Investor Relations (IR) is a strategic management responsibility that integrates finance, communication, marketing, and securities law compliance to enable the most effective two-way communication between a company, the financial community, and other constituencies, which ultimately contributes to a company’s securities achieving fair valuation. However, IR is much more than that. It involves advisory to the C-suite, helping the board connect to shareholders, ensuring the company steers clear of regulatory landmines, and telling the company’s story accurately and meaningfully.
Shareholder investors generally fall into two categories: institutional and retail. Institutional investors include large company shareholders like BlackRock or Fidelity’s Contra fund. Retail investors are smaller, but there are a lot of them. With the rise in popularity of online platforms like Robinhood and leading brokerages like Schwab and TD Ameritrade dropping trading fees and creating user-friendly stock-buying platforms, retail investors have exploded, which has changed the storytelling process.
The Rise of ESG in IR
In addition to the large increase in retail investing, investor relations officers, IROs, and CEOs now also need to be concerned with communicating Environment, Social, and Governance, or ESG, as part of their official storytelling. The three arms of ESG are vastly different categories of a company’s operations but are lumped together and collectively discussed as “a company’s ESG.” According to the 2022 Edelman Trust barometer, “58% of respondents buy or advocate for brands based on their beliefs and values, and 64% invest based on their beliefs and values.”
Stakeholder Engagement in Modern IR
IROs, or IR practitioners, used to control their company’s story through news releases, shareholder meetings, industry conferences, one-on-ones with analysts, and the occasional interview with the Financial Times or Wall Street Journal. With the changes in investor behavior and modern types of company reporting, there is a need for a different approach to shareholder communications. At G8, they call this Stakeholder Engagement. For the IRO, that now means creating multiple levels of communication to reach all stakeholders. And sometimes, the multiple audiences aren’t easy to identify.
Reg FD and the Importance of Compliance
In the annals of the SEC regulations, there’s a section called Reg FD that requires public companies to comply with fair disclosure. This means IROs must help executives stay on script when having one-on-one calls with investors. It’s crucial to have a seat at the table and be privy to strategic conversations at the C-suite level to help guide companies in the right direction.
The Evolution of Public Relations in IR
Public relations, or earned media, has also undergone a massive transformation. We live in a pay-to-play world now, and while obtaining earned media through relationships with writers and reporters is still possible, the amplification gained from paid media is stronger and easier to direct to a target audience.
The Growth of Digital Marketing in IR
Digital marketing has also grown, and there are more platforms and opportunities than ever before for paid or boosted placement. Newsletters can be boosted or directed to stakeholders through platforms that allow the company to control the narrative across multiple social media platforms to selected audiences with surgical effectiveness. Earned media can also be boosted with digital to gain a greater amplification than ever before.
The Future of Investor Events in IR
Company executives and CEOs need events to meet with shareholders. During the pandemic, virtual investor days became popular, and while they are certainly easier on the budget and C-suite calendars, their long-term effectiveness is still to be decided.
At the end of the day stakeholder engagement is the strategy necessary for all companies to tell their story accurately and effectively. Neuroscientists have proven that when speaking to a shareholder, a story resonates 22 times stronger than facts and figures alone. Telling your story effectively is the cornerstone of IR work. At the end of the day, it’s the company’s story – and how you tell it – that will drive engagement, drive interest.
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