The Changing of the Guard in IR?

Sep 2016

Make no mistake, the face of investor relations is changing rapidly.

More and more we hear the refrain from corporate executives and board members: we need to be more strategic, more proactive, more thoughtful about how we build and engage with our investor base. The context of discussions around IR strategy is changing dramatically. In the past, complaints from upper management were reactive and short-term oriented – such as earnings call messaging that missed the mark, or impatience with a stock not reacting to spate of good news.

In today’s market, maturing companies are less focused on yesterday’s missed opportunity and much more focused on tomorrow’s big-picture strategy. The questions they’re asking are smarter: Are we proactively pursuing the right kinds of investors to match our evolving investment story? Why does our biggest competitor always seem to be one step ahead of us with the Street? Does my IRO have the executive profile and skillset to represent our company effectively?

A key dynamic driving this change is the awakening of the board room. Increasing activism and shareholder engagement have raised board visibility and accountability, and that is having a direct impact on the executives of the companies they direct. More shareholder-friendly governance structures have also made them more vulnerable. And finally, with cash-rich corporate balance sheets, M&A-hungry megacaps and brimming private equity coffers, margins of error are smaller for public companies that believe their five- or 10-year strategic vision will lead to superior value creation.

These factors are leading companies to embrace a more sophisticated and discerning view of IR’s role. To seasoned practitioners, having IR taken more seriously by executive management is refreshing and exciting. It also might be more threatening, as companies consider “upgrading” the IR position. Yes, this conversation is going on in more places than you think, including companies maturing from micro/small-cap IPO toward mid-cap status, slower-growth businesses at strategic inflection points and others who’ve survived proxy battles and now have clear mandates to create and surface value.

The search for top talent goes beyond established public companies to the lurking multi-unicorns that may IPO at some future point. Many aren’t just looking at best-of-breed career IROs or proven number twos ready to run their own programs; they’re also considering professionals with more dynamic backgrounds, including executive leadership potential beyond IR and the skillsets to think both strategically and analytically.

Just as the demand for quality IR executives is increasing, so is the supply of people lining up to fill that demand. A new brigade of professionals, led by ex-Wall Streeters and others from different corners of the finance world, is entering the field. Do they have what it takes to succeed? And do companies hiring these executives know what they’re “buying”? We’ll provide insights on these questions in our next two posts; the first will look at the changing face of the IRO, the second will include practical advice to companies on how best to identify what they’re looking for … and what to look out for.

Originally Published on LinkedIn