Which parts of IR programs you should manage yourself and which you should outsource
A common lament of service providers is that they are often brought in too late on a project to make a genuinely strategic contribution to their clients’ IR programs. All too often listed companies wait until the last minute to call their IR consultants, proxy advisers and web support companies, limiting the good work they can do. This is why RPM International’s approach is so refreshing.
The Ohio-based specialty chemicals company closely involves its IR consultancy, Roop & Co, in its strategic planning process. This enables Roop to better understand RPM’s vision for its business and build IR tools that reflect that vision.
‘Roop attends two key management meetings each year, which gives it an intimate feel for our culture and our company perspective on the business,’ says RPM International’s chief administrative officer, Kelly Tompkins, who handles RPM’s IR.
As part of this process, representatives from Roop attend an initial management meeting in November, and a series of growth and strategy meetings normally held in March or April. Attending the second meeting helps Roop gain an understanding of new products and marketing strategies that may be included in the annual report, directly from the management personnel involved.
Interestingly, while Tompkins acknowledges ‘there may be some truth to the suggestion you should change consultancies regularly to ensure creativity’, he also says RPM has ‘found it is equally if not more important for the firm to be familiar with our company’s DNA.’ This means sticking with the same consultancy over time to foster a closer working relationship. ‘We’re entering our third year working with Roop & Co,’ he adds. ‘Our close working relationship pays dividends when it comes to things like drafting the CEO’s letter for the annual report.’
According to Tompkins, Roop contributes to much of RPM’s overall IR program. The firm produces the annual report and other documents, and provides advice on IR projects throughout the year. The only part of RPM’s IR program that does not involve outside consultants is investor briefings, which Tompkins, CEO Frank Sullivan and RPM’s CFO look after on their own.
Small is beautiful
RPM International’s model is one with which Anthony Tregoning, principal at Australian IR consultancy Financial & Corporate Relations (FCR), is familiar. FCR has been consulting to Australian listed companies for more than 20 years, and Tregoning says companies without significant internal IR resources tend to outsource a large part of their program to firms such as his.
‘Companies at the big end of the market tend to have a large internal team of corporate communication and IR people and outsource only project work, whereas at the smaller end, they tend to outsource their total IR function to consultancies, allowing them to take the role of a trusted adviser,’ Tregoning says.
‘A lot of companies see us as an outsourced IR department, and we can often provide greater insights than an internal department because we’ve seen most situations an IR department faces. An internal person may never have dealt with a profit downgrade or been involved in a takeover, but we have, and our clients reap the benefit of that experience.
‘CEOs and senior managers appreciate help expressing themselves succinctly on paper – they may have great broker contacts, but they often have difficulty drafting announcements to get their message across, particularly online.’
When the situation calls for it, Tregoning says his role is advising clients when not to communicate. ‘We recently advised one client not to send a letter to an editor that it had drafted,’ he expands. ‘There are times when you have to say to a CEO, No, you shouldn’t be doing that. And it can be easier for an outsider to do that than an employee.’
Essential outsourcing
There are, of course, parts of every listed company’s IR program that must be managed by a specialist service provider. Proxy solicitation is one, shareholder intelligence is usually another. But by far the most common part of an IR program to outsource is webcasting and web development work.
Global corporation Thomson Financial is one of the largest providers of webcasting services to listed companies in the world, delivering more than 25,000 webcasts around the globe every year. ‘I don’t know a single company that manages its own webcasts,’ says Sean Cookson, Thomson’s Australasian director of sales and operations.
In contrast to FCR’s market, Thomson’s key audience is large, global listed companies, for which Thomson generally hosts the IR website, manages webcasts and provides daily capital markets intelligence and analysis.
‘Our clients use our services for our global insights,’ Cookson explains. ‘Even small companies are becoming interested in what we have to offer, particularly given recent market volatility. Our services help them stay in touch with their shareholders around the clock, no matter what the market’s doing.’
Whatever a company’s size, there’s no doubt that it pays for IR executives to have relationships with a range of quality service providers, including web services companies, IR consultancies and proxy solicitation and shareholder intelligence firms. This ensures the company has the right resources on tap to deftly manage any IR situation.
