How and when to sub-in the IRO when the chiefs get too busy
Look at a CFO’s typical schedule, and so many issues compete for attention: board and committee duties, acquisition candidate reviews, quarterly SEC reporting, financial planning projects. And then there’s IR, with its calls and roadshows and the demands of information-hungry analysts and institutional investors. The job can seem Herculean. But IR professionals and veteran counselors say much can be done to shift, enhance and lighten the CFO’s IR load.
‘You want to minimize the time the CEO or CFO spends on IR, so they can go about the daily business of long-range planning and operational execution,’ says Doug Wilburne, a NIRI board member and vice president of IR at Rhode Island-headquartered Textron. ‘The best way to do that is to be as effective in your job on a daily basis as you can be.’
What makes an IRO highly effective? Full access at the senior management level, a deep knowledge of the company’s operations, finances and strategic issues, and the ability to articulate those positions, according to Wilburne.
‘The most effective IROs are those with a good command of the business so that the buy side and sell side don’t try to go around them to get to senior management,’ says Jeff Shacket, vice president of corporate advisory services for Thomson Financial.
‘You have to be a politician, statistician, accountant, lawyer and marketing person,’ adds Virginia Stuart, a veteran IR corporate and strategic adviser. As trust builds, senior management ‘tends to turn over more responsibility,’ she says.
It’s similar for UK firms, says Nick Bastin, a director at London IR agency Capital MS&L: ‘In the past IROs weren’t necessarily up to dealing with many of the questions. Now management recognizes that an empowered IRO alleviates demands on its time.’
Practical strategies
Even if you’re not at the top of the corporate chain, experts say IROs can improve CFO IR efficiency.
Screen new investor calls. When new investors want to speak with the CFO or CEO, ask what kind of questions they have. Often, says Don De Laria, a NIRI board member and vice president of IR at Regal Entertainment Group, the investor is seeking a general industry overview, trends and company strategy. ‘I usually suggest that I spend some time with the investor, leaving open the door for conversations with the CFO and CEO if needed,’ he says.
Remind follow-up callers to stay on point. If the investor talks with the CFO, encourage follow-up questions that don’t cover old ground. ‘IROs need to interrupt the investor-CFO conversation if it detours into unproductive territory,’ De Laria says.
Have good reasons for non-deal conferences and roadshows. Nearly half of US CFOs travel 10 or more days a year to reach investors, according to Thomson Financial, so it’s imperative these meetings take place for the right reasons. Once you know what the sell side and institutional investors want to know, address those concerns in your presentation.
Avoid one-on-ones. Larger meetings can reach more investors in a non-roadshow trip. Forget about a formal presentation. Instead, the CFO should skip to Q&A, using time productively to address follow-up questions to earlier conversations with the IRO.
Ask – and listen. Ask large shareholders who else should be investing in your company. See what they’re saying about your competition, suppliers and others important to your firm. Ask sell-side analysts what they’re hearing during a non-deal roadshow. ‘A lot can be learned by management taking the initiative to ask questions and listen,’ De Laria says.
Sweat the small details. Failed logistics can be a killer, says Wilburne. Transportation, audio/visual, lodging – all have to be arranged and carried out seamlessly. ‘If the CEO got rained on and is in a bad mood, he’s unlikely to represent the company as well as he otherwise might,’ Wilburne explains.
Different strokes
Not all interaction is bad. Some small-cap CFOs ‘are willing to meet with anybody because it’s hard to get people in the door,’ says Stuart. And some CFOs simply enjoy the Street outreach.
Genlyte Group’s CFO Bill Ferko, who handles much of the IR himself, says he has ‘learned as much from analysts as they have from me.’ Those conversations have helped Genlyte become better understood, lowered perceived risk and created value, he adds.
Other CFOs, says Shacket, ‘would much rather be left alone with spreadsheets and a stack of numbers and not have to face questions about the strategic direction of the business.’ In reality, the relationship between IRO and CFO is somewhere in between.
Bastin says the CFO should be wheeled out as part of an investment event in which analysts and professional investors ‘want to hear the organ grinder speak, rather than the monkey.’
