Reflections on a quarter-century of IR to mark IR Magazine's silver anniversary
Whether it was a stroke of luck or pure genius, Janet Dignan’s decision to launch IR Magazine 25 years ago could not have been better timed.
We recognize today that the mid-1980s were an inflection point in the development of IR, which 25 years ago was just beginning to branch out from financial public relations. The hot topics were takeovers, greenmail, raiders, arbitrageurs, poison pills, proxy fights and the plaintiff’s bar.
But the most controversial and enduring event of 25 years ago was the infamous 1987 letter from CalPERS to the SEC setting forth a laundry list of demands for improved shareholder rights, board accountability and corporate governance.
This letter, which marked the birth of institutional investor activism, set in motion forces that caused the global transformation of IR that continues today.
IR now confronts a set of governance-related problems that were unimaginable 25 years ago. Even a partial list is daunting: empowered shareholders, activist investors, confrontational annual meetings, high-frequency trading, empty voting, imperial CEOs, say on pay, short-termism, boardroom transparency, director-shareholder communication, websites and new technology. The list goes on.
Given the volume and urgency of these problems, it’s surprising that IR practice remains focused on financial communication with analysts and portfolio managers; it has made only limited progress in establishing lines of communication with institutional decision makers responsible for governance policy and proxy voting.
This is largely the fault of institutional investors that keep these functions separate and are reluctant to bring non-financial metrics into their investment models. This continues despite ample evidence that governance failures can create havoc at firms and cost investors dearly.
But it is also the fault of companies. Boards continue to prize collegiality and privacy over transparency. Legal counsel warn against board communication with shareholders. Budgets constrain co-operation between IR and governance functions.
Will companies succeed in creating a form of holistic IR to embrace the full scope of financial, non-financial and governance issues endemic to all businesses?
That depends largely on whether financial institutions accept their fiduciary and stewardship responsibilities. It also depends on a shift to younger, more tech-savvy CEOs and directors who are committed to transparency and skeptical about theories of market efficiency and shareholder primacy.
There is no question that IR practitioners will play a central role in the development of this new company model – or that IR Magazine will continue to lead the way for the profession.
John Wilcox is the chairman of Sodali.