How do IR teams show their worth to senior management?
IR teams often struggle with how best to show their worth to senior management. Many IR goals – such as a fair value for the company, good visibility with the investment community and effective communication of the corporate story – are hard to measure. But IR professionals need to find ways to show their CEOs and CFOs they are doing a good job.
To explore this issue, we asked an open-ended question in a recent IRO survey: what is the best way to demonstrate the effectiveness of investor relations to senior management at your company? We received 302 responses and categorized the answers into different areas.
The most frequently cited way to demonstrate value is investor feedback: 82 of the responses to our survey have some reference to feedback in their answer. The comments on feedback include:
‘Provide feedback from Wall Street on the strategy and direction of the company’ – small cap, energy, US
‘Add value by providing investor feedback and competitive intelligence as well as strategic feedback. This helps set the corporate goal agenda’ – large cap, materials, US
‘Share the views of the market, participate in strategy discussion and the formulation of messaging’ – mid-cap, financials, Singapore
The second-most mentioned area is the share price. This refers not just to corporate valuation, but also other share-price related issues such as liquidity and volatility. Some of the comments include:
‘Share price movement, and being able to explain the movement’ – small cap, materials, Hong Kong
‘Corporate strategy and equity story is understood and reflected in the share price’ – mid-cap, industrials, Switzerland
‘Valuation improvement compared with peers, maintain access to capital markets, recognition of external disclosure improvement, improvement in sell-side analysis’ – large cap, utilities, Canada
The third-most mentioned area is the share register, including factors such as shareholder diversity and turnover. Below you can read some comments that include share-register issues in their responses.
‘Reducing ownership churn from existing holders and increasing ownership from targeted accounts’ – mega-cap, energy, US
‘This is difficult. I am tracked against the goals that are laid out at the beginning of each year. In the past this included things like increasing sell-side coverage, diversifying the base of shareholders and increasing non-US ownership’ – mid-cap, technology, US
‘Showing shareholders’ change in holdings post-meeting and investor feedback’ – mega-cap, energy, US
As many of the above comments show, IR teams use a combination of several factors to demonstrate their value to senior management, encompassing quantitative and qualitative measurements. But no matter how you measure good IR, investor feedback seems critical to the effort. If you are not getting much buy-side feedback, you should investigate how to get more.
These findings are included in Measuring & Demonstrating IR: Part II – Senior management, the new research report from IR Magazine, available to professional subscribers.