Integrating Investor Relations Internally - ABF Investor Relations Conference

INTEGRATING INVESTOR RELATIONS INTERNALLY Case Study, Concepts, and Debatable Ideas Kenny Ong CNI Holdings Berhad www.myCNI.com.my www.OOBEY.com

About: CNI

18 years old

Core Business: MLM

Others: Contract Manufacturing, Export/Trading, eCommerce

Malaysia, Singapore, Brunei, Indonesia, India, China, Hong Kong, Philippines, Italy, Taiwan

Staff force: ± 500

Distributors: 250,000

Products: Consumer Goods and Services

www.myCNI.com.my www.OOBEY.com

IR and its problems Overview of Corporate Communications and Investor Relations problems www.myCNI.com.my www.OOBEY.com

How to please Investors (the Dilbert version)

Buy back shares

Announce massive cutbacks

Spin off New Divisions

Ironically and Unfortunately, the above prescription is true in real life… www.myCNI.com.my www.OOBEY.com

Why is UMW favored by Analysts?

high dividend yield,

low price earnings multiple,

buoyant growth outlook;

Challenges of Investor Relations

Stock- vs. Share-holder*

Public Opinions

Global operations – difficult to explain

Increasing focus on ecological, social, ethical issues

Diverged expectations for same issue

What to do with Excessive Cash?

Superficial changes vs. Fundamental Changes

Investors depend on ‘hearsay’ vs. ‘facts’

Share Price ≠ Market

R&D/M.S./HR vs. Investor Expectations

Opposing ‘Expert’ views

IR problems

“ Good news for stockholders can be bad news for other stakeholders.”

Gregory Miller, Assoc. Prof., Harvard Business School.

Why integrate IR internally? The unseen effects of Internal Matters on external Investor Relations www.myCNI.com.my www.OOBEY.com

Principles of Investor Relations

Long-term relationship

Consistent and Proactive

Performance vs. Controllability

Aligned with operating/strategy position

One message, Different Emphasis

Outside-in Intelligence*

Types of Investors (1/2)

Institutional

Fund Managers Corporations Sovereign Funds VCs NGOs Non-Profit Org Financial (Loans) JV Partners M&A Social VCs Holding Co. HQ (MNC) Gov. VCs Supply Chain Gov. Partnership PFI Competitors Franchisees www.myCNI.com.my www.OOBEY.com

Types of Investors (2/2)

Retail

Investor-Shareholders Employee-Shareholders Management-Shareholders Customer-Shareholders Distributor-Shareholders Distributor-Entrepreneurs www.myCNI.com.my www.OOBEY.com

Why do they Invest?

Return/Profit

Risk Management/ Hedging

Tax-benefits

CSR/Image

Diversify revenue

Counter-cyclical balance

Support ‘Mission’

Exclusive rights

Contractual obligation

National Agenda

Control Supply Chain

R&D portfolio

Control Management

Alternative Cash Flow

M&A

How do Investors get their ‘INFO’? (1/2) Institutional Gov./Politics Customers Suppliers Economics AGM Market Research Internet* Annual Report Media Analysts Fund Managers Due Diligence NGOs Newsletter Spokespersons www.myCNI.com.my www.OOBEY.com

How do Investors get their ‘INFO’? (1/2) Institutional Gov./Politics Customers Suppliers Economics AGM Market Research Internet Annual Report Media Analysts Fund Managers Due Diligence NGOs Newsletter Spokespersons www.myCNI.com.my www.OOBEY.com

How do Investors get their ‘INFO’? (2/2) Retail Gov./ Politics Customers Public Events Economics AGM Ads Internet* Annual Report Media Analysts Fund Managers Relatives Friends Pasar Malam Employees Employee Bloggers Mgmt Actions Newsletter www.myCNI.com.my www.OOBEY.com

How do Investors get their ‘INFO’? (2/2) Retail Gov./ Politics Customers Public Events Economics AGM Ads Internet Annual Report Media Analysts Fund Managers Relatives Friends Pasar Malam Employees Employee Bloggers Mgmt Actions Newsletter www.myCNI.com.my www.OOBEY.com

How not to talk to Retail Investors

“ The holder [of a CAB certificate] may continue to serve regularly any point named herein through the airport last regularly used by the holder to serve such point prior to the effective date of the certificate. Upon compliance with such procedures relating thereto as may be prescribed by the Board, the holder may, in addition to the services hereinabove expressly prescribed, regularly serve a point named herein through any airport convenient thereto.”

Civil Aeronautics Board, 1977

How not to talk to Retail Investors

“It has been determined not to be in the public interest that United Airlines continue to provide air transportation services between San Diego and San Antonio”

“ I forbid United Airlines to fly between San Diego and San Antonio”

What topics interest Investors? www.myCNI.com.my www.OOBEY.com Acquisition target Layoffs Cost Cutting New Mgmt Treatment of Profits Consistency Ecology Economics Politics Strategy Alignment CSR- related Crisis Topics?

What Events impact Investors? www.myCNI.com.my www.OOBEY.com Politics Financial Announcements Shareholding changes Structure Accidents Economic Crisis Competitor Moves M&A New Plans Share- drop Events?

How to integrate IR internally The unseen effects of Internal Matters on external Investor Relations www.myCNI.com.my www.OOBEY.com

What to Integrate? www.myCNI.com.my www.OOBEY.com 1. Aligning Organization To the Culture 2. Integrating External & Internal actions 3. Alignment and Consistency to the Strategy 4. Long-term Relationship Building efforts

Outside-in Intelligence

Integrating IR internally Culture Importance of I.R. Investor Relations Principles www.myCNI.com.my www.OOBEY.com Structure Resources Leadership Person

Alignment: Framework

Operational and Strategic moves have to consistent with messages

Trust – consistency in external-internal messaging

Visibility – through Culture and Morale

Clear Employee roles

Outside-in Intelligence for decision making

Culture www.myCNI.com.my www.OOBEY.com

The 6 Sins of Greenwashing

Sin of the Hidden Trade-Off

Sin of No Proof

Sin of Vagueness

Sin of Irrelevance

Sin of Fibbing

Sin of Lesser of Two Evils

Study by: TerraChoice, December 2007

Org Structure

Job Design

C&B

Policies & procedures

Decision making

Job fit

Management Systems

BSC and KPIs

Decentralized & Empower

Specialists IR in CR topics e.g. Ethics, Ecology, Politics

Spokespersons

Business Unit reporting

Shares, C&B schemes

IR ↔ MR

www.myCNI.com.my www.OOBEY.com Structure

Role modeling

Vision/Mission/Philosophy

Leadership Style

Delegation & Empowerment

C&B, Promotions

Sense of Urgency

Speak regularly about Strategic and Operational direction

Spokespersons

Fundamentals vs. Short-term

IR as MR intelligence

www.myCNI.com.my www.OOBEY.com Leadership

Recognition

Recruitment

Training

Profit sharing

Values

Motivation

Self Efficacy

Awareness

Useful Competencies

Career aspirations

Specialists IR in CR topics e.g. Ethics, Ecology, Politics

Spokespersons

www.myCNI.com.my www.OOBEY.com Person

Enablers

Technology

Equipment

Materials

Human

Intellectual Property

Partners

Property

Financial Utilization

Investment

Divestment

Dividends

HR

Buybacks

Restructuring

www.myCNI.com.my www.OOBEY.com Resources

Integrating IR internally Culture Importance of I.R. Investor Relations Principles www.myCNI.com.my www.OOBEY.com Structure Resources Leadership Person

Integrating Internal/External Communications Internal External Mgmt Distributors Suppliers Proactive Reactive Proactive Reactive COMM Tools COMM Tools www.myCNI.com.my www.OOBEY.com Employees Associations Universities NGOs Investors Media Government Public Authorities

Integrating Internal/External Internal External Feed Feed www.myCNI.com.my www.OOBEY.com

Integrating Internal/External

Internal

Halal Committee

Social Education (e.g. SCK)

Umrah trip

China Trip

RBOS

CFA/HFA

Coffee Van

External

Sponsorship

Donations

News clippings

Newspaper Ads

MHI

Awards

Corporate Profile

AGM

Gov. Celebrity

Analyst research

Integrating Internal/External

Internal

Entrepreneur Dev.

Health products

Health education

“ Made in Malaysia”

Events

Media Celebrity

External

Website

DSAM

Yayasan

Publish Book

Social Education

Crisis Comm

Children Education

National interest

Analyst BD connections

Alignment & Consistency

Mamak stall

Alignment & Consistency

"Exactly what I need"

Customized products

Personalized communications

"They're very responsive"

Preferential service and flexibility

Recommends what I need

"I'm very loyal to them"

Helps us to be a success

"They are the most innovative" "Constantly renewing and creative" "Always on the leading edge" "A great deal!" Excellent/attractive price Minimal acquisition cost and hassle Lowest overall cost of ownership "A no-hassles firm" Convenience and speed Reliable product and service Product Leadership Operational Excellence Customer Intimacy www.myCNI.com.my www.OOBEY.com

Alignment & Consistency: Market Disciplines Operational Excellence (low cost producer) Ref: The Discipline of Market Leaders , Michael Treacy & Fred Wiersema; 1995 Product Leadership (best product) Customer Intimacy (best total solution) www.myCNI.com.my www.OOBEY.com

The McPlaybook*

Make it easy to eat

50% drive-thru

Meals held in one hand

Make it easy to prepare

High Turnover

Tasks simple to learn & repeat

Make it quick

“ Fast Food”

Tests new products for Cooking Times

Make what customers want

Prowls market for new products

Monitored field tests

*Adapted from: Businessweek , Februrary 5 th 2007 www.myCNI.com.my www.OOBEY.com

Product Leadership

New, state of the art products or services

Risk takers

Meet volatile customer needs

Fast concept-to- counter

Never satisfied - obsolete own and competitors' products

Learning organization

Alignment & Consistency: Disciplines, Priorities, and KPIs

Operational Excellence

Competitive price

Error free, reliable

Fast (on demand)

Simple

Responsive

Consistent information for all

Transactional

'Once and Done'

Customer Intimacy

Management by Fact

Easy to do business with

Have it your way (customization)

Market segments of one

Proactive, flexible

Relationship and consultative selling

Cross selling

Operational Excellence

Move know-how from top performing units to others

Benchmark against best in class

Ensure operations training for all employees

Use disciplines like TQM for continuous learning to reduce costs and improve quality

Alignment & Consistency: Market Disciplines www.myCNI.com.my www.OOBEY.com

Alignment & Consistency: Market Disciplines

Customer Intimacy

Capture knowledge about customers

Understand customer needs

Empower front line employees

Ensure that everyone knows the customer

Make company knowledge available to customers

Product Leadership

Reduce time to market

Commercialize new products fast

Ensure that ideas flow

Reuse what other parts of the company have already learned

Ensure there are multiple sources of funding