A Word on Guidance

I just returned from attending the joint CIRI and Toronto CFA Society panel discussion, ‘Guidance on Guidance’ held at the Ontario Club in the heart of Toronto’s financial district. Panelists came from a variety of backgrounds:Edel Ebbs, VP Investor Relations at R.I.M.; Donald Lewtas, VP Finance at Onex; Duncan Stewart, technology analyst and columnist with the National Post; and Brad Willock, Senior Portfolio Manager, RBC Asset Management.

Considering all comments, my take away from the event was this this – in order for guidance to be helpful it must be accurate, relevant and conservative. If you can’t meet these standards, you shouldn’t be providing guidance. This may sound blindingly obvious, but numerous companies do not seem to use these standards as a guidepost.

In addition, retail investors don’t have the same tools that analysts have and so need more information. And as Duncan Stewart pointed out, shareholders own the majority of the company and so should have the same information and context that management and executives have. 

According to Brad Willock, most companies do not give the right information. Two examples of “how to do it right” were United Technologies and General Dynamics.

Duncan Stewart provided a great analogy that any parent can relate to, “If you’re going on a road trip with small kids and you start the day without telling them where you’re going, how long it will take and what’s going to happen on the way – you’re not going to have a very pleasant trip!”

Investors are taking a road trip with you and your company, and if they don’t have the information they need, you might hear requests to “Stop the car! I wanna get out!”

[tags] Guidance, Investor Relations, IR, IR Best Practices, CIRI [/tags] 

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