Investor Relations

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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?”
74INVESTOR RELATIONSSome types of regulatory changes can impact issuers’ businesses and operations.Investor Relations must in this case explain how the costs associatedwith compliance will affect earnings, or possibly how the new regulationswill boost demand for the company’s products.2.7 THE CONVERGENCE OF INVESTORRELATIONS AND CORPORATECOMMUNICATIONS2.7.1 Convergence Is Here to StayInvestor Relations has traditionally been the domain of ex-bankers, stockbrokers,or financial analysts who could read a balance sheet and know howto talk to the CFO of a listed company. It caused many problems: There wasno single point of contact within the company; mixed messages were issuedfrom different areas of the organization. In addition, stakeholders and shareholderswere considered mutually exclusive. Messages became blurred atbest or confused at worst.In a world of globalization where transparent communication drives thevalue of a company’s business, how companies manage consistent communicationwith the financial community, the media, shareholders, employees,customers, and other stakeholders, while tailoring their message to suitthe interests of these groups, is putting Investor Relations and corporatecommunications professionals under pressure everywhere. The need fortransparency, consistency, and equal disclosure, combined with the emergenceof new technologies and new regulations are driving the convergence,not just of traditional Investor Relations and Press Relations, but of crisiscommunications as well.2.7.2 Integrated Communicationsas a Value DriverReality is that there should be no hierarchy of needs as all are equallyimportant. Employees are quite likely to be shareholders, and vice versa.And while the investment community might view a plant closure or restructuringplan at a listed company as a positive development and move up itsshare price, the employees losing their jobs are less likely to welcome theannouncement.The concept of convergence of Investor Relations and the other corporatecommunication functions should not be led by the organization chart. AndInvestor Relations and Press Relations can no longer afford to work in isolation.While the ideal situation may be to have all corporate communications
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INVESTOR RELATIONS
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Investor RelationsPrinciples and In
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ContentsList of IllustrationsIntrod
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CONTENTSvii3.3 Understanding Market
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CONTENTSix4 Measuring The Value Of
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IntroductionAll things being equal,
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INTRODUCTIONxiiion the primary mark
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CHAPTER 1Competing forCapitalBringi
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COMPETING FOR CAPITAL 3FoundersShar
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COMPETING FOR CAPITAL 5attract and
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COMPETING FOR CAPITAL 7OfferDemandS
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COMPETING FOR CAPITAL 9are robust e
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COMPETING FOR CAPITAL 11 Develop an
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COMPETING FOR CAPITAL 13image long
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COMPETING FOR CAPITAL 15ensure that
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COMPETING FOR CAPITAL 17The company
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COMPETING FOR CAPITAL 19will benefi
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COMPETING FOR CAPITAL 21Because deb
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IMPLEMENTING BEST PRACTICES IN INVE
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MEASURING THE VALUE OF INVESTOR REL
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Resources6.1 The CEO Investor Relat
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RESOURCES 1736.3 Earnings Presentat
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RESOURCES 175Today’s investor day
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RESOURCES 1776.5 Investor Relations
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RESOURCES 179Your commitment to sen
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D-7 Audit committee meetingFinal ro
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Indexaccounting standards, 35, 57,
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INDEX 185disclosure, 2, 9, 11, 44,
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INDEX 187investor relations - conti
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INDEX 189risk, 4, 6, 38, 54, 72, 87
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Investor Relations

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