Scams, lies, conflicts, and IR website awards

HAVE you noticed an increase in the number of firms that provide investor relations website rankings and awards? I have, and I wonder how well companies know who they are dealing with or what they’re actually getting.

Obviously, I’m conflicted here because we rank IR websites, so if you don’t trust me to tell the truth, read something else.

First, IR website rankings and awards are full of conflicts of interest. There are also some rather unsavory practices and players involved. Here are a few things to be aware of.

The everyone’s a winner scam

People love recognition. They’re willing to pay for it. This scam works simply by running an awards program, getting people to sign up (for a fee), and then giving them all an award of some sort.

You can tell these scams by their large number of categories and award levels.

There is one such program out there that has snared some pretty big companies. Beware.

Things aren’t quite as they seem

This one is not so much a scam as a shady practice. The company doing the rankings pretends to have a fancy office in a big city, say New York. They’ll claim to have sponsors like a big accounting firm or an IR association or some name you know well.

But they don’t really have a New York office. It’s just a post box and a rented voice mail box with a 212 area code. And in reality, the big accounting firm is just the local partnership in an emerging market country that uses a derivative of the big accounting firm’s name.

I have nothing against emerging market IR firms. I’ve recommended them on this site in the past. But I do have a problem with people who feel they have to pretend they are something they are not. They are liars and I wouldn’t do business with that sort of outfit.

There is one such program that amazes me for how good they are at this particular charade. Again, don’t take New York place lines in news releases at face value. Google the company’s stated address and telephone number. You might be surprised by what you find, or don’t find.

Ranking their own work

You should always consider the biases of the people who review and rank IR websites, especially those who do so in public rankings which are designed to generate publicity for the rankings firm and its services.

One of the clearest biases is when a company that reviews IR websites also builds them. This is a problem because no one can review their own work impartially. They will always favor their own work.

Consider how much pressure there is on a rankings firm to favor their clients over non-clients. Client companies have paid the firm doing the rankings large sums of money to build them a great website. The client company obviously is not going to be pleased if the firm that sold them the site then turns around and ranks it as average or even poor.

Now some companies are very upfront about the fact that they review websites that they themselves have built. It is good that they disclose this information, but it does not make them any less biased in their reviews.

The way they build websites is the way they think everyone else should. Their own approach frames their review criteria, and in some cases their approaches may be wrong.

Other IR website rankings and awards programs are much less transparent. They don’t disclose that top-ranked companies are actually their clients and they built or host the sites. Unfortunately, this calls into question the legitimacy of the entire program because the coordinators aren’t being upfront.

There are a couple of programs run by communications or design firms that build IR websites. Don’t take them seriously.

How we handle all those conflicts

We don’t build IR websites or sell any content for them. We also don’t publicize our rankings, which is an unusual practice I’ll explain in a moment.

I personally also keep a healthy distance between myself and the IR website building and hosting industry. I do this because I consider it important to being an impartial evaluator. When you are evaluating a product from a vendor, it helps not to think about the nice meal they bought you, or their friendly smile, or how nice they are. You want to think about the product, the companies who are supposed to buy it, and the investors who are supposed to use it. That’s all that matters.

We’ve also taken the unusual decision not to publicly disclose our rankings. That was the most difficult decision because rankings lists generated a lot of interest and free publicity (which is the main reason why firms do them — to generate new business).

We stopped publicizing rankings results mainly because there’s a potential conflict in us publicly ranking clients of our advisory services alongside companies that are not our clients. If you remove the “public” component from the rankings, you remove the conflict better than if you keep them public but disclose who are the clients.

It was probably overkill to stop publicizing our rankings, but we’ve never regretted it. In fact, I think it’s the best thing we did.

Our clients today aren’t looking for public recognition from us, they want good advice and insights into what other companies are doing. They want to win awards that actually carry real prestige, which is what I discuss next.

The best approach, sometimes

I think the only public website rankings and awards that have any real prestige for IR departments are those where the rankings or awards organization has no financial or business relationship — existing or hoped-for — with the companies being assessed.

You can include in this group awards run by industry associations such as the IR Society’s IR Best Practice Awards or the CICA’s Corporate Reporting Awards. Various stock exchanges have similar programs. IR Magazine and the Thomson Extel survey would also fit in this group, but they don’t really focus on IR websites.

Unfortunately, you can’t always rely on IR associations to be careful in who they do deals with. Quite a few have endorsed programs that have dubious credentials or imaginary offices. So again, beware.

And that’s it. The low-down on IR website rankings and awards from a conflicted insider. Beware of awards or rankings where there are too many winners, where you can’t verify the company’s address, where they rank sites that they themselves have built, or all of the above.


Dominic Jones

Dominic Jones (bio) created IR Web Report in 2001. He is a consultant to leading public companies and investor relations service providers worldwide. You can contact him via the contacts page.