Is there any relationship between investor language and that of consumer? In most cases, these are seen as two different parties who at parallels. Most companies address their shareholders in ‘jargons’ as they assume that they do understand. The reality is very different. Sample this;
“The shareholders gave me a rough time at Kasarani when I said that the company cannot issue dividends because we need the money for financing our Modernisation project,” said Omollo Okero, the chairman of Kenya Airways after the delivery of the latest Boeing 777
This is one of the many typical problems which board members of many companies continue facing dilemma in trying to communicate with the shareholders. How do you raise the scarce capital by re-investing profits yet you need to please shareholders by short-term dividend payout? Some heckle at the directors if they do not declare any dividends.
Could this be attributed to lack of knowledge on the shareholders part, or is it even been irrational investors? NO. They are not aware of the dealings. Simply put, our capital market has not fully utilized the marketing communication channel to raise awareness on various ways through which they operate. This would also ease communication with the shareholders.
Although the market commands a whopping Ksh.290 billion in capitalisation, there are few people who know the day-to-day dealing of the market. There is little awareness of the avenues to follow, especially for the ‘small’ investors.
You do not have to be an expert in hospitality industry to know how the new multiactive Omo works when washing. On the contrary, for the capital market in Kenya, one has to be an expert in the field for him to even understand the concept of a share. Of course that’s an extreme comparison but I hope it drives the point home. The capital market is characterized by jargons, which only leave out a large number of potential investors out of the scene.
By simplifying the communication, this large number can be put into the net of investors.
For example,
- Whereas in many cases companies say that they are issuing a bonus issue, telling the shareholders that the company is offering them shares for free would be more welcome – (We all have an appetite for free things!!)
- In case they are offering a rights issue, it would be more appealing to the existing shareholders if you told them shares are available to them at a discount not at the prevailing market price (discount Sale!)
- “The stock exchange index lost …points to stand at …” is a common phrase in all business news. We all get lost! Simply put, the market indicator shows a decline in value of stocks would tell most people how the market is moving.
- “We are not paying out dividends” declares the chairman of a company (sounds harsh) and all the shareholders boo at him with a lot of discontentment– they need the cash. (its their money remember) However, most of the board members could save themselves this agony by telling the shareholders that they are using the earned profits to re-invest.
And the list continues.
Use of capital jargons in an environment where people are not yet capital market savvy only makes the whole concept look alien. It is not a wonder therefore that most people consider Plots, farmlands and other tangible items as the investments.
By embracing a little consumer friendly language, the capital market would not only raise the awareness levels about the market but will also arouse interest hence trial. Most people would try to put there little savings into a structured market. This will not only make it more robust but also raise the investment approach in the country. In addition, the local market will have a higher stake of local investors.
For details, contact:
pauline@episodesresearch.com
www.episodesresearch.com
