Chapter 7
On a day-by-day basis, investor relations officers produce annual reports, issue media releases, and conduct shareholder research. Laskin inquired what activity investor relations officers perform most often. He presented investor relations officers from Fortune 500 companies with a list of investor relations activities and asked them to rate how often they are involved in these tasks. The list included report preparations (annual reports, quarterly reports, and other reports), ownership research and analysis, controlled media communications (newsletters, mailing lists, web site postings, etc.), mass media communications (editorials, interviews, or advertising), group communications (roadshows or conference presentations), one-on-one communications and negotiations, responding to requests from shareholders and financial analysts, providing information to the executives and other departments of their organizations, compliance with regulations, and various management tasks.
Laskin’s research concluded that the most common investor relations activity is responding to requests they receive from various constituencies. Indeed, hardly a day goes by without a financial analyst from a sell-side or buy-side contacting an investor relations officer. In fact, Laskin research concluded that institutional investors and financial analysts combined consume on average 70% of the investor relations officers’ time.1
Financial analysts want to stay up-to-date on every development of the company: a launch of a new product, entering new markets, or hiring a new person to a top management team. Private shareholders also submit a fair share of requests for information. In fact, some organizations create a separate department to communicate with private shareholders in order to allow investor relations officers to have more time for financial analysts and professional investors.
Spending most of the time on responding to previously submitted requests raises a concern about the reactive nature of investor relations. Indeed, if the focus of investor relations is on catching up with requests it does not leave much time for proactive and strategic planning for the benefit of the organization. In fact, controlled media communications, such as websites, mailings lists, newsletters, or other company’s media that might allow investor relations officers to set an agenda and proactively deliver information to the interested parties, are rarely mentioned by the investor relations officers as the activity they are involved in.2 Indeed, investor relations officers are often consumed by technical rather than strategic activities. Even today “an exclusive emphasis on intended technical activities deflects attention from the symbolic nature of investor relations departments and the institutional sources of organizational structure.”3 On the other hand, investor relations officers report that they are also often involved in roadshows, presentations, and conferences.4 This indicates a proactive focus of the profession. Practiced proactively, investor relations can create a competitive advantage for a corporation.
Another interesting finding is involvement in one-on-one meetings. One-on-one meetings with investors or analysts have long been considered a cornerstone of investor relations. Yet it turns out involvement in one-on-one meetings depends on who manages the investor relations program. Investor relations officers managed by the corporate communication/public relations departments are not as often involved in one-on-meetings as officers managed by finance/treasury departments or as officers from a stand-alone investor relations departments. Investor relations officers from communication/public relations departments are also more often involved in the controlled media communications and performing managing tasks than officers from finance/treasury departments or stand-alone investor relations departments.5
Investor relations officers are also charged with keeping management up-to-date about the shareholders of the company. Investor relations officers constantly conduct ownership research and provide information to the top management or other departments of the organization. This confirms that the two-way communication is in the very nature of investor relations, when information is not traveling simply from organizations through the investor relations officer to target publics, but when investor relations professionals also deliver information from the investors, financial analysts, or brokers back to the management of their organizations. This emphasizes an important function for investor relations—counseling the management. Thus, two-way communications, an ideal for strategic communications, seems to be incorporated in the very nature of investor relations. It is important for the top-management to know who owns the company, who trades the stock, and what are their motivations; shareholder research is not uncommon in the investor relations. Investor relations practitioners are required not only to deliver the company’s message to the shareholders but also to learn the shareholders position and present it to the company’s top-management. National Investor Relations Institute (NIRI) recommends that “the company’s investor relations officer… [should] report feedback from investors and analysts.”6
What stands behind all these activities investor relations officers engage in? Needless to say, it is providing accurate and timely information to the financial community. But there is more to that. Private shareholders, institutional investors, and even financial analysts following the company are not as knowledgeable about the company’s history, future aspirations, competitive position, and so on. It is not always sufficient to provide information to the investors. Often, investor relations officers are required to educate investors and analysts about the actions the company takes and what these actions mean for the future growth of the company. Explaining to investors complex research and development spending, new product offerings, or even new hires is an important aspect of the investor relations officer’s job. Investor relations professionals cannot simply make information available to investors; they must make sure the information is understood correctly. Investor relations is not about disclosure of information; it is about understanding the company. Thus, investor relations officers from “disclosure” officers must often become “education” officers.
Proper understanding of a company’s business, however, is not a goal in itself either. Rather, it is a stepping stone on the way to a bigger goal—building relationships with the financial community.