OF ALL the media at your disposal, your website is undoubtedly the most important. It’s a 24/7 window on your company and the most likely “place” where investors will form an opinion about your firm’s credibility.
Online credibility is literally a minefield of potential pitfalls, every one of which is important. It’s an area where a seemingly minor issue like incomplete contact information can spoil a user’s visit to your site and undermine the credibility of your message.
To put some structure around the rather fluid topic of IR website credibility, I’ll group credibility factors into five themes for the purposes of this article. These themes are similar to those we use in our IR website reviews, so this article will give you some perspective on the types of things we look for.
1. Completeness and accuracy
IR websites will provoke doubts in the minds of investors if they contain errors, exclude key information or give an overall impression of being slim on content and details.
You need to keep constant track of how your reporting and disclosure practices compare to those of your industry peers. Remember, investors will likely make these same comparisons, even if it’s only subconsciously.
Don’t only compare your company’s financial disclosure, also look at how your peers communicate non-financial, qualitative information. Surveys show that investors’ decisions are heavily influenced by non-financial factors in both good and bad economic times.
Probably the most important thing to remember about completeness and accuracy is that it’s not what you say, but what you don’t say that can hurt you. A common example is many companies’ failure to publish their proxy statements prominently on their sites.
By failing to publish the proxy on the website, the message investors get is that there is something the company wants to hide. If the CEO is uneasy about how much he or she was paid, the surest way to tip investors off is to try to hide information about it.
Completeness and accuracy also refers to ensuring that your site runs smoothly and that errors are kept to a minimum. Being a dynamic, electronic medium, websites require regular maintenance, even if they’re being out-sourced. As we’ve seen before, small issues like broken internal links, poorly managed inbound links or technical glitches negatively impact IR website credibility.
2. Substantiation and impartiality
Although the volume of information published is important, the quality and impartiality of the information is crucial. Information quality is influenced strongly by the amount of substantiation provided and the perceived biases, or opportunities for bias, on behalf of the authors.
Independent third-party assurance, substantiation and verification carries much more weight than the company’s own statements. Items like news coverage, industry research reports, testimonials, awards, industrial certifications and auditors opinions all carry with them the perceived endorsement of a third-party.
When it comes to a company’s own claims to credibility, facts, figures and statistics should be provided wherever possible to back up each statement. Motherhood statements are detrimental to the overall credibility of your message if they result in your communications being perceived as “promotional” rather than as informative.
In October 2002, California-based Sliced Bread Design, an Internet usability consultancy, did a study to find out how seven sophisticated investors assessed the credibility of financial websites.
They found that quality, quantity and the perceived “spin” of information were by far the most important factors influencing sites’ credibility. Design had only little influence over their impressions.
By contrast, less sophisticated consumers make judgments based heavily on surface indicators such as the design and usability of the site. A report on the study is available here.
Qualitative information especially needs to backed up with solid facts, particularly information likely to be viewed with a more skeptical eye, such as corporate social responsibility information.
Companies like Shell and Anglo American PLC , for example, provide lots of facts and figures in their social responsibility reporting. They also use third-party audits as a way to give greater veracity to their claims of being good corporate citizens.
People trust what they know and understand. For communicators this means presenting information in ways and formats that are familiar to the intended audience. Some significant ways to make a company’s IR website more accessible and familiar to users include:
- Writing plainly. Avoiding jargon and marketing speak can make writing more transparent and familiar. Plain language speeds up user’s ability to read and process information online since terms are familiar and sentences are shorter. The more information investors can process, the more informed they will be in arriving at their expectations for the company.You can achieve a lot by communicating with your audience in the way you would to a friend or family member. Or, as Warren Buffett puts it, talking with investors as “partners not patsies.”This kind of familiarity or sense of shared interests takes courage, but it builds a high level of trust between a company and its shareholders. It takes courage because it requires candor, a willingness to admit mistakes, and a faith that investors will give the company a fair hearing.
- Internationalizing your information. Being a global medium, what is familiar to someone in the United States may be foreign to someone in Japan or Germany. Companies must take steps to internationalize their online communications.
Microsoft posts the letter to shareholders in its annual report in 12 languages. It also publishes its annual financials in the local languages, accounting conventions and currencies of seven countries.
- Following established conventions. Unconventional designs, unique naming and muddled architectures make sites seem strange and unintuitive. This undermines users’ confidence in the site. It also makes sites slower and harder to use, which in turn reduces the amount of time investors will spend actually consuming the information you provide.
4. Ease of use.
As a medium that requires users to interact with an electronic interface, whether your site is easy or hard to use can have a dramatic impact on the credibility of your online communications. To avoid common pitfalls, IR communications professionals need to check the usability and accessibility of vendors’ work. That means developing a basic knowledge of Web languages and technologies or hiring someone who does.
Good information architecture and navigation is essential on an Internet site. The navigation scheme of an IR site should be simple, complete and investor-centric. The site should also encourage investors to explore the site in greater detail.
Formatting choices play a big role in how easy your site is to use. Average site visits are short, typically around three minutes, so you should put as few obstacles as possible in the way of investors getting the information they want.
Non-HTML documents like PDF, Word, Excel, Flash, audio and video slow down access and reduce the opportunities for the company to communicate important information. That doesn’t mean not using other formats at all, but using them sparingly and according to good Website usability.
You can be responsive and also appear to be responsive. Being responsive means actually responding to questions and concerns, by email or through the content of your site.
In our survey of the responsiveness of the S&P Global 100 companies to email questions, the benchmark response time was 24 hours. However, only 56% of companies met this standard.
Being responsive also means continually adding new content to your site. A site that hasn’t been updated in a long time looks neglected and gives the appearance that your company either isn’t doing very much or simply doesn’t want to communicate effectively. Either connotation is undermining to your company’s credibility.
You can also give the appearance of being responsive to investors by addressing current issues and key questions through Q&As, FAQs, webcasts, memos, and management interviews.
The more responsive a company is to issues and concerns, the more credible it will appear.
An action plan for building online credibility
Assess your IR program on the five drivers we cover in this article. Make the easy improvements first and work at winning support from others to make the more difficult changes. Get outside help from an impartial source that can help convince management or the board that certain changes are required.
On an ongoing basis, be proactive. Analyze what investors and others are saying, anticipate issues and formulate effective responses.
Treat your site as if it were your company’s own news outlet. Keep it fresh and treat investors as interested stakeholders who care as much about your company as employees do. Be straightforward and balanced because this is what makes media outlets credible with their audiences.
Develop a working knowledge of the online communications methods available and how to use them to good effect. As a relatively new medium of mass communications, no one yet has a monopoly on best practices on the Web so don’t be afraid to innovate.
In the end, though, no company can communicate in a credible way if it does not take seriously the interests of its owners. When that commitment is in place, transparency follows naturally. And pretty soon trust between companies and their stakeholders becomes a given.
Even before Enron, some companies were more credible online than others. And the same thing will continue to happen in the future. The defining quality of credible companies was, and still is, a spirit of openness. Credible companies provide information not because they have to, but because they want to.