Communicating corporate governance via the Web. (Investor Relations).

In September 2002, Blunn & Co. conducted detailed reviews of the corporate governance information of 135 companies around the world, including many of the world's most respected firms. Of those surveyed, 84 percent did not have a corporate governance section on their Web site; only 14 percent published their corporate governance policies prominently; and less than one-quarter published a corporate code of ethics.

Since people use the Web differently, a major goal of the research was to inspect the usability of the information being posted -- how easy information was to find and use. Two objective measures of usability were applied: how well it linked to corporate governance in the site's main navigation; and what formats were chosen for a company's corporate governance information.

Save for a handful of best-practice companies, the results showed that corporate governance information is mostly difficult to find and use. Information is typically buried in a variety of print documents that have been crudely repurposed and posted to sites.

Almost 70 percent of the companies posted their most recent proxy statement in one large PDF file. Generally, PDF is a poor format for users who want quick and easy access to important information, as it lacks HTML's fluidity, ease of use, familiarity and access speed. PDF is, however, often the most convenient way to quickly post new information against tight disclosure deadlines. So, once the immediate pressures are over, the PDF should be replaced with an HTML version for ongoing reference. This is especially true for information that changes infrequently and has a long lifespan, such as corporate governance policies.

Credible IR Communications

Posting complete corporate governance information on a Web site is an important way of showing that a firm is responsive to investor concerns and the need to rebuild confidence in the capital markets. However, in most cases, merely meeting the minimum standards won't go far enough to right many bad habits companies have fallen into over the years. To address these shortcomings, companies need to consider five drivers that determine the credibility of their investor communications:

1. Completeness. Since comparing information online is relatively easy for investors, if disclosure is weak, it'll be obvious. Companies should be aware of how their disclosure practices measure up, not just to their immediate peers, but to a broader benchmark. Investors' perceptions of completeness are also influenced by the accuracy and quality in both substance and style of the disclosure.

2. Verifiability. Heightened skepticism about corporate reporting places a burden on companies to pass a higher threshold of communications proof now. The most credible proof comes from objective measurement, independent third parties and solid substantiation.

3. Familiarity. Investors' perceptions of a company's credibility hinges on how well they understand the company's story. The Internet provides a low-cost and effective way to make it easier to understand the business, strategy, objectives and performance metrics; the clarity of the communications is critical to investor understanding. The surest way to achieve clarity is to present information in ways that are familiar to the audience.

4. Responsiveness. Credible companies hold themselves accountable to their stakeholders and take their relationships with them seriously. Inadequate contact information, reclusive management and ignoring obvious issues are many JR Web sites' Achilles heel.

5. Ease of use. The experience that people have finding and interacting with information on a Web site can influence their overall perceptions of a company. If it's hard to find, use and understand, that creates a negative experience for visitors and can foster a bad impression of a company.

Dominic Jones ([e-mail]) directs the online investor relations consulting activities of Blunn & Company (www.blunnco.com), a Toronto-based IR communications firm. Read the complete article at www.fei.org/mag/Exclusives.