A significant part of my career has seen me provide investor relations advice and support to companies listed on the Canadian, UK and UAE stock exchanges. My experience has shown me that while local laws and rules that govern listed companies vary somewhat in each country, the foundations for investor relations in each country are largely the same. These foundations broadly involve creating a long-term strategy that focuses on engaging with financial and other stakeholders while complying with regulatory rules and laws of disclosure. The latter stipulates that IR must ensure that any company information that may influence the share price must always be shared with audiences in a way that ensures complete, fair and timely disclosure to all concerned.
Disclosure rules & regulations
The rules and regulations around the disclosure of information for listed companies applies to both financial information as well as typical public relations activities such as product speeches, interviews, feature articles and thought leadership programmes. When the regulations are broken, penalties can range from a warning letter from the local regulatory authority to fines and even suspension of share trading, with the latter having significant reputation ramifications for the company concerned.
An assessment of companies in the UAE
In a recent exercise to assess rule and regulatory compliance in the UAE, I looked at companies listed on the Dubai Financial Market (DFM) and the Abu Dhabi Exchange (ADX) to see reasons why share trading was suspended. What I found surprised me greatly. While reviewing the DFM and ADX listed companies’ suspended trading circumstances, I expected unusual circumstances or situations beyond the control of management teams to be the main reason why share trading was suspended. More often than not, however, I found that companies had their share trading suspended for simply not adhering to the UAE’s disclosure rules; e.g. by missing reporting deadlines or failing to communicate important information with the regulators or the market in general. Over the past 12 months or so, more than a dozen companies were suspended for a short period because of such avoidable reasons.
The consequences of not communicating
While failing to communicate might seem a relatively minor issue, from a corporate reputation perspective it sends a message to financial and other audiences that important rules and regulations that listed companies must abide by are unimportant to the company’s management team. Missing deadlines and not sharing information is particularly significant for investors who look for a credible and experienced management team to be a competent custodian of their capital. Unmet deadlines and suspended trading are significant newsworthy events for the UAE media, with most daily newspapers in both online and print formats picking up market news and running editorials around why companies have had their trading suspended. The missing of deadlines and the breaking of disclosure rules becomes a public story very quickly for listed companies, leading to damage to reputation that can take years to rebuild. This consequence can be stark for the success of the companies’ operations in the future.
From my experience in both the UAE and in other countries, I strongly recommend that listed companies never fail to meet a reporting deadline or miss a disclosure that is required by local rules and regulations. I suggest that the ideal modus operandi for every listed company is to have in place best-in-class corporate governance and a robust investor relations strategy that – among other things – includes a calendar of activities that highlight important relevant dates to meet these mandatory requirements. It’s a simple but very effective way to ensure a strong, long-term reputation among investors and other stakeholders. Ultimately, it can be a tool to prevent occurrences that would otherwise damage the standing of the company and negatively impact on its future success.