The unsettling effects of the recent events on Bursa Malaysia involving some listed companies clearly demonstrate the need for improved investor relations as an effective tool in increasing shareholder value.

Barely had Thomas Murrell left the federal capital and headed home to Australia, dramatic developments on Bursa Malaysia quickly brought into focus the subject of investor relations.  It brought out into the open the continued shenanigans in the corporate world that highlighted increasing difficulties investors face in investing on listed companies on the stock markets.

In less than a week almost RM1.65 billion in market capitalisation in three companies was abruptly wiped out on Bursa Malaysia recently after savvy insiders using various social media avenues flooded the offices of media outlets and research analysts with a hailstorm of allegations about the inner working of some listed companies.

When times were good, some of these companies resorted to financial engineering to prop up their numbers. Investors thought these were great companies and could do no wrong.  Ironically, even the top men in these companies thought the same that they could do wrong.  They spent big money in making wrong acquisitions and went more aggressive into investments overseas than their financial strength would have supported.

They had winds in their sails, and thought that they connected very well with their stakeholders.  After all, whatever decision they took were applauded by the markets.

Well, those were the heydays of the pre-crisis period.  After the crisis struck, not only did these companies lose business big time, their balance sheets started bleeding profusely.  The wind was gone, instead the storm was there.

And the people who paid the biggest price were the shareholders. Investors will remember them for their reckless pursuit of growth rather tan any shareholder friendliness. These are clear cases of how a management’s overconfidence can hurt shareholder returns, and hurt big time.

To Thomas Murrell, these are stories that he has heard over and over again in the course of his work throughout the region.

“Not only are shareholders hurt as a result of this but the companies suffer a dent on their corporate image leaving a perception that can be damaging in the long run” he says. “To put it bluntly, many companies continue to have poor internal controls that leave you vulnerable when facing a crisis.”

Putting into perspective

Murrell knows best about these issues. He has been passionate about investor and financial relations since his days when he graduated from three Australian universities with distinctions. An international business speaker, and author of the book Understanding Influence for Leaders of All Levels, he is recognised as an authority on this subject.  And as head of 8M Media and Communications headquartered in Australia, he travels regularly throughout the Asia-Pacific region providing counsel to leading public companies listed on the stock markets.

Murrell was in Malaysia recently to deliver a public lecture with a view of heightening awareness of the need for an effective understanding and to incorporate the culture of investor relations in companies.

Increasing shareholder value:  that according to Murrell remains the primary goal of companies. As world markets advance in search of capital under the scrutiny of rapidly changing technology, the issue of investor relations is fast gaining currency in Asia as companies recognise its importance in meeting shareholder expectations.

“Market value and investor confidence are absolutely important in business now,” Murrell opines.

Bursa Malaysia acted in 2007 when it founded the Malaysian Investor Relations Association, fondly known as MIRA, as a platform for advancing and sharing of best practices among IR professionals, knowing very well it is one of the many necessary components of a mature and efficient market.

“MIRA is of the view that it was absolutely necessary to protect the investment community because it would impact both local and foreign investors,” says Ma Kin Hoong, the executive director with MIRA. “And we moved to establish MIRA.”

According to him, the positive thing is that its members were appreciative of the quality of the training they were receiving at MIRA.

Amid the unsettling corporate behavior that will crop up occasionally Murrell says there must be a continued need to change the mindset within companies about IR.

“Many companies are tied to traditional governance and compliance thinking, which is often anchored on accounting or legal framework and that isn’t enough in the current business environment” he says.

“Companies simply fail to communicate with shareholders due to their lack of understanding the new trends emerging in the marketplace.”

What else can we do?

But Murrell doesn’t dwell on the negatives.  Instead in his lectures with the CEOs of companies, and other decision makers, he urges them to move forward in understanding how to overcome these problems and instill a work culture through a set of investor relations principles that will ensure continued success.

“This is not an uphill task but it takes time” says Murrell, “There are a few steps that must be taken by the management.”

Firstly, there is a need to build the credibility factor and you build that through reputational capital. According to him, like financial capital, reputational capital flows to where it’s well looked after.

“Remember, reputations takes years to build and can be lost in seconds. You can buy a logo or an image but you have to earn a reputation and work to maintain it” he adds. With years of experience behind him, Murrell says that it is important to recognise that reputations are forged during difficult times and there has never been a better time to invest in reputational capital than now given the current global uncertainties.

More importantly, he warns that it is those companies with the strongest values that have the most powerful external reputations. “Companies with the strongest reputations with a responsible management are the most profitable” he adds. He refers to successful companies like Virgin Airlines and Apple that are driven by responsible leadership who have built a strong brand name and loyal shareholders. In Malaysia, Murrell likes Air Asia where the ability to inculcate change throughout the organisation has enabled it to truly make itself felt in a relatively short time since commencing business as a low-cost carrier.

But success needs to be told to the investing public, and if the narrative factor is left out, it will serve as a setback to organisations.

Murrell tells of people like Richard Branson, Steve Jobs and our own Tony Fernandes, who are skilled at gaining the attention of editors and journalists and generating thousands of dollars of media coverage for free. In these people there is always warmth, the same endearing personal touches, the same friendly conversations and easy smiles, the same spirit in going the extra miles to delight.

While Malaysia’s Air Asia is newly emerging on the world turf, Virgin Airlines and Apple have grown into such a formidable global brands and their appeal so universal that people don’t stop to think of their origin.  What these savvy businessmen are doing is to make the connection with the media that will last.

“The media is bowled over, visibility is great and in the process it is reflected in high shares prices” says Murrell. “Most narratives are crafted on the crucible of facts and it needs to have a compelling trajectory, with its message of hope and success.”

For MIRA, its narrative is pretty much set through its activities. It is time now to move ahead and see how to nurture this narrative. Under MIRA, this means getting into details, for it is in the details that any narrative actually comes alive.

As it has always been said, investor relations can never be a science because there are too many inter-linkages and viewpoints to allow a set of regulations to cover all aspects. It can be very complicated to the inexperienced. Hence, it is a ‘mindset’ that every company needs to cultivate and strengthen, through a corrective process from failures and shortcomings. To remain true to the spirit of investor relations that is the choice that every company will need to make to succeed.

And here in Malaysia, much would depend on MIRA’s Ma Kin Hoong, and of course Thomas Murrell, a prolific speaker.