The involvement of the CEO with the investment community
Responses to our global investor relations survey detailed in this month's cover story indicate that chief executives are spending a relatively large amount of their time dealing with the investment community. Indeed, it came to our attention that one German CEO really took the IR function to heart and was devoting roughly half of his time to investor relations.
Luckily for the health of the majority of businesses, most CEOs don't go anywhere near that far. But senior executives across the globe are certainly responding to the clamor of institutional investors with more information and more contact. Increasingly, the favored response is to delegate the function to a well-resourced, well-remunerated investor relations department. Perhaps, in the future, our German CEO will resort to a savvy IR specialist to target investors so he can make the best use of fewer IR hours.
Unless, of course, the onset of a growling bear market has changed his mind about the value of the IR function. Will he still be so mightily enthusiastic about IR as stocks everywhere are stricken with contagion? If he's forward-looking, he will be. He may even be bargain-hunting in Asia or Russia right now, and raising capital to do so, aided by his turbo-charged IR ethos.
No doubt other, less enlightened companies are already cutting IR budgets, just as many consumer companies slash advertising in hard times. It's the smart ones, conversely, who move in for the kill and increase market share while competitors are saving their pennies.
Then there's the newer, often smaller cap companies that have also come lately to the world of IR. These CEOs may look at the IR department merely as the people who keep their options above water. And as that well dries up, they might just cut their losses and fire the lot.
Enough doom and gloom, though. Few practitioners really know what IR in a bear market is all about. IROs old and grizzled enough to have experienced it are a rare species. But the few that remain out there generally agree on this: one of the differences between a bear market and a bull market is that the former is much more strongly driven by earnings; and any puffed-up corporate story which omits earnings information becomes even more of a hard sell.
So out with the spin-meisters and gloss-builders, the hype-monsters and dream-weavers. If anyone knows about managing earnings expectations after a decade of momentum-driven growth it's your classic, number-crunching IRO.
And if your job's under threat due to growling bears, drop a few hints that things might get a whole lot stickier for your CEO if you're not around to offer solid investor relations advice. You might add that your presence will also allow him to get on with running the business. Well, for some of the time, at least.