The Green Room

The value of an Investor Perception Audit

Written by Genevieve Norton

May 27, 2015

If you’re a regular reader of our Green Room series of articles, you’ll be aware of how important it is for CEOs of publicly listed companies to spend considerable time actively promoting their company to a wide range of market participants including current shareholders, potential investors, equity analysts, brokers and other opinion formers. The rationale being that the better the market understands the company and its business model, the better it can value the company’s equity.

While regular market engagement is to be encouraged, many CEOs are left frustrated when marketing efforts are not rewarded with increased investor support, either in the form of share buying or positive analyst research coverage.

One of the keys to translating effort into positive outcomes and to stand out from the crowd is to not only have a deep understanding of the target investor base, including what the catalysts are for investment, but also to take an honest look in the mirror to understand the company’s own strengths and weaknesses in the eyes of the market.

Companies listed on the ASX must remember that they are but one of about 2200 trying to attract attention from a limited pool of investment dollars. Why should a fund manager invest in company A rather than company B, a similar looking competitor?

Interestingly, it is usually the negatives in the eyes of fund managers that carry more weight than the positives when it comes to making an investment decision. These negative concerns – real or perceived – are rarely communicated to the company, either directly by investment managers or indirectly through a third party, such as a broker collecting feedback following a recent roadshow. And yet, these comments are probably the most useful pieces of feedback a company can gather.

Carefully structured investor perception audits are one of the best tools a company can use to actively gather shareholder and market feedback in a confidential and arms length manner. While some stakeholders will provide frank feedback to company CEOs, most respondents are prepared to be more forthright in their answers to an independent third party, knowing that it is being given on a non-attributable basis.

Many institutional investors welcome the opportunity to participate in perception studies and regard it as a positive indication that management is taking a serious and proactive approach to their investor relations program and demonstrating an understanding of the importance of listening to its investor base.

Companies should not only want to gather as much feedback as a possible from the market, but have a duty to do so. The ASX Corporate Governance Council states a company’s investor relations program “…should not just involve one way communication from the entity to the market but also provide an opportunity for investors and other financial market participants to express their views to the entity on matters of concern or interest to them. Where they do, those views should be distilled and communicated to the Board.

Perception audits – when adopted as part of a best practice investor relations strategy – are usually carried out annually or bi-annually following financial results, with the conclusions easily collated into a format that can be presented to the Board. The questions can be compiled in conjunction with the company’s advisors and can be very focused in nature or as wide-ranging as appropriate to illicit the most useful data, including:

  • Reaction to recent financial results;
  • Management performance or Board composition;
  • Competitive landscape;
  • Corporate governance policies;
  • Strategic objectives or M&A criteria;
  • Executive remuneration packages;
  • Wider investor relations strategy;
  • Levels of disclosure; and
  • Any other areas deemed important to the company’s public perception and market valuation.


The perception audit and its findings should be an integral element of a company’s wider, ongoing investor relations program. Not only are companies fulfilling their obligation to listen to investors’ views and concerns, but they are also getting on the front foot with the market, to combat any negative perceptions that may be preventing potential investors from buying shares, or analysts from being more positive on the company’s prospects.

Key outcomes of a well-managed Investor Perception Audit include:

  • Satisfy corporate governance requirements to ensure shareholders’ views are communicated to management and ultimately the Board;
  • Receive detailed investor feedback on wide range of issues;
  • Flag areas in which the company is succeeding or needs to improve;
  • Receive candid and unbiased views of the company’s strategy and management team;
  • Ability to address sensitive areas such as executive remuneration and Board appointments;
  • Ability to gather opinions and thoughts on recent financial results, potential M&A, capital management initiatives, levels of debt, etc.;
  • Demonstrate to shareholders that the company is serious about investor relations and communicating with core stakeholders; and
  • Allow the company to act on areas flagged for improvement.


Improved communication with the market will ultimately lead to a greater understanding of the company, more supportive shareholders and equity analysts, and ultimately a more robust valuation.


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