People and Practices: in IR, it Takes all Kinds

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Photo credit: Walter A. Aue / Foter / CC BY-NC-ND

Investor Relations (IR) professionals come from many fields. Some come to the function by way of the finance department. Others transfer in from mainstream corporate communications positions. Even former high school math teachers have found new homes in IR. And then there are those who have worked with intelligence agencies. With all these varying backgrounds, IR has a wealth of perspectives upon which to draw for its best practices.

“It is important for every IR pro to capture communications—including social media metadata—across the enterprise,” says Ingrid Hansen, director of Launch Media, which represents a company that has worked with intelligence agencies. More recently, that company has started to work in the federal banking area and by extension applications for IR, compliance and legal. This functionality could be part of a content management system (CMS), which would be an emerging best practice for IR. “It ensures all areas of an organization are aware of current and past documentation and communications.”

Derek-Handova-says-it-takes-all-kinds-of-people-from-different-fields-to-make-IR-a-strong-function-26-November-2014
Photo credit: Walter A. Aue / Foter / CC BY-NC-ND

CMS for full Coverage of your Assets
Hansen recommends using a CMS for making IR more effective. “With a CMS, Investor Relations can make content queries and pull reports to see which people are allowed to see what content related to IR,” Hansen says. “It allows us to track what content assets were sent when, where and to whom.” In that context, CMS can also function as a documentation process.

“Document, document, document!” says Noula Zaharis, vice president of compliance, Breitling Energy, an oil and gas exploration company. “Documentation is your friend.” Beyond that, Zaharis agrees that there is potential insight to be had in the metadata of IR CMS as a way to tap into the investor collective consciousness.

CMS use for IR can serve as a best practice due to the nature of it as a repository of content that is searchable as well as providing a means to putting content into a user-friendly approval process. Then once approved it is easily accessible.

However, CMS systems do not have to be custom-built for IR. General-purpose CMS solutions for marketing automation can find usability in IR. “Absolutely, I see a lot of potential in IR for properly adapted CMS tools,” says Rob Berick, senior vice president and managing director, Investor Relations, Falls Communications. “So much so that we’ve designed a new approach to IR that combines senior counsel and advanced investor targeting analytics with sophisticated marketing and digital strategies.”

Use Traditional Means for Disclosure
Of course, one of the main purposes of IR is the continual updating of investors and other market stakeholders. However, with the increased volatility of the present stock market as compared to years past, there are more opportunities for IR professionals to slip up. Nonetheless, IR disclosures have to be made regardless of market conditions or their effect on the stock prices of individual companies.

Therefore, this is not the time to fool around with the channels of disclosure. In spite of this, some companies have chosen to experiment. For example, according to Hansen, GoPro, the extreme sports camera maker, decided that it was not going to respond to critiques of the company using a traditional means of market communication such as BusinessWire, which a more mainstream company like AMD would utilize. “They decided they were going to refer to criticism using Reddit in this once instance,” Hansen says. “Nowadays, the temptation is to use social media platforms as opposed to calling journalists directly or issuing a press release.” In that context, as a best practice, Hansen counsels that IR professionals should not make traditional reporters mad.

That is not to say social media does not have a place in IR, but proceed with caution. “Should social media channels make sense, I would insist that the company conduct a thorough ‘listening’ phase to understand the relevant conversations taking place,” Berick says, “on what platforms those conversations are taking place and who are the key influencers. Talking before you properly listen only ensures that you’ll be talking to yourself.”

Strong Web presence, transparency and trust
In the Internet age, the tendency for most investors is to go directly to the IR page, according to Donna Stein, managing partner of Donna Stein & Partners and adjunct professor of PR at the S.I. Newhouse School of Public Communications at Syracuse University. “In that case, you need very robust content on the IR page,” Stein says. “A study from the National Investor Relations Institute qualifies this concept.” According to Stein, the links on the corporate IR page should include:

  • SEC filings
  • Signup for quarterly newsletters
  • Other company non-financial web pages

Above all, Stein says transparency and trust in all communications are critical. Investors want to know the reasons for good news. And they need to know why what is happening in the marketplace when things go wrong. If those best practices are not followed, the credibility of management with the investing public will be shot.

Perception and Reality
When Stein works with a new client, to build trust between management and investors she recommends a perception audit of investment community sentiment. As a third party, Stein can conduct confidential interviews with analysts and investors, which encourages candid responses. “By offering survey participants anonymity, they know their views, concerns and opinions will be shared with management but will not be attributed to them,” she says. “Respondents share things they are reluctant to say directly to the CFO or CEO for fear of alienating them.”

The audit is necessary to determine if the investing public’s view of the company aligns with management’s view. Once the audit findings have been shared with management, Stein can begin working with them to develop the investment story and key messages to position the company favorably with investors and analysts.

A third-party perception study should be performed on a recurring basis, according to Berick. “Verifying the informal feedback a company gets directly from investors is just as important as uncovering a previously unseen or underappreciated factor influencing valuation,” he says. An independent audit of investor sentiment could be done annually but is typically conducted every 18 months, according to Berick. “Timing can be influenced by a number of things, such as meaningful changes in the shareholder base.”

Companies that do perception studies face qualitative and quantitative questions. Some quantitative shops that Berick mentions include Rivel Research Group and Corbin Perception. For qualitative research, there is a universe of companies.

Regarding how a company is perceived, it maintains a reputation as an investment in much the same way people think about other buying decisions. “Just as a company builds a brand for customers, so too should a company think about building a brand with investors,” Berick says. “We believe an ‘investment brand’ is critical because—among other things—it cuts through the daily noise of those trading stocks and creates genuine connections with those investing in companies.”

Derek Handova

Derek Handova is a freelance journalist, blogger and content marketer in the high-tech industry with an emphasis on social media and related channels. He received his masters in business administration (MBA) and bachelors in journalism from California State University, Long Beach (CSULB). The opinions expressed in this article are purely those of the interviewees or his and do not reflect the views of any of his past or present employers.