Richard Davies, founder and managing director of RD:IR, has been an investor relations adviser for the last 30 years. In this Q&A he talks about how the profession has changed during his career and what the future may hold for public companies.
What has been the biggest change in IR during the course of your career, and how has this shaped IR?
Mifid II is the most significant change in the IR environment since I started in this industry 30 years ago in terms of regulation. The greatest change in terms of the IR environment has to be the impact of technology, from the increase of processing speed for PCs through the arrival of mass internet to the current drive toward mobile.
What have been the most positive changes you have seen in IR?
The acceptance of IR as an intrinsic part of corporate life for equity issuers by both senior management and investors has been wonderful to witness over the last couple of decades. The professionalization of IR has brought credibility to the profession globally. We are still some way from investor relations being understood by the general public as a job role in the UK but I am sure this will happen over time.
What have been the most negatives changes you have seen in IR?
I think the IR industry has matured significantly over the last 30 years in the UK so, by default and somewhat inevitably, we have lost some of the excitement of the pioneering days in the sector, but there have certainly been some wonderful events over the years – and IR Magazine has organized many of them!
What advice would you give someone coming into IR today?
The IR job has become more complex than ever – it now encompasses communication with a wide range of stakeholders, including governance and sustainability investors. The practices of IR and corporate governance have overlapped to a major extent. I would advise any new IROs to get themselves involved in the governance conversations at their place of business.
How has technology changed IR as a job? Has this been for the better or worse?
Technology has provided IROs with wonderful ways to do their jobs more efficiently: from keeping in touch with investors and targets to managing the day-to-day workflow of the IR team, there is now a technological answer to nearly every requirement. But no technology can ever replace the basis of good IR, which is about building the relationship between issuer and investor. The human aspects of IR have not changed over the last 30 years and I doubt they will for many years to come.
What change or changes would you like to see in IR, and why?
I think the senior management teams of all public companies should realize the importance of good IR in terms of protecting shareholder value, and resource their teams accordingly. Mifid II is changing the landscape of IR by placing more of the onus on companies to manage their relationships with the buy side, which requires more time and effort from the IR teams to ensure they are running the strategy to optimal efficiency.
What do you envisage being the most important change the IR industry will face in the future, and why?
The number of equity issuers is falling in most western economies, as company managements choose alternative sources of capital, mainly in the form of cheap debt. Changes in the nature of private equity investment that we have already seen in the US will mean private companies with multiple institutional owners – and the roll-out of blockchain as a mass technology will mean the growth of sophisticated internal trading systems within those companies. As private companies start acting more like public companies, there will be more opportunities for IR roles in the private sector.
What has been the most important advice you have been given in your career, and why?
‘Never forget that cash is king’: it seems an obvious truism for someone running a small business but it is a shame that people seem to forget this is the case for any company, large or small. There are several examples over recent years where a company’s demise could have been predicted far more accurately if someone had looked properly at the current and prospective cashflows.
How has the relationship with investors changed during your career?
As an adviser to companies, I see the major change in the relationship as IROs spending more time dealing with the buy side over the sell side, a welcome change that happened before the arrival of Mifid II. The rise of passive and quantitative investment means the priorities of IR have changed toward hunting down and retaining active asset managers while keeping in mind the longer-term needs of the governance-oriented funds.
If you could pass on one IR lesson from your career, what would it be?
It is always important to understand the whole picture before making a decision – and data always has to be viewed in context.
As IR Magazine builds up to its 30th anniversary issue – the upcoming winter 2018 issue, which will be the 279th edition of the industry’s flagship magazine – we’ll be posting more throwbacks to old covers, revisiting some of the hot topics from the past 30 years of investor relations and hearing from some of the industry titans.