Investor relations officers at US companies have crucially important jobs. After all, their fundamental responsibility is to reduce their companies’ cost of capital by ensuring the share price remains at the highest sustainable level. But what do the analysts and investors they serve most want from them? Answer: They want them to ‘get back to them’.
OK, so they want more than that: they want transparency; they want access to senior management; they want consistency; and they want knowledgeable IROs – knowledgeable, that is, about their own company’s performance as well as the sector it operates in. Above all, however, they want the IRO to pick up the phone. Fast. Call it responsiveness, if you will, but basically they want an answer and they want it now.
Every year IR magazine surveys buy-side and sell-side analysts and portfolio managers across the States to find out which US corporates do the best job of meeting their insatiable hunger for information. Those companies then accept awards for the various categories of IR activity at a prestigious Oscars-style gala dinner on Wall Street.
The research questions focus on the IR service itself, insisting respondents take corporate performance out of the equation. And they do. Historically, there has been little or no correlation between performance and IR prowess in the IR Magazine Awards research results. On the contrary, it seems there’s nothing like a crisis to give an IRO the chance to shine and make what is often a lasting impact on the investment community.
So, for instance, JPMorgan Chase won the award this year for best crisis management, an acknowledgement by investors of the company’s handling of improper foreclosures, an issue that initially attracted extensive negative media coverage. The debacle prompted investor panic, with stock dumped in the wake of fears over profits. Ultimately, however, the bank reassured the market with its cool, straightforward and open handling of the matter.
In short, throughout the crisis JPMorgan displayed transparency, responsiveness, accessibility, consistency and knowledge. Neil Stewart, editor-at-large at IR magazine, lists these key qualities of successful IR in this order so he can remind IROs to keep on TRACK.
But if he had to reduce them down to one, it would be the R he’d keep – r for answering the phone, that is. The investment community is not only greedy for information; it’s also impatient. Delay is a huge risk factor in the market’s mind, and an IRO has to be able to calm nerves at speed. Silence is suspect: no news is distinctly bad news in the world of IR.
Here are just a few examples of respondents’ comments about companies that underline the importance of keeping on ‘track’:
Anadarko: The whole team is good. Team members are proactive and call back promptly
Bank of America: People are prompt in returning calls and provide great disclosure. IRO Kevin Stitt is responsive and willing to share his insights
Bristol-Myers Squibb: John Elicker [IRO] provides a good level of transparency and CEO Lamberto Andreotti is accessible and conversational
Brunswick: The IRO acts more as a facilitator of management access than a gatekeeper
Children’s Place: We get timely responses from the IRO, who has an in-depth knowledge and understanding of the company
Cisco: The IR team at Cisco Systems is very accessible, responsive, organised and willing to set up one-off calls with internal experts
Covidien: Cole Lannum is responsive, accessible, knowledgeable and always willing to speak
Eli Lilly and Co: Lilly consistently provides the most transparent investor relations program of all the companies I cover
Fedex: The IR team is accessible and diligent. It has fantastic knowledge of both the industry and the company
And that’s just a smattering – from A-F – taken from the Investor Perception Study, US 2011.