According to the recent Trust and Reputation 2024 study, Finnish listed companies receive the lowest scores from retail investors for their interaction. At the same time, trust in company management has been declining for the fourth consecutive year.
Why do retail investors feel that public companies don't listen, understand, or engage in dialogue? Why do they feel that listed companies are not interested in them?
Functo's partner Taneli Hassinen pondered Finnish organizations' inability to engage in dialogue some time ago when writing about organizational autism.
When things are running smoothly, reporting is of high quality, and results are being produced, focusing on special investor interaction may seem unnecessary. Why do I argue that interaction is so important in building and strengthening investor confidence? Or why does its absence – or a significant change in style – set off alarm bells?.
It's about human nature - who we are at our core.
Humanity has reached this point because we have a superior ability to think and act together, experience and build community, and enrich knowledge through discussion. We succeed and evolve because we have an unparalleled capacity for interaction. We commit to each other when we can understand and trust one another. We survive and reach higher when we feel we are together.
What should an individual listed company think about this?
Quite a lot, actually. Let's start with the fact that in investor relations - as the term itself suggests - it's specifically about interaction with all its nuances.
People don't invest in what they don't trust. And they sell their holdings when trust is lost.
Interaction is connection. A company and its management must have the ability to be present, open, and honest in investor communications, both in fair weather and foul. Openness strengthens mutual understanding and enhances accountability, consistency, and empathy. The line of communication is the glue of trust, effective in all conditions.
Interaction is the relationship's thermometer. In investor relations, as in any relationship, the activity of both parties reciprocally feeds and tunes the other. Long-term commitment, clarity, and consistency combined with an empathetic ability to put oneself in the other's shoes nurtures deeper investor relationships. This creates shared relationships, communities, and cultures between the company and its investor community, as evidenced by those who travel to Berkshire Hathaway's annual meetings.
Interaction is a sign of the will to survive - together. We always lament when we see companies run aground in reputational storms. Some lock their course forward, even understanding that the waves could capsize them. Others abandon the helm to others and retreat to their cabins to wait out the storm. The wheel needs to be turned in every swell. Locking the course or letting go of the grip are disservices to investors as well.
Interaction is the best crisis management tool. And openness is its only proper style, at least when it comes to trust. The restriction and scarcity of investor communications during crises is a signal to investors that the company either fears the consequences of openness or decides not to care what investors think.
Fear or indifference. Both equally detrimental.
Interaction is service. Imagine a listed company that treats its investors with the same attention as its most important customers. It would respond quickly to investors' questions, be actively present in different channels, and strive to understand its investors' needs and concerns in the same way it maps out its customers' wishes through segmentation.
Individual investors would feel valued by the company in an entirely new way. Their needs and concerns would be taken seriously, and they would receive clear, transparent answers in both upswings and downturns. Just as quality customer service engages customers, this approach would engage investors with the company in a whole new way.
The heuristic of appreciation works
Ultimately, interaction is about appreciation. When a listed company, through its various representatives, engages in open dialogue with individual investors across different channels, it is appreciated. The human feeling of being valued, in turn, automatically supports the continuous, all-weather sustainable true valuation of the stock.
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