Edelman’s Trust Barometer is one of the most-recognized benchmarking surveys in use across governments, corporations, NGOs, and media – it’s been published annually since 2001.
Within public companies, its results occasionally cross into the IR realm from the PR or corporate communications side, as issuers seek ways to build and maintain trust with customers, suppliers, regulators, and the general public.
Last week, Edelman published the first-ever supplement to Trust Barometer that focuses on the institutional investment community, surveying institutional investment managers of all levels across the globe. Ipreo is proud to be a contributor to the survey, and in particular we found some of its findings eye-opening for the IR community as well as corporate decision-making in general.
A few takeaways that stood out to us from the findings touch everyday IR issues:
- Investors take action based on their level of trust: Obviously, investors are more likely to buy or own the shares of trusted companies and sell those of distrusted. However, the level of trust may have an amplification effect within the buy-side – 60% of managers reported praising trusted companies to peers, with 53% reporting persuading others to invest; conversely, with companies they distrust, 37% of managers reported persuading others to sell shares, and 23% noted they were likely to support an activist investor.
- Companies can lose trust for many reasons – and weak IR is among them: Of a list of items likely to lower their trust in a company, 63 % of investment managers reported “poor shareholder communications and disclosures” in their top 3 concerns; in the same frame, 51% reported “mishandling company crises” or “poor corporate governance” as major risks. Each of these items are within the job description of IR – and represent an opportunity for strong communication to maintain trust.
- Guidance impacts trust: In a result that might surprise many companies, 68% of respondents say providing long-term guidance on financial performance impacts trust. Further, 59% agree with the statement: “I trust a company that provides forward-looking guidance but misses occasionally more than I trust a company that provides no forward-looking information.” Providing effective guidance is always a balance between risk and reward for companies in any industry – but it’s important to keep in mind that any level of forecast given carries a possible reward of greater trust, not just risk of underperformance.
Edelman’s Financial Communications team conducted the survey in June/July, incorporating data from IPREO. For further information, contact Deb Wasser, EVP, US IR Practice Lead, Edelman.
There’s a lot more to learn here that we’ll be highlighting, so stay tuned to this space for additional dialogue around the survey’s results.