Does Investor Relations Expertise Belong On the Board?
Times sure have changed. Whether a company’s equity is owned by a few venture capitalists or a league of activist investors, investors today want to have their say about where the company is headed and who is leading it.
Perhaps the time has come for companies, both public and private, to consider better use of an underused and under-appreciated asset that many of them already have and others should acquire: the role of the investor relations (IR) professional. Integral to the board’s oversight of corporate asset allocation (i.e., dividend policy, investment in research and development, external growth through M&A and other measures to return value) is a current understanding of how the securities and capital markets work, characteristics and propensities of investor types, investor attitudes and concerns, and relative values of the enterprise.
Request Reports From Your IR Professional
It is commonplace today for the corporate IR professional to present quarterly market analysis reports to the C-suite and in particular the CEO and CFO, regarding relative market performance, changes in ownership, and current investor perceptions and concerns. In my opinion, such reports should find their way to the board of directors as well, both in formal, written form, and as in-person presentations, inviting questions and discussion—all in an effort to keep the board up to date regarding pertinent market activity and best prepared for contingencies.
In the current market environment, the IR professional requires special and multi-disciplined skill sets that can help a board. As spokesperson for the company and often the proxy for the CEO and CFO with investors, the IR professional must be thoroughly familiar and conversant with the business plan, financial structure and strategy, and the performance of the company. He or she must be aware of and sensitive to disclosure Regulation FD, securities laws, and other regulatory imperatives.
Intentionally Include IR Experience and Perspective on the Board
In addition, nominating committees should consider seeking an outside director who has IR experience in addition to other useful boardroom skills. Just as public companies are required to have a financial expert on the audit committee, perhaps boards should be urged to have a skilled investor relations professional among their ranks. While the same might be said of other core disciplines (cybersecurity, finance, human resources, law, marketing, technology, and so forth), the domain of IR knowledge seems worthy of particular consideration at this time of market turmoil and uncertainty. Having IR expertise on the board certainly would make the board smarter and better prepared to deal with myriad corporate and financial decisions within its purview.
The corporate IR professional could be an invaluable asset to the board, as he or she must be cognizant of the pulse of the investment community on specific issues, while bringing this critical perspective to bear on the board’s discussion and decision-making process. The corporate investor relations discipline has evolved significantly over the years out of necessity. No longer simply a stockholder relations functionary, the IR professional is the primary, and sometimes the only daily, interface with owners (as well as prospective owners and market influentials) of the enterprise. The IR professional thus has a keen sense of investor interests and concerns, their perceptions of relative value, and of their voting propensities.
Suggesting the addition of an IR skill set on the board is not to be taken lightly. Recognize that there are numerous skilled and experienced IR professionals available, all of whom, in addition to the aforementioned experiences, know how investors think and know all the hard questions and concerns regarding material corporate events, financial performance, prospects and policies—all in a constantly changing economy.
Robert D. Ferris is an investor relations and crisis counselor and commentator, with more than four decades of experience with both domestic and foreign issuers. A former chairman of National Investor Relations Institute’s Senior Roundtable, his ideas on C-suite communications strategies in challenging corporate situations have been widely published.