Considerations when starting a new IR department – or renewing an existing program
Whether building an investor relations department from scratch or revitalizing a program that hasn’t fully hit its stride, the analysis always centers around one simple question: what is the objective to be achieved by the IRO? The answer to that question will determine staffing, the tasks undertaken and the vendors retained. The first part of this two-part article focuses on key plan components and the second part will identify available tools and resources.
Why do it?
The impetus for a company to hire an IRO and create an internal office dedicated to the IR function almost always relates to one of three events: an impending or recently completed IPO, an impending or recently completed spin-off, or a recognition that the company would benefit from providing analysts and shareholders with full-time access to someone in addition to the CFO who is deeply knowledgeable about the company’s performance and strategy.
Scoping it out
Once the decision has been made to create an in-house IR function, the scope of work must be determined. IR departments span a continuum: administrative on one end and highly proactive on the other. A truly responsive IR department promotes transparency and engagement. The IRO will serve as the primary contact for shareholders, sell-side analysts and the financial media, while also determining when and where to grant access to other members of the organization. IR budgets vary enormously, a fact that will affect staffing and the scope of activities that can be carried out, irrespective of the philosophical outlook.
Program components
At the heart of every IR program is access to information and people. The most basic components are a dedicated IR section located on the corporate website, possibly supplemented by an IR app. A phone number and email address enabling viewers to contact the IR department should appear prominently on the website. Additional social media tools and means of contact also warrant consideration.
Other program components include:
- Quarterly earnings releases – in certain industries additional releases providing updates on key metrics are common, with monthly same-store sales reports being one example
- Quarterly conference calls, while not mandatory, are widely held. Replays and transcripts should be provided. Supplemental information decks can be used to highlight key points or deliver supplemental information
- Press releases and/or SEC filings disclosing other material information, the most common of which are earnings preannouncements and dividend declarations
- Required SEC documents such as 10Ks, 10Qs and a proxy statement, along with hard copies for mailing to shareholders upon request
- The annual meeting of shareholders.
Further aspects of an IR program primarily cater to institutional investors and analysts. Activities centering on that group include investor days, post-earnings follow-ups, analyst conferences, non-deal roadshows and headquarters or facility tours. IROs may also participate in meeting with institutional shareholders’ corporate governance officers or with rating agencies.
Retail shareholders, on the other hand, require their own attention, as their needs typically differ. This group most often seeks assistance with share transfers, lost stock certificates or dividend checks and related matters. Depending on your company’s approach to this investing group, attendance at retail conferences could be warranted. The financial media – or even industry experts – may request interviews with senior management or responses to inquiries. There are also opportunities to proactively seek media coverage and participate in industry surveys, panels or conferences.
Your final constituency is the company’s management and board of directors. Tools to engage them include presentations or reports providing feedback from the investment community, updates on trading and ownership trends (both periodically and when unusual activity occurs or activist concerns arise) and market intelligence reports tracking peer companies, the competitive landscape and macroeconomic or social trends.
Conclusion
Every IRO must customize a department to meet the needs of his or her company and that can functions well given the available personnel and financial resources. Given those variables, there is no such thing as a one-size-fits-all department or approach. It should also be noted that IR departments are frequently staffed by permanent professionals along with employees rotating through the department for training purposes.
This structure will affect the allocation of responsibility for public-facing functions. Regardless of departmental structure, every successful IRO excels at providing varied constituents with the information they need to develop a comprehensive understanding of, and appreciation for, the IRO’s company.
Marisa Jacobs is the vice president, investor relations at Express
