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Nov 26, 2018

A new voice for investor relations: The early days of IR Magazine

Looking back on the launch of the publication as IR Magazine celebrates 30 years

I launched Investor Relations back in 1988 with an utterly inadequate understanding of what IR really was. I wasn’t the only ignorant one, however. I’d heard the term ‘investor relations’ and asked around about what it was without getting entirely satisfactory answers.

Nor did it help to call a UK listed company and ask to speak to the IR department or the IRO, where you might well meet with confusion: ‘Do you mean industrial relations?’ or ‘I don’t think we have an investor relations officer. What exactly do they do?’ 

I was working in the financial publications division of The Economist in London at the time and had just wound up City Changes, a monthly newsletter I’d been writing and editing for the previous few years. It concentrated on the organizational changes prompted by London’s Big Bang in 1986, when the old divisions between stockbrokers, jobbers and merchant banks were ending, along with fixed commissions on trades. 

As I soon discovered, IR and Big Bang were not unrelated. The latter meant the days of corporate brokers in effect doing IR for client companies – holding broker lunches and so on – were coming to an end. So was the separation between those who traded stocks and shares and those who advised investors; and foreign firms were now allowed to own UK brokers, all of which led to the introduction of investment banks to the UK for the first time. But by 1988 things had begun to settle down, which meant City Changes had rather passed its sell-by date and we decided to wind it up. 

I was, therefore, definitely in the market for a new project and investor relations seemed an interesting subject area, at least for a one-off publication, I thought. 

So I asked Mary Maude – whose company does research for the IR Magazine Awards to this day and who, back then, was already working freelance for The Economist – to undertake some research among European corporates to discover whether there might be a market for such a publication. 

Meanwhile, I embarked on getting to know what it was really all about. Sometimes I’d be talking to chief financial officers – or finance directors as we called them back then in the UK – who’d never heard of IR but were intrigued to know more. So I’d pass on to them what little I knew by then, some of it garnered from the UK’s Investor Relations Society, which had been established in 1980 and whose head, Peter Smith, was particularly helpful. In due course, Mary Maude reported back that people definitely wanted a publication – but a regular one, not just a one-off. 

So that was that. We launched a quarterly magazine, Investor Relations, in autumn 1988. We’d now call it fall 1988 but in those days we used British English rather than American English. That was because we were 

not trying to be a global publication back then but a European one. And, in practice, much of our market was the UK, not least because of the relative unimportance of continental European stock markets at that time. 

The Atlantic divide 

Although Germany was a big country and economy in 1988 – albeit to become a dramatically bigger one after the fall of the Berlin Wall and the ensuing unification – it was still very much a debt-based market, with a relatively small stock market. Companies wanting to raise cash to expand, for instance, would typically go to their bank for a loan, not to the market to issue shares. 

This risk-averse approach was true of the majority of continental Europe whereas the UK had always had more in common with the US in terms of the importance of its stock exchange and equity markets in general; they shared the Anglo-Saxon approach. In IR terms, however, things were fundamentally different on either side of the Atlantic. 

Sue Nunn of NIRI wrote about this in our first issue, noting that while PR was important in the UK, it was less so in the US. Nunn attributed this state of affairs largely to the relative size of the two countries and the nature of their markets. US corporate executives clearly needed sophisticated marketing skills in order to reach all parts of their nation. But PR was problematic in such a big country with different time zones and a whole variety of newspapers and other media outlets, divided by geography, so relying on the media to get information to individuals was complicated and difficult. The Wall Street Journal, one of just two country-wide newspapers in the US at the time, simply could not cover developments at all US companies. 

In the UK, on the other hand, the number of listed companies was much lower, and there were numerous nationwide papers. As a result, even relatively small companies could get themselves covered in the FT with a bit of skillful PR – so there was less reason for IR. 

As time went on, European IR became more established but it remained far less widespread or sophisticated than in the US. By now the inimitable Ian Richman had joined the business to run the commercial side of the magazine and, no longer part of The Economist, we set up an independent company to publish it. By the early to mid-1990s we were active in the North American market and in due course – 1995, to be precise – Richman moved to New York to set up IR Magazine’s base there. 

Battle stories

We grew the magazine on the back of a market thriving at least in part because of the dotcom boom and the growth of mergers and acquisitions activity – especially hostile bids. More common in the 1990s than now, these also provided the basis of good copy for IR Magazine. We could tell an exciting story of a battle, complete with a beginning, a middle and an end. 

One of the best of these concerned the virulent battle between Bennett LeBow’s Brooke Group and RJR Nabisco, a story we told with specific reference to the advertising slogans used by each side. It all started in 1995 when Brooke Group, in cahoots with corporate raider Carl Icahn, launched a consent solicitation for two proposals at RJR Nabisco, tobacco company and manufacturer of Oreo cookies, Ritz Crackers et al. One was for RJR to spin off its food division to shareholders; the second sought to increase the number of shareholders required to call a special meeting from 25 percent to 50 percent. 

RJR had retained Mackenzie Partners for the solicitation and advice and DF King for stockwatch services, while Georgeson was working for LeBow. Brooke’s first advertisement, which ran in the Wall Street Journal, was short, sweet and to the point: RJR to shareholders: drop dead! 

LeBow’s point was that RJR was riding roughshod over the wishes of its shareholders, which wanted the food business split off from the tobacco company, he said. RJR didn’t disagree with the idea but said the time was not yet right. Its own ad said, in big letters: Spin off Nabisco? You bet. In rather smaller letters it said: But at the right time, when it’s in your interest. 

And so the battle ran on. Now is neither the time nor the place to retell the whole story but here are some of the advertising lines used, to give a flavor of the vehement nature of the fight. RJR Nabisco offered Working for all shareholders... responsibly. And this one went on to talk about LeBow and Icahn’s records as corporate raiders, in negative terms: ‘...enriching themselves and leaving other shareholders out in the cold.’ Another leveled this accusation against LeBow: ‘By placing his own agenda above all others, he managed to wipe out – in a single day – $5 bn of stock market value’ from RJR and other tobacco companies. 

Some of the advertising took a cleverly short, sharp approach, with examples like LeBow LeBankrupt and LeBow LeBogus. And, for its part, IR Magazine ran the story of the fight – eventually won decisively by RJR Nabisco – under the heading LeBow LeBeaten. No doubt the ads had amused newspaper readers along the way. More importantly, however, they helped make the whole battle very public, and the advertisements managed to encapsulate – and influence – the way the battle was played out. 

It’s not something we really see any more. But there are still proxy fights, if less excitingly conducted than this one. And companies – and especially their investor relations departments – still work hard to win over shareholders. They typically do this now via investor meetings, conference calls, one-on-ones and other forms of direct contact. 

The future of the world 

One subject area where IR has undoubtedly developed over the years is ESG issues. That’s not new – IR Magazine has been covering such matters since its very first issues – but it’s all become much more standardized and widespread. For a long time we would hear complaints from US IROs that they simply couldn’t raise interest among their shareholders in environmental and social issues, in particular. I recall one telling me how much he enjoyed trips to Europe where he could hold a shareholder meeting devoted exclusively to the subject of sustainability. The US is changing now but researchers working on the IR Magazine Awards still find US investors and analysts much less concerned about these issues than their counterparts elsewhere. 

There are other regional differences, of course. The ways IR is practiced in the Asia-Pacific region, Europe, Canada, the US and Latin America all have their own idiosyncrasies but, as the world gets ever-smaller, so do those variations. And while investor relations was far from widespread back in 1988, it’s now normal enough for a good proportion of the populace to have at least a rough idea what it’s all about. 

Since that day 30 years ago, I’ve learnt a fair amount about investor relations. And to my surprise, it’s made for an interesting working life. One of the best things is that it’s always changing, not least because whatever’s going on in the world, IR is affected by it and has to reflect it. Crises in the real world – from hurricanes, political events and legal change to financial meltdowns and acts of terrorism – all have impacts on companies and their share price. Which then impacts the role of – and thus the reporting of – IR. 

There are constants, of course. And if the high IR priorities of honesty, openness and, above all, trust ever changed, the role would, and should, become irrelevant. 

No sign of that yet, so here’s to the next three decades. 

This article was published in the winter 2018 issue of IR Magazinethe 30th anniversary issue of IR Magazine

Janet Dignan

Janet Dignan is a graduate of Otago University in New Zealand, where she read philosophy. From 1979 to1982 she was head of information at Linklaters, with responsibility for internal and external information resources for its offices in London, Hong...
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