Investor relations – Is it public?

Investor relations is regarded by all correct-thinking people as a branch of financial public relations, but it too struggles to come up with a decent definition of itself.

At its most basic, it could be said to be the direct marketing end of the stocks and shares promotion business. Investor relations centers around the close relationship and two-way communication between the company, its shareholders and those who directly advise them. Those who advise them are principally the stockbroking analysts who were memorably dismissed a few years ago by the then Chancellor, Nigel Lawson, as ‘teenage scribblers’. Analysts can therefore often be regarded, like journalists, as another conduit of information to be the ultimate investor audience, although increasingly, nowadays, investment institutions have their own in-house ‘buy-side’ analysts.

As many market traders will tell you, there is no substitute for direct contact with your customers and it is, therefore, extremely important for public companies to maintain a dialogue with their shareholders. For public relations people, this is potentially a very sensitive area. It is particularly important that those facilitating the communication do not get between the company and its owners. It is the role of a communications adviser to help improve the perception of the company. By getting between a company and its shareholders it is in great danger of becoming part of that perception.

Coordination and consistency

It is also perfectly clear to all correct-thinking people that investor relations has to be integrated totally with corporate and financial media relations. Consistency of message is probably even more important in the specialist area of City public relations than it is in the other area of communication, not least because of the sensitive nature of so much of the information that has been given out. There is also a temptation to make life easier by assuming that different audiences are discreet and do not interact.

For example, to those outside the City it sometimes comes as a surprise that City journalists talk to City analysts. It should be clearly recognized that to a greater extent they live off each other. An analyst with a particular view can supply a journalist with a story, the story can then provide the journalist with a reason to contact a client investor, who then buys or sells the shares which affects the price, giving the journalist another story. Managing this unstable triangle is at the very heart of any financial public relations activity.

There is a growing amount of information that a company has to give out or send to the Stock Exchange. There are new accounting regulations designed to make company results more transparent. So far they seem to have succeeded only in making every company’s results far more complicated to understand without professional interpretation. One of the roles of financial public relations people is to help ensure that the audience concentrates on the figures that really tell the story and not the hundreds of others that company accountants are now obliged to provide. Controlling the flow of this information and getting it to the right place at the right time is every bit as important as the style or content of the messages themselves.