It is common in sub-Saharan markets for CEOs to invite the attendees of investor presentations (typically analysts) to “speak to the senior management” and ask them questions about the company after the event, over a cup of tea or a beer.
This is bad.
Generally speaking, members of senior management have not been adequately trained or briefed on what they can or cannot say from the perspective of avoiding the disclosure of material non-public information.
This is a corporate governance issue and is usually, or should be, enshrined in a board-approved corporate governance disclosure and investor relations policy. I know that most companies do not have disclosure policies or investor relations disclosure policies.
The risks of management releasing material non-public information is higher than it would be without management acting within a formal disclosure policy.
The premature release of ‘material’ non-public information has serious regulatory implications for listed company CEOs
It is impossible to provide a complete definition of what constitutes “material” company information, but a CEO would do well to adopt the guidelines below, which guidelines should evolve over time based on the specific experiences and industry and corporate governance framework of each listed company.
Both positive and negative information can be material, as well as information that forecasts whether an event may or may not occur. Any questions concerning the materiality of particular information should be resolved in favour of materiality. Examples of material information about companies include, but are not limited to:
- Announcements of earnings or losses;
- An actual change in earnings or in forecasted earnings that is higher or lower than the forecast (if forecasts are given);
- The launch, or delay or discontinuance of a new project, product or business;
- A pending or prospective merger, acquisition or tender offer;
- The sale of significant assets, or a significant subsidiary;
- The gain or loss of a substantial customer or supplier; and
- Major changes in senior management.
The impact of the release of material information has to also be taken into account given a company’s relationship with its key stakeholders be they project financiers or Government shareholders.
When I present disclosure and investor relations policies to clients I combine disclosure, communications and social media policies all in one since they are all so intertwined. This also accentuates that investors are also prospective customers and so the relationship with both is regulatory and commercial.