IROs at mega-cap companies offer advice on managing the supply and demand challenges of investor relations
Investor relations professionals are constantly faced with the challenge of balancing demand from the Street with their own internal constituents. This battle is magnified for IROs of large and mega-cap companies that have extensive sell-side coverage and thousands of institutional shareholders all jockeying to speak with management.
In this scenario, public companies must think strategically about how to execute an IR plan that effectively engages the investment community, manages the resources of the C-suite and maximizes the overall return on investment of its financial communications outreach.
In efforts to provide clients with recommendations of how to build a best-in-class investor relations program, Edelman’s financial communications and capital markets team conducted a review of 10 US-based blue-chip companies with an average market cap of $200 bn.
The review includes in-depth interviews with heads of IR as well as a comprehensive assessment of all IR programming to learn how some of the world’s most-followed companies effectively communicate with the investment community. A large portion of the insights gleaned from the research are applicable to companies across all market caps and offer interesting insight into what skill sets and resources are required to execute an effective IR strategy in today’s fast-paced investment environment.
In the first of a three-part series (read parts two and three here), Edelman examines how some of the world’s leading companies think about the necessary skill sets and team structure required to execute an effective investor relations program.
A company’s ability to adequately navigate the public markets is heavily dependent on the breadth and capabilities of its IR team. All of the IROs Edelman spoke with stress the importance of building a team that can properly execute a comprehensive IR strategy and be able to address the constant flow of analyst and investor inquiries.
• IR teams average six members, including at least one person responsible for administrative support. Respondents acknowledge that their teams are larger than the industry average given the size and complexity of the companies they represent.
• It is common practice to implement a two to three-year rotational program for mid-level IR staff, drawing generally from candidates with previous financial planning & analysis experience.
• Many IROs recommend having at least one senior member of the team who is not rotational, in order to maintain a level of consistency and continuity.
• There is a strong preference among IROs who have a long career in the industry to recruit former Wall Street analysts to their team, with specific emphasis on those who have covered the company and/or industry in their previous role.
Edelman finds there is limited consistency on how IR teams delegate the responsibility of investor outreach. Many say it is a matter of bandwidth and which IR team member has the most established relationship with a specific analyst and/or investor. Only a handful of respondents mention delegation based on the subject matter of investor inquiry; the majority agree it is important for all IR team members to be fluent across all business segments and geographic regions.
Additionally, while there are examples of large-cap companies that delegate responsibility by audience (sell side, buy side), there is little evidence of this among the research respondents.
Other articles in this series:
Blue-chip best practice: Part two – buy and sell-side interactions
Blue-chip best practice: Part three – earnings, events and social media
Ted McHugh is vice president of financial communications & capital markets at Edelman
