously make it more difficult for us to anticipate events."

Or sell advice. For finance executives, though, disclosure laws present a different sort of risk. "The US law is certainly a driver," says Premod Thomas, CFO at Singapore Technologies group, "and we're very conscious that the website should be used as a tool for full and simultaneous disclosure." But given that the CFO's role is to minimize risk, not add to it, Thomas takes great pains to ensure that information posted on the web is accurate. That includes hypertext (links to other websites) to analysts covering the stock.

In the US, hypertext can be especially hazardous, since the Securities and Exchange Commission views links to analysts' sites as the equivalent of the company directly transmitting the information. While the regulations in Asia aren't yet clear, CFOs need to be very careful that the site doesn't endorse an analysts' work, which could trigger legal liabilities, and that the analyst list is constantly updated so as not to appear selective.

With that cautionary note in mind, setting up the site is just a matter deciding of how many bells and whistles you want and how much you can afford. For Hong Kong-based Norris Leung, CFO at watch manufacturer Dailywin Group, there was never any doubt that an on-line IR site would boost the company's brand and reputation as an open and transparent business. But Leung had neither the technology, the people or the desire to spend the money on a fancy site - 1999 turnover amounted just to HK$238 million (US$30.6 million). Instead, he outsourced the job to a third-party web manager for a mere HK$30,000 (US$3,800) a year.

By hiring third-party providers, especially high traffic financial services hubs such as irasia, or Shareinvestor.com, smaller companies can leverage their exposure. For example, at Wallstraits.com, S$10,000 (US$5,800) a year buys the design and maintenance of a corporate website. The package includes an IR section, corporate write-ups and broadcasts to affiliate media such as Yahoo and ChannelNews Asia, and even visits to your headquarters from real investors.

Medium is the Message

CFOs with bigger ambitions and budgets are broadcasting "live shows" through their IR sites. While the multi-media equipment alone can cost at least US$80,000, Mohandas Pai, CFO at Bangalore-based, Nasdaq-listed Infosys Technologies, says spending on IR is a smart investment. Pai notes that web communication is especially important for high-growth technology companies, where timely disclosure can help stabilize volatile share prices. It's equally important for companies with a large US institutional following as a means of expanding the company's shareholder base and building brand equity.

Unusually, for a finance head, Pai is directly involved in all aspects of Infosys' web IR strategy - from the "look and feel" of the pages to the content disclosed. Maximizing the site's impact to keep investors interested is a job for the CFO - not a web designer, he says. As a CFO, he knows that communication is a two-way street, and by supervising headlines, prioritizing information and eliciting feedback, Pai can ensure that the site is effectively servicing shareholders.

Part of Pai's strategy is to personalize investor relations through webcasting (delivering live or delayed audio or video broadcasts over the web). With webcasting, Pai can reach his international investor base simultaneously and meet US disclosure requirements. What's more, investors can put a face to the corporate machine. "Investors appreciate the live experience," says Pai. "Personal communication is the way of the future."

India isn't the only place where CFOs are embracing the web. Kelvin Wong, Hong Kong-based head of finance at Cosco Pacific, is a recent convert to the benefits of communicating with stakeholders through on-line IR. The company's site began by offering not much more than a corporate profile and its annual report. But after consultations with analysts and investors, he became convinced that offering more information would pay off. "We had a lot of interest in port performance in Hong Kong and mainland China," he says. "Shareholders asked, and we agreed, to provide operational data each month on the web."

Still, as far as the web is concerned, Wong takes a conservative approach. What matters most, he says, is the content and cost effectiveness of the site, not state-of-the-art design and technology. While he appreciates having investor comments channeled via the web back to the company, he argues that Asian companies and their US counterparts are at different stages of sophistication and therefore have different requirements. "US companies ... have been operating [under] a very substantial disclosure regime for some time," he says, "so the content and form of their presentation is of equal importance."

Maybe so. But if CFOs have any doubts about whether on-line IR can add value by communicating directly with shareholders, they should note the case of Singapore electronic contract manufacture, Sesdaq-listed Flairis Technology. Last September CFO Tan Zing Yuen noticed that a research report published by an on-line broker contained a glaring and very worrying error. The broker noted that "2001 should be a better year as [the company's] asset utilization improved from as low as 25 percent to 80 percent."

Tan, along with company president and CEO, KY Wong, immediately went live on the Net to correct the mistake - the all time asset utilization low was 55 percent. It had never been as low as 25 percent. Their swift action preempted market confusion and negative reaction.

With this kind of capacity for immediate response, effective on-line investor relations is an opportunity CFOs can't afford to miss.

Elizabeth Fry is a contributing editor at CFO Asia.