Take, for example, the idea that investors buy shares because they believe a company is well managed. This reason for investment can apply equally well to uninformed investors, sophisticated analysts or savvy investment managers. However, underlying this simple idea are many investor relations concepts, such as how to create the perception of good management, how to marshal the information to substantiate the claim and how to prove the assertion is valid. What this example shows is that investor relations combines many disciplines, from marketing to communication, investment analysis and corporate strategy.

It also highlights the need to consult investor relations experts experienced in the complete task of providing input from these many perspectives.

The value of investor relations

A truism of capitalism is that investor relations would not have been invented if it did not deliver value. A Dow Jones/Investor Relations magazine survey in the US in 1999 showed that companies across several market cap ranges which were committed to investor relations outperformed the S&P 500. A more recent US survey showed that 94 per cent of analysts in a national study would recommend a stock based on the CEO’s reputation. There is much other empirical evidence that attests to image, credibility, reputation, media profile and many more non-financial factors having an influence on share price, a large part of which are the products of investor relations.
Consequently, by focusing on these communications related inputs, investor relations delivers value to shareholders.

The task of investor relations

Primary audiences for investor relations are shareholders, the investment community and the media. Sub categories of these groups are employees and customers who increasingly are shareholders, bankers who provide debt to corporations and ratings agencies which are influential on cost of capital issues. Each of these groups needs to understand the corporate story, a company’s industry sector and its operating environment. While a primary task of investor relations is preparing this information, a crucial input is how the story is communicated. This underlines the value of experience in guiding the style and timing of communication of corporate and investor information.

● Investor relations cliches
● People invest in what they understand
● Be quick with the bad news, slow with the good
● Under promise and over deliver
● Balance integrity with deliverability
● Elevate basic values
● Perception is reality
● Keep shareholders in the picture
● Accountability goes beyond financial results
● There is no benefit to shareholders in a personality cult
● Build a long term relationship with the share register
● Managers should manage and let the share price look after itself
● The market delivers value, not management

Source: Westbrook Communications - Investor Relations;
www.westbrookfin.com.au;