Investor Relations will continue to gain in importance and prominence as a critical business function
There are many duties and responsibilities that keep Investor Relations busy and on the ball around the clock. Helping raise capital, engaging with analysts, marketing to investors, communicating financial results, managing expectations, and tracking the stock price are just a few of the many activities that keep IR professionals hustling all year long. Being on top of each of these facets of the business is critical to ensuring that a company is well positioned with both capital markets and asset management stakeholders.
In our view, there are four clear trends that are making IR as a business function for public companies more important than ever. And these trends bring both increased responsibilities and increased pressure for transparency and accountability.
1. Stronger corporate governance engagement:
Passive investors may be passive with their portfolio allocations, but they have become increasingly active with proxy activity and meeting with companies to ensure strong corporate governance programs across the environmental, social and governance landscapes. Larry Fink recently wrote a letter to CEOs exploring and explaining this phenomenon, and many large passive asset managers are growing their stewardship and engagement teams to put plans in place to address this.
According to one recent study, the number of stewardship team members at the 12 largest passive managers has increased by 85% in the past few years.
Source: Harvard Law School Forum on Corporate Governance and Financial Regulation (link)
2. Broader remit on messaging and roadshows:
MiFID II will likely result in the scaling back of research budgets and teams. A survey of asset managers in Europe finds that spending on sell-side research will decline about 20-30% on average.
Source: Greenwich Associates 2017 Mifid II Equity Research Budgeting and Pricing Study (link)
This reduction in sell-side support places greater emphasis on the IR team to handle the traditional buy-side messaging, targeting and roadshow work.
3. Responsibility to track and engage with activist investors:
Activist investors are more active than ever, and the need to manage an increasingly vocal activist investor base introduces a whole new set of challenges.
According to Lazard, global activist activity more than doubled from 2016 to 2017.
Source: Lazard’s 2017 Activism Year in Review (link)
4. Board members are getting more involved:
Board members are increasingly engaging directly with institutional investors, either at the request of the investor or as a deliberate strategy of some company IR programs.
According to PWC’s 2017 Governance Insights Center:
many institutional investors believe that this direct engagement is core to the job of being a public company director, and that these discussions are critical to the relationship
Source: PWC Governance Insights Center, 2017 Annual Corporate Directors Survey (link)
As a result of these trends, IR teams need to increase their sophistication and manage an increased workload to keep their stakeholders updated and to ensure consistent messaging both internally and externally. Awareness, transparency, and consistency of message with internal stakeholders are important to the company’s external success.
While these “challenges” present an opportunity for IR programs, there are also new digital solutions, which can enable IR teams to manage the new workload. At StreetReader, we have a fundamental view that IR is often an under-leveraged asset in many companies and will continue to increase in importance and prominence as a critical business function. We empower IR teams to face the challenges the new world brings by dramatically improving their internal stakeholder communications process.
If you are an IR professional, interested in evolving internal communications, and striving for a best-in-class solution, please reach out to learn more.