Investor Relations Officers Continue To Struggle To Prove Their Worth

And For A “Seat” – If Only On Occasion – At The Board Table: We Offer Our Top-Five Ideas For Getting There

A recent IRO consultant’s posting on the NIRI-NY Linkedin page, bemoaning the much-fallen status of the IRO these days, moved us to move this topic up on our own agenda, and to think on what might be done.

Your editor was on the scene at the very beginning of the IR profession – when virtually every large company, and many mid-cap and small companies too, had an IRO who was at the SVP level or above – and who had regular access to the entire C-suite – and to the Board. We have our own thoughts about what’s happened since – and why – which you can dredge up from the NIRI-NY site if you’d like, but let’s cut to the chase and summarize five things IROs can do to make the big and highly valued impact they did in days of old:

1. One of the most important things – and maybe THE most important thing a Board should be actively watch- ing – and taking responsibility for – is the firms’ cost of capital. In other words, the interest rates the company has to pay for borrowed capital and the company’s stock price – relative to peers, and to “best in class companies too. Yes, it is largely the CFO who bears the heaviest burden on this subject, but in the “old days” IROs were viewed as key sources of info for the Board – and also as key “influencers” – and “key players” when it came to doing everything possible to assure that the company would be “fully valued” in the marketplace. IROs need to reclaim their OLD “place at the table” here.
2. As we, and several wise guest columnists too have written here on many occasions, the best way to “get to the table” is to become the primary source for totally unvarnished information about what investors actually think, and say, and do about the company and its stock…and what their “perceptions” are. Sometimes, the reason a big investor prefers to buy your peers vs. you – or maybe thinks you have “governance issues” – will turn out to be based on mis- perceptions…But unless you know what investors are really thinking – and get a chance to make “corrections” – or just to correct misperceptions – your chances of being “fully val- ued” are slim. In the “old days” one of an IRO’s top roles was to constantly gather info about investor perceptions from investors themselves – sometimes via visits or friendly chats; sometimes through more rigorous, and sometimes anonymous “perception studies”: IRO’s need to go back to basics like these – and bring the findings to the table.
3. In our last issue – devoted to “Reaching Out to Inves- tors” – Steven Brown of TIAA CREF offered some awe-some suggestions on making the IRO a valuable part of the “governance team” – and as part of a company’s overall plan for “reaching out.” He also offered some very practical dos and don’ts for IROs and others, worth reviewing. If nothing else, the IRO ought to be urging institutional investors to be giving heavy weight to actual company performance vs. check-the-box formulae for “good governance” – many of which are poorly corre- lated with financial performance – which, when all is said and done, is what investors most want to have.
4. IROs should become key members of the company’s cri- sis management team. Just look at the extra damage that was done to BP’s stock price when they failed to address the investment community quickly and clearly. Billions of dollars of shareholder value evaporated in an instant. Yes, there was a huge “financial hit” for physical damage control and remediation. But the hit to the stock price due purely to reputational damage was bigger, and is likely to last even longer. And, relative to the overriding need to be “fully valued” mentioned above – an unwanted takeover attempt is another of the biggest crises a company is likely to face – And here, the IRO simply must have a “seat at the table.”
5. IROs need to play a much bigger role in the way a com- pany “reaches out to investors” – and to the public at large – via its written materials, its website, its marketing and PR efforts and increasingly, via “social media.” The place we’d most like to see them start is with a top-to-bot- tom overhaul of the annual report and proxy statement - and with the related “meeting machinery.” Recently, Dominic Jones, who edits the IR WEB Report noted that IROs – along with Corporate Secretaries and Gover- nance Officers too, we’d add – have been conceding major chunks of turf due to a lack of “tech-savviness.” Right on the money, we say. But if one wanted to create a re- ally readable and usable proxy statement, a user-friendly voting site, a simple but compelling investor education program that would WORK – by increasing investor en- gagement, and voting behaviors – AND a campaign to take better advantage of the web – one really needs to bring IR, Legal, PR, Marketing and IT experts together. Someone needs to take the lead role here…and who bet- ter than the IRO, who, typically, has some experience in all these fields?

Readers; we’d love to hear from you on these issues – and on these ideas – and with any ideas that YOU may have.