Jonathan Atack talks about how to build the best team, the growing importance of IR qualifications and working in and out of the profession
This year, Dutch firm AkzoNobel leapt 10 places up the IR Magazine Euro Top 100 rankings to joint 21st position. The good work of its head of IR, Jonathan Atack, won the paints and chemicals manufacturer the award for most progress in IR. Atack’s career has oscillated between finance and IR, with a debut in investment banking, senior financial roles at listed corporations and IR positions at five different companies, including a global asset management firm.
The enthusiastic IRO, who has also recently seen treasury added to his responsibilities, is keen to highlight the importance of mastering IR skills for the well-rounded finance professional. He expects the current trend toward specialized training and IR qualifications will reinforce both the value and the visibility of the function.
How is your team set up?
My responsibilities include treasury and insurance as well as IR, covering a total of around 60 staff globally. Within this, there are four dedicated to investor relations, of whom three are externally facing and one is responsible for administration, investor targeting and event management. Some of the treasury team members are also actively involved with the investor relations team on debt IR. We have an in-house captive insurance company, so we self-insure the first tranche of all our risks. The company comprises 220 plants worldwide, and some of them make chemicals that aren’t always pleasant, so we have a fairly significant level of insurance to protect the properties against damage and liabilities.
Have you done more traveling to meet with investors this past year? If so, where to?
It’s the nature of the IR role so I still do quite a lot of roadshows, but we’ve also got hubs in Singapore, Shanghai, São Paulo and Chicago and, as group treasurer, I tend to visit those occasionally, which has added to the load rather than making it better. As far as roadshows are concerned, the trend has been to increase the number of meetings in the tier one cities and to visit more tier two cities, looking to reach those marginal new investors. This year we plan to get to the Middle East and Asia.
What was this past year’s hottest topic with investors and analysts?
For us, the main issue concerns efficiency improvements being driven by a new CEO. The analysts and investors are looking to see traction from the high level of restructuring costs, resulting in cost savings and improved key performance indicators. Most questions revolve around the specific initiatives and how they contribute to this.
What is the biggest IR challenge you have faced in the current economic environment?
The negative impact from operational gearing in weak economies and foreign exchange rates has obscured some of the more positive effects of our strategic actions and investments. We have had to work much harder to make the benefits visible.
You’ve been in and out of the profession. What is your view on life after – and before – IR?
There’s been a lot of discussion over the years about where you go with investor relations. I’ve been doing IR for more than 10 years now, at a number of different companies; AkzoNobel is my fifth. During that time I think it has evolved into a genuine profession.
Enough companies have big-enough IR teams for you to grow and develop within them. At the same time, however, because of the nature of the role, its profile and its position in the organization, it provides a lot of visibility and awareness, so a lot of IR people move on to other good roles within their firm. I’ve moved on a couple of times in a company from IR into a good CFO role and now into a good treasury role.
So is an IRO’s future bound to be in finance?
Yes. I tend to regard IR as primarily a finance function rather than a communications one. I think the real essence of what you do is rooted in the numbers and the valuations, and understanding the financial markets. I have also been in IR teams that were part of communications functions rather than the finance column. Obviously whichever column you’re in you’re going to have to work in both, but I think IR sits more naturally in finance.
At AkzoNobel, IR is very much part of finance and from the first day I reported to the group CFO, but physically they put me and the IR team on the same floor as the communications team. It worked very nicely in making sure we had very good access to group communications and group media and so on, but also functionally within finance we had access and involvement in everything that was going on there.
Do you see IR as one of the stepping stones to a position on the board?
Ultimately, if you’re going to be on the board of a public company, then having an understanding of your disclosure obligations and your relationship with shareholders is fundamentally important. It’s interesting to see how people who grow into senior management internally suddenly find that IR is the one part of their new responsibilities they’re not familiar with. I remember quite early in my IR career, a very senior finance guy at the company came over and asked me for a lot of advice about IR. It turned out he was interviewing externally to be the CFO of a quoted company, and it was the only part of the CFO remit that he hadn’t had exposure to before.
However big the company is, there are relatively few people who are involved in communications with investors, so if you get to that level and you haven’t had experience, it can be quite daunting because you’re very much constrained by rules and regulations governing what you can say, and getting it wrong – even from a regulatory or positioning point of view – would be potentially quite serious.
What do you think of a role in investor relations as part of a rotation program?
I think it’s vitally important. If people come into IR, the exposure they have to the most senior levels of the company – to strategy, finance and decision making, as well as the breadth of experience in terms of understanding all of the issues and all the different parts of the business – is a tremendous experience to have for their own personal development.
Whenever I’m running an IR team, I always try to position it like that, if it isn’t already. You get bright people in, give them some good exposure and you’ve got to have people you can trust with the chief executive and the main board directors as well as other senior management members. That gives them the ability to build networks or even sometimes manage career transitions.
Most people tend to look for other finance opportunities, but I have seen one person I worked with use it to transition into a fairly senior marketing and sales role. That’s less regular: he came into investor relations from finance and I don’t like to characterize IR as selling but there is some element of marketing to it – in effect, some of the meetings you have are negotiations where you try to persuade someone that you have a good investment proposal and good value proposition, which they might not have thought of in the first place. Because of the exposure he had, he was able to persuade one of the business heads to take him on as a senior marketing guy.
What about hiring an IR person from another firm?
That’s certainly a possibility, but it depends on the nature of the team. From where I am, given that I’ve been doing IR for quite a long time, there’s less of a priority for me to hire people with IR experience. The ideal thing if you’re building an investor relations department is to make sure you have people with complementary skills, so some internal and some external people is a good mix.
If you’re in a company that has an established IR team, you’ve got that structure with governance and deliverables in place, so you can bring someone in who doesn’t know IR so well and he or she can fit into established procedures. If you’re building up a team that hasn’t been so strong, bringing someone in with more IR experience can be useful in terms of getting the governance structure in place, and getting everything up and running.
Some IROs are keen to employ former sell-siders. What’s your opinion?
I have a diametrically opposed view. I think learning the capital markets side is not that difficult. Anyone I bring into IR who is coming from within the business, I will ensure is properly inducted and trained, and will send out to spend time with investment banks and brokers and on the trading floor. People can get that fairly quickly.
When you bring someone in from the sell side, obviously he/she has the understanding of how analysts and the markets work. You would probably tend to hire someone from within the sector, so he/she will understand the business at a certain level. But financial services [firms] tend to have very different organization from many other firms. They tend to be very flat hierarchies with a lot of independence in individual roles. A lot of people from the sell side don’t adapt well to a more corporate setting.
The other risk you have, if you take a person from the sell side who’s been in your sector, is that he/she already has established relationships externally. He/she will immediately be dealing on your behalf with his/her key customers – who were previously his/her competitors. Depending on where he/she was positioned in the marketplace, that may or may not be a good thing.
Here at AkzoNobel, two of our three main externally facing people came from internal finance roles and the other one used to work in banking in the UK market – so he had a good understanding of company financing and financial markets, but wasn’t specifically a sell-side analyst, so there was no risk of any conflict or history.
Can you tell us about your experience working for an asset management firm?
I was head of IR for a very traditional, primarily long-only asset manager for five or six years, then I was CFO and risk officer for its European business. When it globalized, I became its global CFO. It had about €400 bn ($536 bn) in assets under management in 33 countries. I wasn’t very close to the investment decisions and not particularly close to the analysts making them, but I was a member of the investment committee so I had an interesting additional insight into how fund managers work.
From an IRO’s point of view, understanding how the buy side works is also vital. When you’re doing things like targeting and encouraging people to make investments, understanding what the investment process is, understanding that large asset managers have different funds with different criteria and different benchmarks is also very useful. It helps you understand what the investment drivers might be.
Where do you see innovation in current IR practice?
IR has grown into a true profession in its own right over the last decade or so. Companies now generally attribute real value to investor communications and there is increased recognition of the importance of having a good IRO. If you can use the senior executives’ time efficiently and engage them in a proactive strategic communications exercise, there is so much value you can add to companies. You see the companies that get it wrong being punished very quickly so I think the more you formalize the profession and give it proper recognition and support it with proper training, the better it will be for those in the profession and the companies that employ them.
Of the three hats you wear, which is your favorite?
Actually, there are big overlaps between them. The common thread is risk management: insurance risk, financial risk, credit liquidity and so on with treasury, and reputational risk with IR. Treasury and IR very much rely on understanding capital markets, debt and equity. Within treasury you’ve also got a lot of operational matters, which isn’t normally part of IR, and they’re intrinsically interesting, which overlaps with the insurance business, where tracking insurance and insurance claims is very important. They’re all fundamentally related, and I really couldn’t choose between them – they’re all good fun.