Investor relations
Encyclopedia
Investor Relations 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. (Adopted by the NIRI Board of Directors, March 2003.) The term describes the department of a company devoted to handling inquiries from shareholders and investors, as well as others who might be interested in a company's stock or financial stability.
Typically investor relations is a department or person reporting to the Chief Financial Officer
(CFO) or Treasurer
. In some companies, investor relations is managed by the public relations
or corporate communications
departments, and can also be referred to as "financial public relations" or "financial communications". Investor relations is considered a specialty of public relations
by the U.S. Department of Labor.
Many larger publicly-traded companies now have dedicated IR officers (IROs), who oversee most aspects of shareholder meetings
, press conferences, private meetings with investors, (known as "one-on-one" briefings), investor relations sections of company websites, and company annual reports. The investor relations function also often includes the transmission of information relating to intangible values such as the company's policy on corporate governance
or corporate social responsibility
. Recently, the field has trended toward an increasingly popular movement for "interactive data", and the management of company filings through streaming-data solutions such as XBRL
or other forms of electronic disclosure have become prevalent topics of discussion amongst leading IROs worldwide.
The investor relations function must be aware of current and upcoming issues that an organization or issuer may face, particularly those that relate to fiduciary duty and organizational impact. In particular, it must be able to assess the various patterns of stock-trading that a public company may experience, often as the result of a public disclosure (or any research reports issued by financial analysts). The investor relations department must also work closely with the Corporate Secretary on legal and regulatory matters that affect shareholders.
While most IROs would report to the Chief Financial Officer, they will usually also have access to the Chief Executive Officer
(CEO) and Chairman or President
of the corporation. This means that as well as being able to understand and communicate the company's financial strategy, they are also able to communicate the broader strategic direction of the corporation and ensure that the image of the corporation is maintained in a cohesive fashion.
Due to the potential impact of legal liability claims awarded by courts, and the consequential impact on the company's share price, IR often has a role in crisis management
of, for example, corporate downsizing, changes in management or internal structure, product liability
issues and industrial disasters
.
In a difficult time such as the bear market of 2008-09, IROs will want to stay visible and build relationships, be factual in tone and not too quick to make promises, focus on the long-term story and balance sheet strength (as opposed to short-term earnings growth), aggressively refute rumors and answer concerns of investors, and coordinate media relations
and investor communications. Finally, IROs should remember: “The story is the business, not the stock price.”
The most highly-regarded professional member organization for Investor Relations in the United States is the National Investor Relations Institute
, or NIRI. In the United Kingdom, the recognized industry body is The Investor Relations Society
, while in Canada, the professional association is called the Canadian Investor Relations Institute, or CIRI. Australia's professional organization is known as the Australian Investor Relations Association (AIRA).
of 2002 significantly increased the importance of investor relations in the financial markets. The act established new requirements for corporate compliance and regulatory governance, with an increased emphasis on accuracy in auditing and public disclosure. Notable provisions of the act which apply to investor relations include enhanced financial disclosures and accuracy of financial reports, real-time disclosures, off-balance-sheet
transaction disclosures, pro forma financial disclosures, management assessment of internal controls, and corporate responsibility for financial reports. More specifically, Sarbanes-Oxley sections 301, 302, 404, and 802 have been of particular interest to companies improving corporate compliance. Similar to Sarbanes-Oxley are Bill 198
in Canada, Financial Security Law of France
in France, and J-SOX
in Japan. The European MiFID
Directive, although principally concerned with investor protection, also covers regulation and compliance for listed European companies.
Typically investor relations is a department or person reporting to the Chief Financial Officer
Chief financial officer
The chief financial officer or Chief financial and operating officer is a corporate officer primarily responsible for managing the financial risks of the corporation. This officer is also responsible for financial planning and record-keeping, as well as financial reporting to higher management...
(CFO) or Treasurer
Treasurer
A treasurer is the person responsible for running the treasury of an organization. The adjective for a treasurer is normally "tresorial". The adjective "treasurial" normally means pertaining to a treasury, rather than the treasurer.-Government:...
. In some companies, investor relations is managed by the public relations
Public relations
Public relations is the actions of a corporation, store, government, individual, etc., in promoting goodwill between itself and the public, the community, employees, customers, etc....
or corporate communications
Corporate communications
Corporate communication is the message issued by a corporate organization, body, or institute to its publics. "Publics" can be both internal Corporate communication is the message issued by a corporate organization, body, or institute to its publics. "Publics" can be both internal Corporate...
departments, and can also be referred to as "financial public relations" or "financial communications". Investor relations is considered a specialty of public relations
Public relations
Public relations is the actions of a corporation, store, government, individual, etc., in promoting goodwill between itself and the public, the community, employees, customers, etc....
by the U.S. Department of Labor.
Many larger publicly-traded companies now have dedicated IR officers (IROs), who oversee most aspects of shareholder meetings
Annual general meeting
An annual general meeting is a meeting that official bodies, and associations involving the public , are often required by law to hold...
, press conferences, private meetings with investors, (known as "one-on-one" briefings), investor relations sections of company websites, and company annual reports. The investor relations function also often includes the transmission of information relating to intangible values such as the company's policy on corporate governance
Corporate governance
Corporate governance is a number of processes, customs, policies, laws, and institutions which have impact on the way a company is controlled...
or corporate social responsibility
Corporate social responsibility
Corporate social responsibility is a form of corporate self-regulation integrated into a business model...
. Recently, the field has trended toward an increasingly popular movement for "interactive data", and the management of company filings through streaming-data solutions such as XBRL
XBRL
XBRL is a freely available, market-driven, open, and global standard for exchanging business information. XBRL allows information modeling and the expression of semantic meaning commonly required in business reporting. XBRL is XML-based...
or other forms of electronic disclosure have become prevalent topics of discussion amongst leading IROs worldwide.
The investor relations function must be aware of current and upcoming issues that an organization or issuer may face, particularly those that relate to fiduciary duty and organizational impact. In particular, it must be able to assess the various patterns of stock-trading that a public company may experience, often as the result of a public disclosure (or any research reports issued by financial analysts). The investor relations department must also work closely with the Corporate Secretary on legal and regulatory matters that affect shareholders.
While most IROs would report to the Chief Financial Officer, they will usually also have access to the Chief Executive Officer
Chief executive officer
A chief executive officer , managing director , Executive Director for non-profit organizations, or chief executive is the highest-ranking corporate officer or administrator in charge of total management of an organization...
(CEO) and Chairman or President
President
A president is a leader of an organization, company, trade union, university, or country.Etymologically, a president is one who presides, who sits in leadership...
of the corporation. This means that as well as being able to understand and communicate the company's financial strategy, they are also able to communicate the broader strategic direction of the corporation and ensure that the image of the corporation is maintained in a cohesive fashion.
Due to the potential impact of legal liability claims awarded by courts, and the consequential impact on the company's share price, IR often has a role in crisis management
Crisis management
Crisis management is the process by which an organization deals with a major event that threatens to harm the organization, its stakeholders, or the general public. The study of crisis management originated with the large scale industrial and environmental disasters in the 1980's.Shrivastava, P....
of, for example, corporate downsizing, changes in management or internal structure, product liability
Product liability
Product liability is the area of law in which manufacturers, distributors, suppliers, retailers, and others who make products available to the public are held responsible for the injuries those products cause...
issues and industrial disasters
Industrial disasters
This article lists notable industrial disasters, which are disasters caused by industrial companies, either by accident, negligence or incompetence. They are a form of industrial accident where great damage, injury or loss of life are caused....
.
In a difficult time such as the bear market of 2008-09, IROs will want to stay visible and build relationships, be factual in tone and not too quick to make promises, focus on the long-term story and balance sheet strength (as opposed to short-term earnings growth), aggressively refute rumors and answer concerns of investors, and coordinate media relations
Media relations
Media relations involves working with various media for the purpose of informing the public of an organization's mission, policies and practices in a positive, consistent and credible manner. Typically, this means coordinating directly with the people responsible for producing the news and features...
and investor communications. Finally, IROs should remember: “The story is the business, not the stock price.”
The most highly-regarded professional member organization for Investor Relations in the United States is the National Investor Relations Institute
National Investor Relations Institute
The National Investor Relations Institute, known as "NIRI," is the largest professional association for investor relations professionals in the world...
, or NIRI. In the United Kingdom, the recognized industry body is The Investor Relations Society
Investor Relations Society
The Investor Relations Society is the professional body for investor relations professionals in the United Kingdom.Established in 1980, The Investor Relations Society is a non-profit making institute and has almost 600 members drawn primarily from UK listed companies, as well as overseas companies...
, while in Canada, the professional association is called the Canadian Investor Relations Institute, or CIRI. Australia's professional organization is known as the Australian Investor Relations Association (AIRA).
The Sarbanes-Oxley Act
The Sarbanes-Oxley ActSarbanes-Oxley Act
The Sarbanes–Oxley Act of 2002 , also known as the 'Public Company Accounting Reform and Investor Protection Act' and 'Corporate and Auditing Accountability and Responsibility Act' and commonly called Sarbanes–Oxley, Sarbox or SOX, is a United States federal law enacted on July 30, 2002, which...
of 2002 significantly increased the importance of investor relations in the financial markets. The act established new requirements for corporate compliance and regulatory governance, with an increased emphasis on accuracy in auditing and public disclosure. Notable provisions of the act which apply to investor relations include enhanced financial disclosures and accuracy of financial reports, real-time disclosures, off-balance-sheet
Off-balance-sheet
Off-balance sheet usually means an asset or debt or financing activity not on the company's balance sheet.Some companies may have significant amounts of off-balance sheet assets and liabilities. For example, financial institutions often offer asset management or brokerage services to their clients...
transaction disclosures, pro forma financial disclosures, management assessment of internal controls, and corporate responsibility for financial reports. More specifically, Sarbanes-Oxley sections 301, 302, 404, and 802 have been of particular interest to companies improving corporate compliance. Similar to Sarbanes-Oxley are Bill 198
Bill 198
In Canada, Bill 198 is an Ontario legislative bill effective April 7, 2003, which provides for regulation of securities issued in the province of Ontario. The legislation encompasses many areas. It is perhaps best known for clauses that provide equivalent legislation to the U.S. Sarbanes-Oxley Act...
in Canada, Financial Security Law of France
Financial Security Law of France
The Financial Security Law of France , signed by the Minister of Finance, Francis Mer, was adopted by the French Parliament on July 17, 2003 in order to strengthen the legal provisions relating to corporate governance. The LSF was published in OJ No. 177, August 2, 2003 The Financial Security Law...
in France, and J-SOX
J-SOX
The , promulgated on June 14th, 2006, is the main statute codifying securities law and regulating securities companies in Japan.The law provides for:* Registration and regulation of broker dealers and their registered representatives...
in Japan. The European MiFID
MiFID
The Markets in Financial Instruments Directive as subsequently amended is a European Union law that provides harmonised regulation for investment services across the 30 member states of the European Economic Area...
Directive, although principally concerned with investor protection, also covers regulation and compliance for listed European companies.
International IR organizations
- AERI: Asociación Española para las Relaciones con Inversores,
- AIRA : Australasian Investor Relations Association (AIRA),
- AIRP: Association of Investor Relations Professionals (Russia),
- CIRA: Cercle Investor Relations Austria,
- CIRI: Canadian Investor Relations Institute,
- CLIFF: Cercle de Liaison des Informateurs Financiers en France,
- DIRF: Danish Investor Relations Forening,
- DIRK: Deutscher Investor Relations Verband e.V., Deutscher Berufsverband für Investor Relations,
- FIRS: Finnish Investor Relations Society,
- IBRI: Instituto Brasileiro de Relações com Investidores,
- IIRF: International Investor Relations Federation,
- IR Society The Investor Relations Society (UK),
- NEVIR: Nederlandse Vereniging voor Investor Relations,
- NIRF: Norwegian Investor Relations Society,
- NIRI: National Investor Relations Institute (USA),
- JIRA: Japan Investor Relations Association,
- SIRA: Swedish Investor Relations Association
External links
- http://www.niri.org - National Investor Relations Institute (US)
- http://www.ir-soc.org.uk - The Investor Relations Society (UK)
- http://www.ciri.org/ - The Canadian Investor Relations Institute
- http://www.aira.org.au - Australian Investor Relations Association
- http://www.insideinvestorrelations.com - IR magazine
- http://irwebreport.com - IR Web Report
- http://www.nevir.nl - Netherlands IR Society
- http://ir-india.com/ - Investor Relations Society, India