Risk & Compliance

On the Record: ABN Amro’s Former CFO

Tom de Swaan talks about his new role chairing an advisory council for the Dutch Society for Investor Relations.
Janet KersnarNovember 13, 2006

Tom De Swaan considers himself lucky. Back in the late 1990s, when he left his job at the Dutch Central Bank to become CFO of ABN Amro, he says investor relations in continental Europe was still in the early stages of development. “I was fortunate that I could learn on the job,” he says. He reckons that the investor community today wouldn’t cut CFOs who are new to IR as much slack as they once did.

Though de Swaan, 60, stepped down as CFO of the €880 billion (in assets) Dutch bank in May, that doesn’t mean he’s left the world of IR behind. Along with a portfolio of board memberships at GlaxoSmithKline, Ahold, DSM and Zurich Financial Services, among others, he was recently appointed chairman of a new advisory council set up by the Dutch Society for Investor Relations (NEVIR), which is aiming to draw greater attention to how and why the IR landscape across continental Europe needs to change. CFO Europe caught up with de Swaan just hours before the council’s first meeting.

Why did NEVIR see a need for an advisory council?

Ten years ago, only the biggest firms had dedicated IR staff; the rest simply added IR to the communications department, as something that was looked at on a parttime basis. But then we started diversifying our investor base, and looking across the Atlantic. As soon as we did that, we had to change. American investors expected the American way of IR. The types of research being done, the use of external consultants, and the use of the web to distribute financial information and access a broader pool of investors have changed the IR function dramatically. But there’s more room for improvement.

NEVIR’s board wants a “sparring partner,” a group of experts—from all parts of the spectrum, from investors to corporates—who can help its members “professionalise” and have a greater voice in the current debates about disclosure and transparency. And that needs to happen fairly quickly. Like everywhere else, companies in the Netherlands are facing huge challenges in a globalising environment, particularly as competition intensifies among companies for a place on the radar screens of increasingly sophisticated shareholders, and CFOs alongside their IR officers have a critical role to play.

What will you focus on with NEVIR?

One area that deserves some attention is the transparency of share ownership in the Netherlands. At the moment, we don’t have a public share register as other countries do. The regulatory authorities only have to be informed if an investor has a 5% holding. So IR officers spend a lot of time and money trying to identify who their shareholders are, which is essential if they stand any chance of having a constructive dialogue with them. We want to look at what other countries are doing, and explore whether there is a better alternative to a pubic register. Whatever the case, we want to be able to influence the debate.

Overall, would you say that recent developments are taking IR in the right direction?

The AFM, the Dutch financial markets regulator, announced last January that it plans to start randomly monitoring how companies handle press and analyst conferences after they publish financial press releases in order to see whether any price-sensitive information is being released. That raises a whole host of IR issues about how, when and with whom companies can hold meetings.

On paper, developments like these are good—the greater the transparency between the issuing company and the markets is a good thing. But I can’t help feeling concerned that we could soon face an overly strict interpretation of the rules.

It’s what I’m starting to see in the debates about one-on-one meetings, for example. I’m a firm believer in one-on-one meetings if only because it allows investors to get to know management better. It’s at those meetings that investors can decide whether they believe management is capable of executing strategy and whether management is on top of things.

In a broader perspective, it’s time to ask whether we’re letting disclosure become a goal in itself, rather than a means to reach the goal of higher transparency. Consider sell-side analysts. There’s huge pressure from the market for them to publish an analysis of a company just a few hours after it issues quarterly figures. The problem is that quarterly reports can now run up to 80 pages. That means the analyst has to digest an increasing amount of information in just a few hours. I’m convinced that analysts only read the first page of the document, so they’re just getting the highlights, not the analysis.

Meanwhile, individual investors are also suffering from information overload. I can’t believe many of them will really come up with a good analysis of a company based on an annual report that runs to 250 pages. That’s why they look to “translators”—bankers, analysts and so on— for two or three pages of condensed analysis. You have to ask whether more disclosure leads to more transparency.

There has been a lot of discussion lately about the influence of private equity on corporate deal-making and disclosure. What’s your take?

The Netherlands hasn’t been immune from these discussions. We have seen a significant increase in the profile of private equity players—cable TV company Casema, the semiconductor unit of Philips and publisher VNU are just some of the companies now in private equity hands. The big issue is getting private equity to be as transparent as the companies they pursue. While a lot of emphasis over the past few years has been put on increasing disclosure at listed companies, we have another party claiming that it can increase the value of a company without disclosing how it plans to do so. I’m in favour of increasing the transparency of these active shareholders.

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