Iceland, Tuesday 6th September 2016

Communicating to build trust and drive valuation – a distinct perspective

The historical context and the shifting balance of power

What good communication looks like

What we bring to the discussion of building trust and driving valuation:

Regulatory background

Head of IR for leading European corporates at times of profound challenge and change

Regular dialogue with leading global investors

Most senior female executive at major global industrial company

International track record in shareholder and stakeholder engagement

Non-Executive Director with international experience

Advisor to Chairmen on Board effectiveness

Corporates

Investors/ Asset-Owners

Industry Bodies

Government/ Regulators

NGOsBusiness Schools

ProfessionalServices

FinancialInstitutions

The Board

Governance Finance Corporate AffairsSenior Corporate

Roles

Executive Committee

Direct Reports

Building Trust & Driving Value

Evaluation

Executive Search

Development

- Understanding shareholder and stakeholder expectations of the Board and Executive

- Assessing how well placed the Board and Executive team are to deliver

- Board and Executive succession planning

- Sourcing high calibre candidates to meet corporate objectives

- Enhancing corporate and employer reputation

- Bespoke development programmes at Board and Executive level to deliver shareholder/stakeholder value

- Tailored programmes on group and individual basis

Good communication with shareholders and stakeholders is key to Board effectiveness, underpins the license to operate and drives valuation

Communicating to build trust and drive valuation – a distinct perspective

The historical context and the shifting balance of power

What good communication looks like

The 2008 Financial Crisis was a turning point, resulting in erosion of trust in financial institutions, contributing to the rise of populism

Shareholders

Executive The Board

Chair

Institutional shareholders found wanting in 2008 – clearly not providing oversight

Dissatisfaction with investors resulted in the UK’s Stewardship Code - published in 2010 and updated in 2012. This sets out how investors should hold Boards to account and also how they should engage with investee companies

This UK initiative has extended to the Investor Forum which encompasses leading international investors operating under separate codes

Internationally we are seeing an increase in activism:

Passive investors focus on governance – LGIM in the UK £746 billion AUM

Sovereign Wealth funds drive change e.g. Norges with $894 billion AUM and focus on climate change

But also US style activism comes to Europe and drives disruptive change at Board level with an estimated $173bn AUM chasing activist opportunities globally

Increase in engagement / increase in activism

One consequence of 2008 Financial Crisis is fear of dominant CEO

Much governance put in place to prevent potential maverick CEOs:

Oversight by Board stepped up

Chairman required to engage with shareholders & regulators

Regulatory oversight of CEO and Executive team increased in particular with banks

But very clearly shareholders are most interested in engaging with CEO. Harvard Business School assistant professor Eugene Soltes argued in 2012 “Our results suggest that private meetings (with the CEO) help some investors make more informed trading decisions.”

And the Executive pay argument across Europe indicates that public anger with senior Executives has still not subsided

CEO remains pivotal though governance and regulation has increased; succession planning now in the foreground

The Chairman used to be very much in the background

Now we are seeing that Chairmen are being held to account and if the company runs into difficulty we frequently see Chairman as well as CEO stand down

Chairmen are being tasked to hold the Executive to account & the Chairman’s remit is increasing

Chairmen in Financial Services in particular also assuming regulatory engagement

Chairmen meeting with investors on governance issues – attitudes are changing here including in the two tier board system

Chairmen are being tasked with responsibility for culture across the organisation eg the recent FRC report Corporate Culture and the role of Boards. The FRC surveyed chairmen on how influential different individuals were on company culture in practice - 89% felt the role of the chairman is influential or very influential compared with 54% for NEDs

Effective Chairmen may have dotted line to Head of IR to hear what the market is saying

Chairman’s role has changed most profoundly since 2008

The Shareholder

Traditionally shareholders had two main sanctions:

1. To sell the holding

2. To vote against management at the AGM

The UK Stewardship Code 2010 urged investors to engage more intensively with the companies they invest in to observe good governance and improve performance

“Investors in the company […] play an important role in holding the Board to account for the fulfilment of its responsibilities”

UK Stewardship Code, September 2012

The Board

As a consequence the expectation of Board level engagement with shareholders has increased, in particular for the following: The Chairman The Chair of the Remuneration Committee The Senior Independent Director

Prior to the 2008 financial crisis:

8 years later………..

Stakeholder value Shareholder value

License to operate

Country % of Women on Boards

Iceland – OMX Iceland 44.0

Norway – OBX (Supervisory Board) 41.0

Sweden – OMX Stockholm 30 36.0

United Kingdom – FTSE100 27.0

Germany – DAX30 (Supervisory Board) 27.0

Australia – ASX-200 23.4

United States – S&P100 23.2

Canada – S&P/TSX60 20.8

Southern Africa – JSE Top 40 and SOEs 17.1

Ireland – ISEQ 16.0

Malaysia – FTSE Bursa Top 100 15.2

Hong Kong – Hang Seng-50 11.9

*Figures refer to highest decision-making body. In countries with two-tier governance this is the Supervisory Board

Globally, Chairmen and CEOs are alert to the importance of increased female representation in the Boardroom and Executive Committee. The pipeline of senior female executives, however, remains too weak.

As a Board Development and Executive Search consultancy Fidelio has a clear perspective on who succeeds to the Top Table and at the Top Table. We bring these insights to our unique “A Seat at the Table” Programme for senior female executives and directors, as well as a clear goal to develop tomorrow’s female CEOs and Chairmen.

Based on Fidelio research the following attributes are critical for succeeding to the table and at the top table:

Understanding the complexity of shareholder and stakeholder expectations for the leadership team

A firm grasp of governance, including formal and informal power structures

Presence and authority; personal impact; the ability to influence

Reinforcing networks; networks of support and networks of reciprocity

Resilience under extreme pressure

Effectiveness at the Board/Executive Committee table is the focal point of this highly practical two day programme and participants leave with practical tools to help them succeed, including:

A framework for understanding leadership structures and styles

A mirror for personal presence including within group dynamic

A road map of critical networks and milestones in order to achieve and personal objectives

Communicating to build trust and drive valuation – my distinct perspective

The historical context and the shifting balance of power

What good communication looks like

Disruptive technology

Anti-business sentiment

Political interference

Audit requirements

Economic turbulence

Environmental risk

Regulatory overload

NGO activism

Board composition and diversity

Employee needs

Delivering growth

Access to capital

Succession planning

Reward recognition

and remuneration

Strategy and business

development

Consumer activism

The Board

Shareholder activism

Boards face huge complexity and scrutiny

Pension Funds

Mutual Funds

Sovereign Wealth Funds

Hedge Funds

Strategic Investors

Retail Investors

Analysts ConsultantsProxy

AdvisorsIntermediaries

The Corporate /The Board

CorporateCapital Markets

CEO

CFO

IR Director

Communications

Strategy

Treasurer

CSR Director

Management Board

Supervisory Board

Bondholders

Financial Media

Retail Investors

Analysts

Advisers

Shareholders

The opportunity arising from high quality Board-level communication is a premium in the share price and valuation reflecting good governance

The risk from inadequate Board-level communication is increased volatility in the share price and exposure to aggressive activist Hedge Fund investors

Boards be seen to balance the interests of shareholders with those of employees, and the company at large

Attract and Retain Capital

Drive Valuation

Align and Communicate

to Stakeholders

“Effective IR absolutely influences valuation”

86% of investors believe that the quality of a company’s investor communications is a driver of valuation - CNC Global Investor Insight Report, 2015

Communications

Internal

Communications

Executive

Management & BoardCorporate and

Social Responsibility

Strategy

Finance

IR credibility with the market is

heavily dependent on its

relationship with the

Management Board. IR must

be in the loop and have a

voice on market related

issues

IR is very often part of the

finance team, and is always

dependent on Finance to

deliver most of the content

for the IR programme

IR will be less effective if it is

not trusted by employees; IR

must ensure consistency of

messaging to employees and

investors

IR must work closely with

Communications in order to

ensure smooth delivery of

the IR message across

multiple channels

With an increasing amount of

investment tracking

sustainable indices, the IR

programme must be CSR-

consistent

IR and Strategy are moving

much more closely together

to ensure optimal planning

process, as well as clarity of

guidance and target setting

Investor

Relations

Quantitative

Metric Ranking

Number of analysts covering the stock 48%

Number of investor one-on-one meetings 62%

Relative valuation/stock performance 33%

Qualitative

Efficient use of senior management’s time 61%

Perception study (“formal”) feedback 41%

Quality of investor one-on-one meetings 69%

Quality of information in analyst reports 63%

Source: BNY Mellon, Global Trends in Investor Relations, October 2015

“An individual is guilty of insider dealing if he has information as an insider and either encourages another person to deal in securities which are price-affected in relation to the information knowing or having reasonable cause to believe that the dealing would take place in specified circumstances or if he discloses the information to another person otherwise than in the proper performance of the functions of his employment, office or profession.”

Major names have succumbed to insider trading

Boards are right to be wary of the regulatory risk and for example the US Reg FD breeds a cautious and legalistic based approach to engagement with investors

With education and a robust framework we argue that Boards and companies can find appropriate channels of communication with the market

Education

Education and briefings

- internal communications

Regular IR reports to Board and senior

management

Engagement with shareholders

Third party shareholder reviews / investor feedback reports

Compliance

Source: Rivel Research

Fidelio Partners is a Board Development and ExecutiveSearch consultancy. We support our clients to build diverseand effective leadership teams that are well positioned to dealwith complexity and change.

Fidelio has a deep understanding of shareholders, stakeholdersand valuation. Our clients benefit from Fidelio’s functionalexpertise in Governance, Finance and Communication, as wellas our ability to source world-class talent across thesefunctions.

Diversity is hardwired into every aspect of Fidelio’s approachto building and developing leadership teams.

Through Evaluation, Development and Search our clients canensure that the Board and Executive team are well placed to:

drive growth

secure on-going access to capital

sustain corporate reputation and maintain the license tooperate

and thereby increase the value of the business

Fidelio operates internationally from London with a talented,highly qualified, in-house multi-lingual research capability.

13 Regent Street, London SW1Y 4LR

Tel +44 (0)20 7759 2200

www.fideliopartners.com

These slides represent the opinion of Fidelio Partners and have been constructed using publicly available information, which we have taken every reasonable measure to verify.