2014 Survey of Turkey’s Investor Relations Practices by Pylyp Dukhliy

2014 Survey of Turkeyâ&#x20AC;&#x2122;s Investor Relations Practices Analysis & Insight

Bosphorus Consulting: Investor Relations and Stakeholder Engagement

Table of Contents Letter From the Editors.................................................................................................................................. 3 Methodology.................................................................................................................................................. 4 Key Findings................................................................................................................................................... 5 1. Poorly Supported and Under-Resourced IR Departments...................................................................................6 2. Less-Than-Full Awareness of the Benefits of IR...................................................................................................7 3. International Focus Always on Investors, not Always on Best Practices............................................................9 4. Lack of Innovation.................................................................................................................................................9 5. Articulating Turkey’s Investment Climate.......................................................................................................... 11 6. Turkey’s Regulatory Environment...................................................................................................................... 12 7. No Apparent Drivers for Improvements or Reforms......................................................................................... 13 Survey Results............................................................................................................................................. 14 Corporate Profile..................................................................................................................................................... 15 The Investment Climate.......................................................................................................................................... 17 Management and Resourcing................................................................................................................................ 22 The Impact of IR Leadership................................................................................................................................... 26 Channels, Tools, and Content................................................................................................................................ 30 About Our 2014 Survey & Analysis............................................................................................................... 34 About Bosphorus Consulting Ltd.................................................................................................................. 34 Feedback: Your Comments and Opinions..................................................................................................... 36

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Survey of Turkey’s Investor Relations Practices

Letter from the Editors

urkey’s economic development in recent years has meant that it is often under the microscope, with observers and commentators freely applying praise or condemnation to the country’s regulatory structures, trade deficit, growth, EU alignment and more. More specifically, there is ample feedback from international critics advising how to improve matters, detailing what’s wrong with the way Turkish businesses are being run, that Turkish businesses suffer from a lack of transparency, inadequate corporate structures, and so on.

INFLUENCING PERCEPTIONS Howard Lindzon, CEO of Stocktwits, an investor-focused social platform integrating LinkedIn with other social media channels, asserts that a majority (63%) of institutional investors are now forming opinions of companies based on postings on social media – and that doesn’t even begin to take into account the impact of journalists, bloggers, columnists, and other opinion shapers. As such, he says that to avoid being impacted adversely, companies must be proactive in their communications, especially so in their adoption of more innovative communications strategies involving social media.

What there is not enough of, however, is meaningful dialogue amongst IR practitioners1 about IR issues and how they relate to international stakeholders. Yes, there’s no shortage of platforms for talking amongst ourselves, but how is it possible to take that dialogue and internationalize it so that analysts and investors and other stakeholders abroad can digest it? And therein lies the reason for this first comprehensive survey of Turkey’s IR practices: We want to provide an opportunity for IR practitioners to take a look at what they’re doing in relation to their peers, both within Turkey and internationally. We know that in Turkey both IR and corporate governance have been properly embraced only relatively recently. As such, there are many areas to be improved upon if Turkish businesses are to be seen employing the same best practices as those in other markets such as the US or Europe. We also know that Turkey is often viewed as toxic through a lens which is regularly colored by infrastructural weaknesses in capital markets, deficiencies in disclosure, organizational opaqueness, political instability, currency volatility and more. Therefore, IR practitioners need to shape Turkey’s message from within, and then they need to broadcast that message effectively enough to external audiences so they can begin not only to lead the conversation but also to successfully influence perceptions.

an IR industry which stakeholders will admire and which international IR practitioners will envy. No one knows how long that transformation will take, or what exactly must be done in order to get there, but this survey, as well as others of a different hue, will serve to drive the conversation forward. We want to thank you, dear reader, for your interest in our work. We also want to extend a very special and warm thank you to all the IR practitioners, analysts, investors, and other colleagues and friends who took the time to respond to our survey and meet with us… your input has been crucial to the success of this study.

Everyone already knows all of this. What is not as well-known is how Turkish IR practitioners are going to fully adopt international best practices to become 1 While the term Investor Relations Officer (IRO) is generally used in this context, our survey responses point to the use of several titles by those working in the industry. As such, we prefer the more generic “IR practitioner” to refer to not only officers but all others as well.

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Very best regards, George Dyson, Erdinç Ergenç, Simon Hardie, Nina Pfifer, Michael Wyatt

Survey of Turkey’s Investor Relations Practices

Methodology

osphorus Consulting’s 2014 Turkish Focus on Investor Relations is the largest known survey of Turkey’s IR practitioners published in English. It includes a total of 33 responses representative of 31 companies (two companies supplied two separate responses). This compares favorably to BNY Mellon’s Global Trends in Investor Relations 2013 which canvassed 693 responders from 63 countries but included only 21 responses from Turkey representative of only 21 companies, and also the long-running Thomson Reuters Extel Pan-European Survey which in 2014 included votes for only 25 companies in Turkey.

Total number of emails sent: 152 (unbounced) Total responses: 33 (usable) Response rate: 21.71%

Our survey was conducted over the course of nearly 12 months as there were too many monumental events taking place in Turkey to ignore. To us, a “snapshot” was impractical. We take the position that a more encompassing, inclusive view is a more informed one – and one that more accurately reflects the true nature of what is/has been going on in Turkey. Respondents were invited via email, telephone, and in person to participate in the online survey. In addition, interviews were also conducted in person and via telephone. Conversations during our normal course of business with investors and analysts also helped to shape our views and insights.

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Survey of Turkey’s Investor Relations Practices

Key Findings

1. Poorly Supported and UnderResourced IR Departments

average and the average for Western Europe (3.0) and other emerging markets such as Latin America (3.6).

Interestingly, the IR Director of a large FMCG company noted that it is not necessarily the size of the IR Department that is relevant; rather, it is the responsibilities placed on it that really matter. In other words, if IR duties are spread across many different departments, such as Corporate Communications, Finance, or Strategy, for example, then a single IR practitioner may be sufficient. The paradox here, though, is that such a structure leads to a poorly coordinated operation, power struggles, questionable authority, and other inefficiencies.

his study – along with our recent survey, interviews with Turkish IR practitioners, informal conversations with analysts and investors, and experience working in Turkey’s IR arena – paints a picture suggesting that IR is not held in as high a regard as it should be. We see instances where IR teams are not supported by CFOs or CEOs, and we know of too many IR departments that don’t have enough staff or don’t have sufficient budgets to conduct all the activities they need to. Added to this, we find situations where command chains and the division of responsibilities are unclear, often leaving practitioners scrambling to react to fast-moving events, rather than acting in a calculated, coherent, and coordinated fashion. This all points to a situation where Turkish IR practices are more conservative and reactive rather than innovative and proactive.

Consider also that 30% of our respondents claim not to be directly involved in IR, and that 25% of respondents (of which 90% are listed, and nearly a quarter are BIST 30 companies) report to a general director (the majority of IR departments surveyed do not report to the CFO, in contrast with global practice). Of course one would expect hybrid job descriptions and vague lines of authority with unlisted companies, but with BIST 30 companies? It is not unreasonable to expect large, multinationals – especially BIST1 30 companies – to employ very clear lines of authority, control, and management for IR purposes. A quarter of the market surveyed is too large a sample to be without clearly delineated lines of command.

Key Findings

For example, we see instances where poorly supported and/or under-resourced departments don’t have budgets to commit to travel to conferences or other important engagements with stakeholders. Far too many IR teams don’t have enough money to contract consultants to perform investor perception studies (only 4% of respondents report undertaking investor perception studies) or investor targeting or roadshow training, and this often leads to wasted time and resources. In those cases where financial resources are not forthcoming and companies employ inexperienced consultants for investor targeting or attempt to do it themselves, we see instances of mismatching – where the company stock type (say, growth) is not aligned with the target (say, yield).

In addition, it seems companies are doing the bare minimum with respect to corporate policies. This is especially true of disclosure, which is addressed below (see Turkey’s Regulatory Environment), but it is alarming how few companies have in place policies related to crisis communications and data breach or even a code of ethics. Only 12% of the companies that we surveyed have a crisis communications policy in place, and only 24% have a social media policy in place. Again, good examples do exist, but not enough for Turkey to claim a prominent role in IR practices amongst its international partners.

Our survey reveals that 8% of companies surveyed do not have a separate IR department. Of those, 50% are listed. Now that may not appear significant, but when you consider that a whopping 80% of our respondents also report only two or fewer licensed IR staff employed in their companies, including all the 500+ million TL companies, then the pattern begins to emerge. It is no surprise then that IR departments in Turkey are generally smaller (2.41 employees on average according to our survey) than the global

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Some of this may be explained by the fact that IR practitioners in Turkey are generally not bound by their companies’ share prices, for as the Research 1 BIST refers to Borsa Istanbul, formed in April 2013 as a result of the merger of İstanbul Menkul Kıymetler Borsası (İMKB), or Istanbul Stock Exchange (ISE), and Istanbul Gold Exchange.

Survey of Turkey’s Investor Relations Practices

Manager at a top Turkish brokerage points out, the free float in Turkey is so small that “not even big companies live and die by the share price.” All of this inevitably leads to questions: Who’s running the show? Who’s reporting to whom? And so on. We observe very real inadequacies in the industry, and there is ample evidence to suggest many of these inadequacies are the result of industry-wide failures to robustly support, embrace, and promote IR. Throwing money at the problem is easy enough, but elevating the industry and its practitioners in the eyes of senior managers and board members and creating the perception that IR is an essential arm of corporate development are far more demanding. Regrettably, neither seems to be in evidence in the majority of Turkish companies, and the market as a whole risks falling significantly behind the curve of emerging trends that are shaping business today.

As the number of listed Turkish firms grows, tools that can help improve awareness of a company’s performance and help increase attention toward them at key moments will become increasingly important – exponentially so if the Turkish government is successful in its attempts to drive more companies to IPOs in 2015. For example, reporting on ESG issues, which remains relatively under-developed in Turkey as compared to listed firms in the US and Europe, seems to be the favorite buzzword these days and is garnering a lot of attention from investors and analysts, alike. ESG is seen as important to many companies because stakeholders are increasingly relying on ESG metrics to evaluate management style, corporate culture, commitment to relevant social issues and more. As one IR director of a top FMCG company put it, “This has become one investment criteria of fund managers,” so we expect to see more Turkish companies implementing ESG policies.

2. Less-than-full Awareness of the Benefits of IR

he IR Director of a top Turkish food company told us that, with the exception of the BIST 30 companies, most companies in Turkey are just doing IR because they have to, saying, “I’m not sure whether they are aware of the benefits of investor relations or not.” Likewise, our survey also points to an institutionalized lack of complete awareness of the beneficial impact of IR activities. Meaning, some companies seem to view IR as a cost center rather than a strategy delivery center (this supports the lack of financial resources discussed above), perhaps not realizing that IR done well can lead to meaningful added value. That too many companies in Turkey pay lip service to IR, combined with the fact that too many companies refused to participate in our survey and interviews, suggests that this finding is on firm footing. Most of our survey respondents (72%) report that their companies have two or fewer goals (among Effective Disclosure, Shareholder Diversification, Ensuring Management Visibility and Accessibility, Coordinating IR/PR Messages, and Influencing Corporate Strategy). In addition, few Turkish companies surveyed engage with their investors on non-financial metrics,

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Survey of Turkey’s Investor Relations Practices

Key Findings

Environmental, Social, Governance (ESG)

Case Study: Arcelor Mittal

and environmental policies, while the companyâ&#x20AC;&#x2122;s approach to corporate responsibility is clearly explained and illustrated throughout the corporate website.

Arcelor Mittal is the worldâ&#x20AC;&#x2122;s largest steel and mining company, with industrial operations in more than 20 countries. With a business that spans developing regions and focuses on the environmentallyimpacting extraction of raw materials, the company is under significant pressure to perform responsibly and report on a wide range of ESG metrics.

As a reflection of their success in setting high standards of corporate and social responsibility reporting in 2010, the firm was added to the Dow Jones Sustainability Europe Index and has been a member of the FTSE4Good Index since 2007. The lesson for Turkish companies is obvious: After many recent high-profile industrial accidents in Turkey which have left investors increasingly wary of companies that fail to adopt adequate safety measures and policies, Turkish companies now must be seen to be doing more to improve employee working conditions and to implement adequate health and safety policies.

Key Findings

In particular, the company places specific emphasis on corporate governance and social responsibility and has built the ratio of working days lost to injury and an audit of health and safety performance into its key performance reporting metrics. The firm also documents progress in standards of governance, transparency of corporate policies including remuneration, anticorruption procedures, and energy

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Survey of Turkeyâ&#x20AC;&#x2122;s Investor Relations Practices

such as Environmental, Social, and Governance (ESG) issues. Globally, we have observed that there is a trend towards greater investor demand for engagement with environmental and social outreach issues, and many international companies – especially in the US and Europe – are very far ahead of their Turkish counterparts in this regard. To be fair, we know of some Turkish companies that do a lot of work on CSR and ESG initiatives, such as building schools and donating millions of dollars, but those efforts are not publicized or highlighted in any particular way. Those companies are to be applauded, but from an IR perspective we think they could benefit more by better informing stakeholders of their activities.

demands for environmental impact and/or social responsibility initiatives. The goals and efforts of IR departments in Turkey seem to not always fully match up. Another important issue raised during our interviews was the low number of plant tours amongst Turkish companies. Our analyst/investor friends tell us that Turkey is woefully underperforming in extending invitations to visit premises. To be sure, not every company has a production facility, as some of the biggest listed companies in Turkey are serviceoriented, but still, stakeholders would like the option to visit facilities and this is something that too many Turkish IR departments overlook. Again, we cannot help but feel this represents a certain unwillingness to go that extra mile.

On another note, there have been far too many high-profile industrial accidents over the last year in Turkey. Such unfortunate events tend to be highly publicized, leaving stakeholders uncomfortable. An obvious step to improve such situations would be to engage with ESG, for instance, so as to stand out from the crowd.

4. Lack of Innovation

The overriding issue here is that while there are some great examples to the contrary, IR in Turkey is still seen as not being taken as seriously as it should be.

3. International Focus Always on Investors, Not Always on Best Practices

ost companies surveyed are focused on sourcing investment from international sources, primarily from the US and Europe, but there is little evidence to suggest that these companies are doing very much to pursue the best IR practices in operation in those same markets. Exceptions do exist, of course. For example, one IR director whose company is part-owned by a non-Turkish company says that it is essential to always be seen to be adhering to international best practices and world standards.

Few Turkish companies report using social media to engage with investors. Of the companies we surveyed, only 24% use social media to engage with their investors (and most of those that do are also expanding their efforts to attract new investment). In contrast, most IR departments in the US and Europe are making increasing use of social media in their efforts to attract and maintain investors. When IR practitioners were asked why they do not use social media, roughly 40% of respondents answered that the reason is because there is a perceived a lack of investor demand, while others feel they would be unable to control the message (20%), their management does not think social media is useful (20%), or it is their company policy not to use social media (20%). One Turkish IR manager of a top FMCG company told us “there’s not much experience in

Not all IR practitioners feel the same. Amongst Turkish IR departments, there is little use of international consultants, for example, along with low (or slow) adoption of social media, and a worrying unwillingness to acknowledge stakeholder

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Survey of Turkey’s Investor Relations Practices

Key Findings

Our long history with Turkish IR departments suggests that there is a tendency to be wary of doing nearly anything innovative, preferring the “let’s wait until a few more companies do it” approach. This can leave IR departments struggling to react to fastmoving events and, if left unchecked, impair their ability to attract investment from the markets they most focus on, namely the US and Western Europe. Exceptions do, of course, exist, and one recent example is Turkcell’s IR tablet app, which is said to be the first such IR-dedicated app in Turkey. But only one tablet app dedicated to IR for the whole country?

Case Study: Diageo Diageo is famous in Turkey for its $2.1 billion acquisition of Turkey’s then-largest liquor producer, Mey İçki, in 2011. A global producer of alcoholic beverages with operations in more than 180 countries, Diageo increasingly, carefully monitors its governance and corporate social responsibility objectives. As such, the firm has implemented a transparent approach to communicating the firm’s policies through its corporate website. For example, Diageo’s sustainability and responsibility strategy emphasizes the diverse regions where the company does business and includes a section of case studies from across the company’s operations to highlight how policies are put into practice. minimum standards that it expects all suppliers to comply with. These are explained in the website so as to mitigate potential investor concerns over supplier risk.

Key Findings

Additionally, in an industry that is typically heavily reliant on external suppliers as part of the chain of production in getting products to market, the company sets out the this field” and “managing social media content can be problematic.” Where does this perception of a lack of demand stem from? We have more to say about this below.

been unable to observe a single instance of such innovation in Turkey. Additionally, it is rare that we hear of an R&D or Strategy or Marketing Director (in addition to the CEO or CFO) being introduced to delegations of analysts or stakeholders or even attending conferences or roadshows, and it is equally rare that a Turkish company will conduct a webcast instead of an old-school conference call to broadcast earnings releases or other updates.

Outside of Turkey there is a huge and growing trend to produce interactive, digital annual reports and other publications. Far more than a PDF plopped up on a website, a proper digital annual report, for example, is another opportunity to use elements of IR as meaningful marketing tools, but we have

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Survey of Turkey’s Investor Relations Practices

is always positioning itself to be seen as offering more than most other emerging markets, but most companies don’t do enough to tackle the problem of adequately and effectively articulating the investment climate to international stakeholders. What remains for observers abroad is a reliance on often inconsistent, rarely unbiased news, views, or opinions. A more meaty and thoughtful analysis ends up lacking in usefulness because it usually comes after a long delay – after current situations have changed enough to become unrecognizable. By failing to effectively communicate with potential investors in a manner that is in line with best practices, Turkish firms risk being associated with negative perceptions of unreliable emerging markets.

INNOVATION Many global firms are adopting a more creative approach to capturing and maintaining the attention of stakeholders. Incorporating existing social media channels with new digital media in the form of video and specific IR apps, bound together by a more visual approach to their materials through clearer design, updated investor websites and infographics, these firms are striving to address the communications demands of stakeholders. In Turkey, innovative practices are lagging behind international markets. For instance, there is still an aversion to webcasts in Turkey, with companies generally falling back on old-school telephone conferences. Echoing the position of many IR practitioners abroad, one IR director told us about webcasts: “Investors like them, and I recommend all companies do them because they increase transparency and communication with the public.”

The initiative to elevate Istanbul to “global financial capital” status, for example, gained a lot of traction for a while and generated quite a media buzz in some circles. Now, however, it seems that Turkish government interest seems to have retreated (at least as regards the “global” element) and not much has been publicized recently. The process so far cannot be seen as a resounding success, but it has illuminated structural deficiencies of the capital markets and more. None of this is new to anyone, but what it suggests in this IR context is that companies are going to have to considerably expand their efforts in order to make real progress in sourcing investors, shaping perceptions, and engaging more meaningfully with international stakeholders.

urkish companies deserve a lot of credit for the many advances made in terms of disclosure and corporate governance. Our experience working with Turkish companies, however, suggests that these advances may have led to a case of the tail wagging the dog. For example, many IR practitioners report being disturbed by the practices of regulatory bodies. The Capital Markets Board may issue regulations one month and revise them the next, all the while loosely, sporadically, or selectively enforcing them. The end product may make for a good piece of

5. Articulating Turkey’s Investment Climate To say that the investment climate in Turkey is dynamic is an understatement. Not only is Turkey still considered by most international stakeholders to be an emerging market, but it also recently has suffered from 1) extreme volatility in its currency, 2) liquidity constraints, and 3) political risk. Turkey

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Survey of Turkey’s Investor Relations Practices

Key Findings

6. Turkey’s Regulatory Environment

dictates, suggesting a more reactive rather than proactive outlook to IR. We were told by one IR team that they know of companies that have established corporate governance committees for compliance, but that those committees are “not quite functional.” This obviously has a knock-on effect that influences many other issues, such as a lack of awareness of benefits, innovation, and more.

RISK As a result of the global financial crisis and ensuing mess, firms are generally much more sensitive to investor demand. Generally, we see that investors are demanding better, more informative auditing as well as improved communication of the range of risks faced. As a result, risk now encompasses a much broader meaning and may refer to anything from performance and financial management to operational risks, and from governance to the performance, management and behavior of third party suppliers.

When events move at such a fast pace as they do in Turkey, there are many potential benefits to having clearly coordinated IR policies in place that can turn potential risks into opportunities. Perceptions that Turkish companies do not employ such organizational talent and coordination only serve to reduce trust among investors and analysts. Furthermore, there is a cultural component to nondisclosure. Our Turkish respondents report that sometimes (generally amongst non-listed, familyowned businesses) there is a distrust of others, an unwillingness to reveal, and a heads-down, huddled, hoarding nature that discourages and even prevents adequate disclosure.

7. No Apparent Drivers for Improvements or Reforms

international news, but for our colleagues on the ground here, it is often overly burdensome.

n admirable Turkish tradition and style, it sometimes seems that Turkish companies are not shaken by anything. Adversity comes and goes. Everyone adapts. According to our survey, companies are neither worried about global liquidity nor increased regulatory oversight nor innovation with respect to IR activities. There is the everpresent resilience marked by statements such as, “we’ve seen it all before” and “we always bounce back.” However, these attitudes may also be playing a part in thwarting efforts to bring about muchneeded change. It stands to reason that if everyone is satisfied enough (with political instability, shallow capital markets, and more) then we have to ask: What’s going to drive reform? What or who are those forces that will demand change?

Key Findings

Still, despite the regulatory directives, we observe that only 61% of companies surveyed have a public disclosure policy in place. This could be due mainly to a confusing regulatory environment or a host of other causes, but the fact remains that too few have a policy to uphold. In contrast, in key international markets from where Turkish companies are actively sourcing new investors and where we see a growing appetite for IR and corporate governance initiatives, it is rare for companies not to have well-defined policies in place. In our discussions with IR practitioners in Turkey, nearly every single one claims that his or her company is better than the rest as far as corporate governance and disclosure. This could be the result of so many IR practitioners coming from a background that includes Turkey’s Capital Markets Board. Curiously, however, our observations reveal that some individuals or institutions appear to be doing the bare minimum to comply with regulatory

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If the “we always bounce back” attitude is, indeed, as embraced as our experience suggests, then Turkish IR practitioners have reason to be concerned. There may be too little demand for industry-wide reform. If this is true, then the burden

Survey of Turkey’s Investor Relations Practices

MAKING CHANGE Standard Chartered, when accused in the summer of 2012 of inappropriate transactions with Iran, took the thenunprecedented approach to crisis management by taking to the Twittersphere to make its position known. Investors appeared to remain unhappy with the settlement reached in the windup of that ordeal, but they seemed to appreciate the early handling and open disclosure via social media.

Key Findings

LinkedIn, a form of social media rather unanimously adopted if not officially by IR departments then at least unofficially by nearly everyone in the corporate world, offers both Company Pages and Groups which are buzzing with investors and analysts. For example, Dunkin’ Brands (parent of well-known US mega-brands Dunkin’ Donuts and Baskin-Robbins) regularly uses social media to announce new product launches, roadshows, investor conferences, earnings reports, and other matters often left to old-school methods. to tackle some of the heavy issues falls on individual companies and their IR departments to bring about improvements, and that may be very challenging given the many constraints already discussed.

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Survey of Turkey’s Investor Relations Practices

Survey Results

IR Director, Manager, Executive, Officer

55 50 45

1. Job title of respondent

40 35 30 25 20

IR Expert

15 10

Other Accountant, Finance Director Analyst Director Manager

Board Managing Member Editor of Financial Publication

9.091%

3.030%

5 0

57.576% 12.121%

9.091%

6.061%

3.030%

60 55

2. Respondent’s company turnover

50 45

This trend remains surprisingly strong when correlated with respondents from companies which are among the BIST 30 (36.364% of our respondents), a troubling 23.077% of whom appear not to be directly involved in IR.

s we would expect, it appears as if it is mainly respondents from large companies that have dedicated IR and corporate governance (of companies not 500+million TL, only 40% are involved in IR or corporate governance). Fifty percent of the respondents who appear not to be directly involved in IR are from companies with a turnover of 500+ million TL.

500+ million TL

hat approximately 70% of respondents are directly involved in IR or corporate governance is an indicator of the relative good health of IR practices in Turkey. However, at the same, it is still concerning that 30% are not directly involved, which suggests that a number of IR departments are comprised of non-IR professionals. If this is the case, some Turkish businesses may not be operating optimally, and internal re-orientation would be advisable in line with international best practice.

40 35 30 25 20 15 10

201-500 million TL

101-200 million TL

51-100 million TL

26-50 million TL

0-25 million TL

9.091%

3.030%

6.061%

9.091%

5 0 %

69.697%

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Survey of Turkey’s Investor Relations Practices

Survey Results / Corporate Profile

Financial Services

Respondentâ&#x20AC;&#x2122;s company sector

Retail

18 FMCG

16 14 12 Holding Company

10 Manufacturing

8 Aviation

Media

Petrochemicals

Technology

6 Energy

Health

2.941%

Steel

4 2

Survey Results / Corporate Profile

20.588% 17.647% 14.706%

8.824%

5.882%

3. Is your company listed on BIST?

5.882%

2.941%

36.364% of respondents are from BIST30 companies 87.879% of respondents are from companies listed on BIST

n Turkey, more advanced IR practices still remain exclusive to the largest corporate entities. That said, with Borsa Istanbul encouraging more companies to list, this is starting to change, as more and more companies have to fulfill various regulatory requirements. The results of our survey and our analysis benefit from a broad selection of companies, in terms of size and depth of practice. Nonetheless, there is a lot be gained from observing BIST 30 companies, as these tend to set the trend. When these companies do not meet international standards, whilst smaller companies do, those large companies have cause for concern.

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Survey of Turkeyâ&#x20AC;&#x2122;s Investor Relations Practices

esponses to this question will naturally be ever-shifting and inter-related. However, we have to accept that Turkey is particularly susceptible to each of these. From a liquidity point of view, quantitative easing is particularly relevant for any emerging market but in the case of Turkey, serious challenges have not yet appeared but may still arise in the future. Over the course of conducting our survey, we have been reminded time and time again that Turkey is susceptible to political risk and that such events have the potential to have a huge impact on the country’s performance. The outlook for the sustainability of emerging market growth in general is not good. This issue is without a doubt a moveable feast and, of course, not all emerging markets are created equal. Last year Brazil, despite having an economy that is only twice as big as Turkey’s, managed to attract three times as much FDI, despite also facing serious political upheaval and street protests that knocked investor confidence. In a research note from earlier this year, we examined how Turkey’s inclusion in the grouping of MINT countries (Mexico, Indonesia, Nigeria and Turkey) led to unfavorable comparisons for Turkey (“Turkey’s inclusion in the MINT countries makes for unflattering comparisons”). One notable issue is that there is not a lot of opportunity for liquidity built into this market; the availability of capital market instruments is not particularly high. Turkey is limited because of its lack of a significant capital market infrastructure, something which the government continues

40 35

Financial Market Liquidity

Sustainability of Emerging Market Growth

Political Risk

4. What factors are currently affecting global market confidence?

Systemic Market Risk

Eurozone Stability

US Monetary Policy

5 0

35.484%

22.581%

to push for. Nonetheless, in its current state, the Turkish economy remains vulnerable to exogenous shocks. The Turkish economy is in serious need of diversification, away from its overreliance on construction, however attempts in this direction have been met with opposition (see our research notes, “Attempts to diversify Turkey’s economy meet with resistance” and “Russia’s ban on EU imports may benefit Turkey, but the overall picture is less positive,” which touches on Turkey’s lack of economic complexity and its struggling export regime, and “Recalibrating: Turkish companies must adapt to new realities,” where we reflect on the consequences of the general decrease in FDI into Turkey and the troubling situation structurally within the Turkish market). The trouble that all of this poses for IR practitioners is an inability to effectively diversify

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12.903%

3.226%

investor bases. The usual pools of investors are attracted to Turkey by its current set-up, which consists of a shallow range of investment opportunities – a good portion of which are perceived as above-average risk. To be sure, Turkey finds itself in a region rocked by turmoil, creating apprehension among investors and meaning that it could potentially be tarnished with the same brush in the eyes of investors as those more unstable countries. Added to this, the ongoing unrest in the region has been a blow to Turkey’s export regime, with Iraq, for example, until this summer being Turkey’s second largest overall export market and single largest export market for small and medium-sized businesses (see our research note: “Unrest in Iraq impacts Turkish businesses”).

Survey of Turkey’s Investor Relations Practices

Survey Results / Corporate Profile

5. Will an end to quantitative easing programs impact your ability to raise capital?

6. Does an end to quantitative easing concern you institutionally?

Increase 16.667%

Yes 33.333%

Yes 36.667% No 66.667%

D Survey Results / Corporate Profile

7. Will increased global regulatory oversight impact liquidity?

espite quantitative easing being one of the mostdiscussed subjects for emerging markets recently, nearly 70% of our respondents answered “No” to this question. It very well could be that not all respondents completely understand quantitative easing or its ramifications, and our experience supports this notion. There is a very wide range of financial knowledge amongst Turkey’s IR practitioners, with some being very astute with respect to finance, while others remain lacking in knowledge of basic finance principles.

Little or No Impact 43.333% No 63.333%

Reduce 40%

s above, our responses suggest that Turkish companies appear surprisingly unworried (or unknowledgeable) about potential changes in global liquidity.

t is interesting that nearly half believe increased global regulatory oversight will reduce liquidity, while roughly the same think it will have no impact. This may suggest that half of our respondents believe that the impact of regulatory bodies is not particularly significant (or perhaps at least their impact and at least with respect to liquidity issues). Interestingly, we find that the number of predefined IR goals is higher in companies that feel that global liquidity is likely to decrease. Thus, our survey results suggest that of those companies which are more concerned about the investor climate (i.e., those which believe increased global regulatory oversight will reduce liquidity), the majority are, in fact, increasing their efforts to attract new investors.

As they stand, our results point to a perhaps unwarranted degree of confidence amongst Turkish companies.

Bosphorus Consulting: Investor Relations and Stakeholder Engagement

Survey of Turkey’s Investor Relations Practices

No change 46.429%

Increasing 53.571%

e find that only 30% of smaller companies are increasing their efforts to source international investors while roughly 75% of large companies (with a turnover of 500+ million TL a year) are increasing their efforts. Overall, just more than 50% of all companies surveyed are increasing their efforts. Globally, we find that uncertainty is increasing among investors across the world and emerging markets are facing a rising sea of troubles. Turkey finds itself among the “fragile eight” world economies. The rising strength of the dollar and Turkish businesses’ high level of debt denominated in foreign currency makes

9. From which regions are you actively sourcing investors?

Note: many respondents chose more than one answer

Western Europe

Central & Eastern Europe

Northern Europe

hat’s clear is that the US is the preferred market for sourcing investors, followed by Western Europe, then emerging Europe. Some Turkish businesses surveyed are being more creative in their approach by looking further afield, but they are in the minority. From experience, we know that investors from Western Europe and the US particularly have increasingly higher expectations with respect to standards of corporate governance and reporting. Given the worsening climate for Turkey, convincing potential investors from these markets of Turkey’s worth will require increased efforts on the part of IR practitioners.

for a troubling combination, with the potential to seriously shake investor confidence in the country (See our research notes on how “Turkey’s middle income trap makes the country vulnerable to external shocks” and “The potential emerging market bloodbath” as a result of the resurgent dollar and high foreign debt profiles). All of this may suggest that Turkish IR departments may need to redouble their efforts to stay ahead in what may become an increasingly troubled market.

Other Asian Countries

China and Hong Kong

Latin America

10 0

Gulf Region 75.000%

46.429%

60.714%

17.857%

42.857%

On this subject, Bosphorus Consulting earlier this year produced a research note from discussions with industry professionals, both analysts and clients, looking at evaluating corporate governance in Turkey (“Evaluating corporate governance in Turkey”). We find that while some feel Turkey’s adoption

Bosphorus Consulting: Investor Relations and Stakeholder Engagement

Singapore

7.143%

10.714%

Japan

3.571% 3.571%

3.571%

of corporate governance best practices is improving, there is still some way to go. Broadly speaking, we find that IR departments may be deficient in their ability to communicate effectively with participants in important markets such as the US and Europe.

Survey of Turkey’s Investor Relations Practices

Survey Results / Corporate Profile

8. Are you increasing or decreasing your efforts to source international investors?

10. Is your company considering a secondary listing? If you are, where are you considering listing?

iven the financial strength of a lot of Turkish companies, we are surprised that nearly 90% are not considering a secondary listing.

Of those companies that are considering a secondary listing, roughly 30% are considering the US, 30% Europe (but not the UK), and 30% Hong Kong (as well as other Asian countries). The choice to look to the US and Europe is unsurprising for these respondents, as those markets represent their main export markets. East Asia, while only a small percentage in terms of the number of our respondents, may represent an interesting strategic pivot.

No 88.889%

Other European US Hong Kong Countries 3.704% 3.704% and Other East Asian Countries 3.704%

90 Institutional Investors

11. Which type of funds or investors are you targeting?

80 70 Pension Funds

Note: respondents chose multiple answers

Survey Results / Corporate Profile

Sovereign Wealth Funds

Investment Funds

Hedge Funds

Individual Funds

20 10 0

89.286%

57.143%

35.714%

32.143%

21.429%

17.857%

Venture Capital Firms

Investment Trusts

M&A Private Equity

Long Term Investment Funds

7.143%

3.571%

ur survey indicates that our respondents are overwhelmingly interested in institutional investors. It is curious how few of our respondents show appetite for attracting capital from investment funds, for example. Our own experience tells us that in many cases, IR departments lack resources (personnel and/or financial), and this impacts policy or strategy for targeting investors, which in turn limits them from expanding their approach. It can also lead to time being used inefficiently as IR practitioners are left without diversified means for attracting investment. Based on our experience, we observe there to be a “copycat” practice whereby some Turkish firms copy one another without always adequately adhering to a targeting policy. Obviously, such a practice cannot be considered “best practice,” and all Turkish firms are encouraged to implement more robust investor targeting policies and guidelines.

Bosphorus Consulting: Investor Relations and Stakeholder Engagement

Survey of Turkey’s Investor Relations Practices

12. Which of the following are investors asking for when considering an investment in your business?

90 80

Margins

Revenues

Debt Profile

Note: respondents chose multiple answers Earnings

NonFlow Financial Cash Projections Goals

60 50 40

Capital Expenditure

30 20

Catalysts Dividend and Their Yield Proceeds

10 0

General Macro KPIs and Expectations Leverage

85.714% 78.571% 75.000% 64.286% 57.143% 53.571% 50.000% 25.000% 3.571%

3.571%

here are no surprises here, apart from the fact that we omitted EBITDA from our response options. We did this based on our belief that EBITDA is most useful for evaluating only very large companies (only 70% of all companies). Nevertheless, it is still interesting to note that nearly 60% of respondents stated that investors are asking for nonfinancial goals, yet we still note that Turkish IR departments are not delivering on those demands. Only 39.13% of our respondents said that they were engaging with investors on non-financial goals (see Question 24).

Bosphorus Consulting: Investor Relations and Stakeholder Engagement

Survey of Turkeyâ&#x20AC;&#x2122;s Investor Relations Practices

Survey Results / Corporate Profile

Future Funding Requirements

13. Do you have a separate Investor Relations department?

14. How many licensed IR staff do you employ?

No 7.143% 3 to 4 15.385%

7 to 8 3.846%

0 3.846%

1 to 2 76.923%

Survey Results / Management and Resourcing

Yes 92.857%

(75% 500+ million TL; 5% 0-25; 5% 26-50; 15% 201-500)

t is positive that over 90% do have an IR department. It is curious, however, that it appears that 30% of respondents are not directly involved in IR. Consequently, there are concerns as to the level of IR experience of those working in the IR departments, or the level of coherence and direction of IR activities, if responsibilities are too widely divided. Our experience tells us that the coherence and level of importance placed on IR practices in Turkey fall considerably short of global best practices.

t is concerning that 75% of the companies surveyed with two or fewer licensed IR staff are large companies with 500+ million TL turnover. It must be noted, however, that one large company with several IR staff members can skew these findings considerably. IR departments in Turkey are generally smaller (2.41 employees on average according to our survey) than the global average and the average for Western Europe (3.0) and other emerging markets such as Latin America (3.6). It appears that the majority of our respondents which are large companies are dedicating too few resources to IR and perhaps not giving IR the attention it deserves.

Bosphorus Consulting: Investor Relations and Stakeholder Engagement

Survey of Turkeyâ&#x20AC;&#x2122;s Investor Relations Practices

15. Do you work with independent consultants?

No 48%

We need to point out that based on our discussions and on our experience, some IR practitioners simply are not aware of which independent consultants are the most suitable to work with. Perhaps because the industry is still relatively new in Turkey, there is a lack of knowledge of the options available to outsource or retain services. Not only that, but there is ample evidence in Turkey that the decision to work with independent consultants is not for the IR practitioner to make; rather, this is generally decided by the CEO or CFO.

Yes 52%

Our “No” responses by sector:

7.692% Technology

7.692% Steel

Of our “No” responses, more than three quarters (76.923%) are companies with an annual turnover of 500+ million TL. This suggests that either they do not value external consultancy services or do not need them. In our experience, leadership in Turkish companies, even large ones, tends to expect more from their IR departments than they are reasonably able to deliver with the resources made available.

23.077% Financial Services

7.692% FMCG 15.385% Aviation

7.692% Holding Company

15.385% Retail

Interestingly, more than half of the companies that used independent consultants were concerned about financial market liquidity affecting global investor confidence. To us, this appears to be a sensible approach, and we would expect more companies to likewise engage in such activities.

15.385% Manufacturing

Bosphorus Consulting: Investor Relations and Stakeholder Engagement

Survey of Turkey’s Investor Relations Practices

Survey Results / Management and Resourcing

iven Turkey’s many challenges regarding internal market infrastructure, sourcing international investors and more, it is surprising that only half of the companies surveyed commit resources to engaging with independent consultants, especially regarding investor perception studies, investor targeting, road show training and more. As before, this could be due to lack of personnel or financial resources, but our experience tells us that too many companies do not attach the significance to these activities that others do, preferring to do the work themselves or ignore it altogether.

16. Are the independent consultants you work with Turkish or international?

17. Do you have, or are you planning, a fixed income program?

We Do Not Have 14.286%

Survey Results / Management and Resourcing

International 38.4615%

Turkish 61.5385%

We Have 35.714%

s above, there tends to be a lack of knowledge of which international consultants to use, and that decision is generally not one that most IR practitioners are permitted to make, anyway.

f course, the corporate bond market in Turkey is not well developed, and there are not a lot of participants. The market is only now beginning to develop, and that’s why we believe it relevant to include a survey question about what IR teams are thinking about fixed income.

Again, only about half of our respondents report using independent consultants. Of those which do, only 20% report using international consultants. Our experience has shown us that businesses in Turkey are wary of foreign consultancy services, with a number having faced bad experiences in the past. We see this also as an indicator of a broader hesitance among Turkish businesses to embrace innovation and international best practices and/or a reluctance to attach commensurate importance to achieving best practices.

Bosphorus Consulting: Investor Relations and Stakeholder Engagement

We Are Thinking of Having 50.000%

Over the last year, we have seen the Turkish lira go through many ups and downs. There are positive and negatives to both rises and falls, as a weaker lira can be good for exports but bad for debt profiles (see our research note for more on this: “Strong lira vs. weak lira – reflecting on the ups and downs”). In any case, we know there is not the depth of capital markets in Turkey as compared to other markets, and we find there to be strong suggestions of an inherent instability in capital markets in Turkey.

Survey of Turkey’s Investor Relations Practices

101-200 million TL turnover: 5;

14.286%

201-500 million TL turnover: 3;

1 2

7.143% 0%

25%

10.714%

14.286%

17.857%

7 8

3.571% 7.143%

0-25 million TL turnover: 5.3 policies; 26-50 million TL turnover: 3.7;

501+ million TL turnover: 3.72

90 80

Public Dividend Disclosure Policy Policy Compensation Policy

Note: many respondents chose more than one answer

Donation Policy

70 60

Board of Directors Communication Policy

Social Media Policy

Crisis Communications Policy Data Breach Policy Code of Ethics

30 20 10 0

84.615%

76.923%

84.615%

46.154%

73.077%

23.077%

30.769%

3.846%

15.385%

f particular note in the results to this question is the discrepancy between the number of companies which have a dividend policy or a public disclosure policy (approximately 85% for both) and companies which have a crisis communications or a data breach policy (23.077% and 15.385%, respectively). We see in this, and also our experience supports, that Turkish IR departments sometimes appear to be able to do only the bare minimum of what is required of the company in terms of reporting and are not engaging in more creative IR activities. Moreover, we see that many companies are ill-prepared to expand their IR activities into more adventurous territory, such as ESG and social media, a move which should be supported by contingency policies. Globally, we see that there is a growing interaction between IR and corporate governance, but that there is low planning for contingency policies. However, given the volatility that capital markets in Turkey have experienced recently, having a well-defined means to communicate the company’s response to such events is vital in terms of reducing uncertainty on the part of investors.

Bosphorus Consulting: Investor Relations and Stakeholder Engagement

Those Companies by Sector

25% holding, 25% FMCG, 25% aviation, 25% manufacturing 50% media, 50% FMCG 57.143% of which retail, 28.571% financial services, 14.286% FMCG 33.33% petrochemical, 33.33% technology, 33.33% financial services 25% steel, 25% manufacturing, 25% technology, 25% FMCG 40% financial services, 20% aviation, 20% retail, 20% holding company 100% financial services 50% retail, 50% FMCG

Number of corporate policies per company: 8 policies 7 policies 7.143% 3.571% companies companies

0 policies 14.286% companies 1 policy 7.143% companies

6 policies 17.857% companies

5 policies 14.286% companies

4 policies 10.714% companies

3 policies 25% companies

We see a slight tendency towards smaller companies having more corporate policies on average than larger companies. While this reflects poorly on the larger companies, it may be a result of the fact that those smaller companies that do engage with IR on a diverse basis may commit more resources to it. Similarly, we may speculate that smaller companies are more aspirational, putting greater effort into attracting investment.

Survey of Turkey’s Investor Relations Practices

Survey Results / Management and Resourcing

Percentage of Overall Companies

18. Does your company have any of the following corporate policies in place?

# of Corporate Policies in Company

Average number of corporate policies by company turnover

19. Who do you report to?

Finance Director

60 (Note: some respondents chose more than one answer)

50 40 General Director

CFO

Survey Results / The Impact of IR Leadership

30 20 Director

10 0

65.385%

t is worth noting that many use the titles Finance Director and CFO interchangeably. Also, some may not perceive a difference between General Director and Director. Still, these are the responses that were provided to us, and this survey will surely help to better inform us as we prepare next yearâ&#x20AC;&#x2122;s edition. Our results reveal that more than 25% of our respondents report

26.923%

to a general director. Of those, nearly 90% (88.89%) are listed companies, and nearly a quarter (22.22%) are BIST 30 companies. Given that a lot of companies in Turkey are structured in such a way that the director holds a disproportionate amount of control, we observe that such a structure often dampens the impact of good quality IR delivery and ultimately reduces

Bosphorus Consulting: Investor Relations and Stakeholder Engagement

7.692%

efficiency in the application of expertise. This sort of structure is typical of emerging markets, is off-putting for investors as it both represents inefficiency and is tacitly associated with other poor practices typically found in emerging markets, and is a structural challenge that needs to be overcome.

Survey of Turkeyâ&#x20AC;&#x2122;s Investor Relations Practices

20. How many days did you and your management team spend at roadshows during the previous year?

Aviation Financial Services FMCG Holding Company Manufacturing Media Petrochemicals Retail Steel Technology

Days Spent at Roadshows 11-20 31-40 1-5 41+ 1-5 6-10 11-20 31-40 21-30 11-20 1-5 6-10 6-10 6-10 1-5 11-20 11-20 6-10

ccording to our survey results, the majority of respondent companies spend very few days on roadshows. This could be due to the availability of brokersponsored conferences or lack of financial resources and/or personnel. At the same time, some of our clients tell us that they use roadshows only as a last resort – if investor acquisition is going smoothly, there is no need to head out on the road – or if there are no broker-sponsored events, as a substitute. Consequently, in some cases the use of roadshows can be an indicator of poor performance.

50% 50% 80% 20% 40% 20% 20% 20% 50% 50% 50% 50% 100% 100% 83.33% 16.67% 100% 100%

31 to 40 7.692% 11 to 20 4.000% 21 to 30 7.692%

41+ 3.846% 1 to 5 46.154%

11 to 20 11.548%

6 to 10 19.231%

This would explain the lack of take-up for financial services firms. This would also be in line with our finding that IR practices in Turkey sometimes tend to be more reactive than proactive. Companies may therefore find themselves caught short and having to improvise, rather than working with a cohesive plan, policy or strategy in place.

conferences should not be seen as substitutes for roadshows because: 1) investor conferences are generally for only a day or two, and this can be an insufficient amount of time to do what needs to be done, and 2) roadshows are about a company driving its own agenda rather than following an agenda based on the availability of conferences.

Roadshows are important, and in many cases they are essential. From our point of view, it is a mistake to believe that roadshows can be replaced by investor conferences. We maintain that investor

Interestingly, 2.94% of our respondents had an IR department but no defined IR goals, and yet spent 10-20 days a year at roadshows, more than 50% of our other respondents.

Bosphorus Consulting: Investor Relations and Stakeholder Engagement

Survey of Turkey’s Investor Relations Practices

Survey Results / The Impact of IR Leadership

Companies by Sector

21. Was the number of days you spent at roadshows in that year higher or lower than in the year before?

22. What percentage of the CEOâ&#x20AC;&#x2122;s time is dedicated to communications with existing shareholders?

31% to 40% 4.167%

Lower 27.273%

21% to 30% 8.333%

Higher 72.727%

10% or less 79.167%

Survey Results / The Impact of IR Leadership

11% to 20% 8.333%

he majority of our respondents spent more time at roadshows in the current year than in the preceding year. With respect to the above point, this is most likely because of fewer broker-sponsored events. It may also be related to greater insecurity in the market, with respect to liquidity and raising capital. However, we did not find a significant correlation between those companies increasing their roadshows and those expressing insecurity in global liquidity or that they would increase their efforts to target investors. Some may deduce that many business entities are not making the link between growing global emerging market volatility and the difficulties they are facing attracting investment.

Bosphorus Consulting: Investor Relations and Stakeholder Engagement

ur experience tells us that generally international investors and analysts like to hear from a CEO when it comes to investing in the company, while they may at the same time be put off if they perceive the CEO as too interfering. Thus, not only the amount of CEO communication but also the way the CEO communicates is important. For most companies surveyed, it was found that the CEO dedicates 10% or less of his or her time to engaging with existing shareholders. One exception to this included the companies surveyed that are considering a new listing in the US. In companies where CEOs dedicate 10% or less of his or her time to engaging with existing stakeholders, there tend to be fewer defined goals for the IR department, suggesting less engagement on the part of the leadership with IR practices, and likely a lack of resources and importance being given to IR practices.

Survey of Turkeyâ&#x20AC;&#x2122;s Investor Relations Practices

23. What are the primary goals for your investor relations department?

Note: many respondents chose more than one answer

Effective Disclosure

Shareholder Diversification

60 50

Companies that engaged with nonfinancial metrics, a step towards bringing their practices in line with international best examples, tend to have more defined goals for their IR departments.

Ensure Management Visibility and Accessibility

Coordinating IR/PR Message

Number of goals per company Influencing Corporate Strategy

0 goals 17.857% companies

30 4 goals 7.143% companies

20 10 0

73.077%

57.692%

onsistent with our other findings, disclosure ranks highest. This further suggests that a lot of IR practices in Turkey are focused merely on serving regulatory enforcement (again, this may be due to the prevalence of IR practitioners having worked previously for Turkey’s Capital Markets Board). We see IR often being equated with reporting required by regulations and not a lot more. For companies in Turkey to truly rise to the challenge of attracting shaky investors in a climate of growing emerging market uncertainty, much more creative, analytical approaches may be needed. Less than half

46.154%

30.769%

It is worth noting that with respect to a coordinated IR/PR message some IR practitioners firmly believe that IR should be kept very separate and distinct from PR (the CEO of a top retailer told us, “IR is for investors; PR is for consumers.”). Others, however, such as an award-winning IR team, told us that a coordinated approach to IR and PR is essential to them, ensuring a consistent message and addressing relevant disclosure standards as well as being influential in helping them win awards.

2 goals 32.143% companies

3 goals 17.857% companies

It is concerning that most companies surveyed (approximately 72%) have only two goals or fewer.

of the companies surveyed coordinate their IR and PR messaging as a primary goal.

Bosphorus Consulting: Investor Relations and Stakeholder Engagement

1 goal 24.138% companies

Companies with a turnover of 0-25 million TL had an average of three goals for their IR department; 26-50 million TL had 1.5; 101-200 million TL had 1; 201-500 million TL had 1.3; 501+ million TL had 1.67 Our survey results point to a surprising correlation: the larger the company, the fewer the number of policies. Again, we see evidence that the efforts of larger companies are being eclipsed by those of smaller companies.

Survey of Turkey’s Investor Relations Practices

Survey Results / The Impact of IR Leadership

“I think they should certainly be integrated because as IR, we are the key contact to investors, and PR is of course the main contact for the general public. So we have to have the same message. We can’t deliver it two ways.” FMCG IR Director

Survey Results / Channels, Tools, and Content

24. Do you engage with investors on non-financial metrics such as Environment, Social, and Governance (ESG) issues?

25. Are you using social media for investor relations purposes?

Yes 39.13%

Yes 30.769%

No 60.87%

No 69.231%

We found that companies that engaged with non-financial metrics had more licensed IR staff (3.42) than those that did not (1.5). This suggests a correlation between engagement in these issues and greater importance being placed on IR within a given company.

Most IR departments in the US and Europe are making increasing use of social media in their efforts to attract and maintain investors. Furthermore, our own research tells us that Turkish companies do not engage in social media due to a lack of demand and/or an internal lack of control. However, given the growing turbulence looming on the horizon for the Turkish economy, social media may well represent an as-yet under-utilized platform to combat worsening perceptions of Turkey.

lobally, we observe that investor demand for ESG is growing. Curiously, however, we find that while most respondents report an increase in demand from investors for information on their ESG practices, most are still not complying.

hat more than two thirds of respondents are not engaging in social media for IR purposes is contrary to the global trend.

Given the battering that Turkey’s image has taken in the eyes of international investors over the past year, redoubling efforts to present Turkish businesses as transparent and modern is crucial. By demonstrating a commitment to ESG efforts in a well-communicated fashion, Turkish businesses can set themselves apart from the crowd in a market which receives a lot of interest as well as ample scrutiny. For example, growing concern about how Turkish businesses treat their workers has the potential to spook investors wary of bad PR (see our research note on how “Construction deaths in Turkey are off-putting to investors” and “Worker safety,” which notes that companies are not making enough efforts to communicate the positive steps they do take and thus distinguish themselves from the competition in the eyes of investors).

Bosphorus Consulting: Investor Relations and Stakeholder Engagement

Interestingly, we find no correlation between company turnover and use of social media. Once again, we find that smaller companies seem to be the less complacent and more aspirational. The sector most represented in social media is FMCG, possibly because engaging with consumers via social media is a more established practice in the FMCG sector, common among the world’s largest and most successful brands. While few companies engage with social media, most of those that do are also expanding their efforts to attract new investment, supporting the assertion that these activities are more common among more aspirational, less complacent companies. Interestingly, although only roughly 30% of companies surveyed use social media to engage with investors, half of those which do are most worried about political risk affecting global investor confidence.

Survey of Turkey’s Investor Relations Practices

26. If you aren’t using social media, which of the following reasons apply?

50 Lack of Investor Demand

(Note: respondents chose more than one answer)

Unable to Control Message

40 35

Company Policy

20 15

Insufficient Resources

Lack of Understanding

12.5%

10 5 0

50.0%

hese results are generally unsurprising and reflect global trends apart from lack of investor demand which, globally, is one of the main reasons to engage with social media for IR purposes. Results from our 2014 survey clearly illustrate that of all channels, social media is the least widely used among the IR community in Turkey. The reasons include a lack of understanding of the direct commercial benefit by Turkish IR practitioners, as well as uncertainty as to how to manage social media from an IR point of view.

37.5%

25.0%

Regardless, social media channels are proving increasingly valuable to some IR teams as an additional meaningful tool for communications. Not only does social media allow IR practitioners to inform a wider audience of investors and stakeholders with a regular, generally immediate update, but they also allow for engagement in a more informal (and familiar) environment. In fact, most of our respondents claim that “informal communications” is the preferred and most popular form of engagement with investors and analysts alike.

Bosphorus Consulting: Investor Relations and Stakeholder Engagement

According to our friends at Edelman, the world’s largest PR firm, “Social media for investor relations is moving from marginal to mainstream” – at least in the US, which remains a focal point for Turkish companies seeking to attract investors and emulate best practices. Moreover, as Turkey’s capital markets expand and a greater number of firms compete in the regional and global capital markets, the need for effective use of social media, especially during investor/analyst days or on earnings calls, is likely to increase.

Survey of Turkey’s Investor Relations Practices

Survey Results / Channels, Tools, and Content

Management Does Not Think It Useful

27. Which media do you use to communicate with investors?

Broker-Organized Events

1 media

(Note: some respondents chose more than one answer)

Company Events

3 media

30 2 media

40 30

Survey Results / Channels, Tools, and Content

Market Media

0 media Daily Finance Newspapers

10 0

Professional Investor News Service

73.077%

57.692%

23.077%

26.923%

10 5 0

7.692%

Average number of media used to engage with investors by company size

10.71%

35.71%

25%

28.57%

Number of media used to communicate with investors by company

It is worth noting that Company Events include earnings updates, webcasts, analyst days, investor days, and similar events.

Companies with turnover less than 200+ million TL do not use broker-organized events.

It appears that there is little to no correlation between company size and use of varied media to communicate with investors, which is perhaps unsurprising and further supports our notion of there being an over-reliance on usual practices. Nearly three quarters of companies engage mainly with broker-organized events.

ompanies with a 0-25 million TL turnover had an average of 2.3 different media for engaging with investors; Companies with 26-50 million TL had 1.5; 101-200 million TL had 2; 200-500 million TLhad 1.3; 500 + million TL had 1.78

Bosphorus Consulting: Investor Relations and Stakeholder Engagement

Survey of Turkeyâ&#x20AC;&#x2122;s Investor Relations Practices

28. How do you measure the impact of investor relations activity and communications? 90

Informal Feedback from Investor Community

80 Quality of Investor 1:1 Meetings

70 60

Shareholder Maintenance

Relative Valuation/ Stock Performance

Note: respondents chose multiple answers

Surveys and Efficient Perception Use of Senior Management Studies that We Have Done Time

Extel

Other

3.846%

10 0

80.769%

65.385%

46.154%

he fact that the overwhelming majority of respondents (more than 80%) rely on informal feedback from investors highlights the rather surprising lack of use of a more structured approach (e.g., investor perception studies) in gauging the usefulness of IR activities. An astonishingly low percentage of respondents, less than 4% (3.846%), report using surveys and perception studies to measure their impact. Some IR departments admit to relying exclusively on the Thomson Reuters Extel findings to gauge their effectiveness, and this is truly

Additionally, we also observe a very low number of Turkish companies conducting shareholder identification studies, and this further complicates measurement efforts. To compare and contrast, consider that in markets such as the US and Europe, where Turkish companies seek to penetrate, we see much greater use of more structured means of measurement. Average number of means of measuring by company size

3 means 10.714% companies

1 means 14.286% companies

0 means 10.714% companies

Bosphorus Consulting: Investor Relations and Stakeholder Engagement

3.846%

unfortunate given the very low number of Turkish companies (only 25) included in the 2014 ranking.

Number of means of measuring per company 4 means 14.286% companies

11.538%

Companies with a turnover of 0-25 million TL had no means of measuring. Companies with a turnover of less than 500 million TL had on average 1 means of measuring.

5 means 14.286% companies

Companies with a turnover of more than 500 million TL had on average 3.39 means of measuring. 2 means 37.037% companies

Survey of Turkey’s Investor Relations Practices

Survey Results / Channels, Tools, and Content

About

About Our 2014 Survey & Analysis

his document has been prepared independently of any and all survey respondents and/or interviewees or other company representatives consulted whilst preparing this analysis or whilst conducting the relevant survey. Bosphorus Consulting Ltd has no authority whatsoever to give any information or make any representation or warranty on behalf of any company mentioned or not mentioned, explicitly or implicitly, in this analysis. In particular, the opinions and recommendations expressed herein are entirely those of Bosphorus Consulting Ltd as part of its normal research activity and not as an agent or other representative of any other entity. Bosphorus Consulting Ltd has not independently verified the information given in this document. Accordingly, no representation or warranty, express or implied, is made as to, and no reliance should be placed on, the accuracy, completeness or fairness of the information or opinions contained in this document. Neither Bosphorus Consulting Ltd nor any of its affiliates, directors or members, officers or employees or any other related person accepts any liability whatsoever (in negligence or otherwise) for any loss however arising from any use of this document or its contents or otherwise arising in connection with this document. This document has been forwarded to you solely for your information and may not be reproduced or redistributed or passed on directly, or indirectly, to any other person or published, in whole or in part, for any purpose. Any press releases or publication of the findings must comply with our Terms and Conditions. Publishers must obtain advance approval from Bosphorus Consulting Ltd.

About Bosphorus Consulting Ltd

osphorus Consulting Ltd is the best example in Turkey of an international IR consultancy (we are a limited company registered in England and Wales – Company Number 09345536) with local expertise (our Turkish and international team members service our Turkish clients on home turf here in Turkey). We are a team of seasoned IR, finance, research, journalism, and PR professionals. Our competitive advantages over other consultancies are: 1) We are a dynamic team with a wealth of experience in international IR best practices, 2) We enjoy working with Turkish companies and Turkish IR practitioners, and 3) We truly understand Turkish IR practices, where they’ve come from, and where they’re headed.

Bosphorus Consulting: Investor Relations and Stakeholder Engagement

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Feedback: Your Comments and Opinions

s with all of our work, we invite your comments and opinions. Your feedback on our 2014 survey, analysis, methodology, style or other is not only welcome, but it is positively essential for us to help you to develop the IR industry in Turkey. We are proud that many of you regard Bosphorus Consulting Ltd as a respected international IR consultancy, but we are not the professionals leading Turkish IR departments and influencing IR policy and strategy. You are. And it is your voice that counts. So we welcome your feedback as a natural complement to our finished product â&#x20AC;&#x201C; a compilation of our understanding of your survey responses, your interview input, your informal chats, and more. You are the authorities; we are simply the mouthpiece. So please do let us know where we have been particularly strong or particularly weak in conveying your messages. With your feedback, we will be able to deliver an even more informed analysis in 2015. Please send any comments to George Dyson at george.dyson@bosphorusconsulting.com.

Bosphorus Consulting: Investor Relations and Stakeholder Engagement

Survey of Turkeyâ&#x20AC;&#x2122;s Investor Relations Practices