Investor Relations

SEVEN KEYS TO SUCCESSFUL INVESTOR RELATIONS 73them to calculate the myriad ratios they use. The priorities of equity andbond investors can sometimes differ, including on the topics of acquisitionand debt reduction strategies, financing solutions, and share buyback anddividend policies. Companies must nonetheless present their strategic prioritiesexactly in the same way to all audiences. Research and development. R&D expenses may be recordedin different ways depending on their nature and the accounting standardsapplied. Some companies book them as operating expenses, deductingthem from operating income, while others record them as investments thatare amortized over time. The IR department will seek to justify the levelsof R&D expenditure announced and respond to any claims by analysts orinvestors that the issuer is investing too little or too much, notably comparedwith its competitors. Shareholder returns. There are many ways for issuers to generateshareholder returns, and the decisions must be justified on the basis ofwhether the companies are paying dividends, allocating bonus shares, ormaking cash payments, sometimes or several times during the year. Veryfew issuers talk about their payout policies and commit to quantified targets.This is tricky issue for IR departments as issuers only give general guidelines,usually claiming that they need to remain flexible in allocating theirresources.2.6.2 Exogenous Factors The competitive environment. Investor Relations can also beimpacted by the content and style of the messages sent out by competitors.Some will focus more on certain financial ratios than others; they may havedifferent ways of describing the markets in which they operate, and failto provide quantified targets or, on the contrary, give earnings targets forthe following 3, 5, or even 10 years. Particular attention should be paid tohow thorough and user friendly the competition’s Web sites are, when theyrelease their earnings, and how far their disclosure goes. Regulatory changes. This is particularly important with regardto stock-market regulations, as discussed above. For instance, the deadlinefor publishing financial statements may be shortened or quarterly reportingmay become mandatory. Such changes have a substantial impact onInvestor Relations. IROs must keep abreast of changes in the pipelineand involve the company, where appropriate, in any lobbying efforts tolimit as much as possible the negative impact of the new regulations onits organizational structure or, at least, to assure that it has enough timeto comply with the new rules. In most cases, any change in the regulatoryenvironment boils down to understanding “what must be disclosedwhen?”