Investor Relations

Investor Relations (IR)

According to the National Investor Relations Institute (NIRI), investor relations is defined as “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.” When I think investor, I think of someone devoting capital for self-gain of return. A company strategically creates objectives and a “vision” that include “making money” but includes core purpose and values. Once companies thought corporate secrecy was for its own protection. Investors wanted transparency of their investments. Public companies had to disclose company information to the U.S. Securities and Exchange Commission (SEC) with the passing of federal securities acts in the 1930’s. Through the years, SEC oversaw many changes in the regulating companies with institutional investors. Investors today “demand more communications, more transparency and more access to companies.” Companies must have IR programs to stay completive for investors’ capital.

Framework for Investor Relations Program:

IR program needs to have components of communication, strong financial understandings, and guidance on future earnings. First, developing a framework to understand the IR functions. The IR needs to understand the types of investors. Then, there are three key objectives companies need to focus.

Key Objectives of Investor Relations:

The first objective is Explains Company’s Vision, strategy, potential investors and conduit constituencies such as analysts and media. A good example is the Heinz

Company website is user friendly, and has direct links to information with clear titles. Heinz also uses wordage level acceptable to all ages; uses visuals and audio communication strategies; use updated technology. Their annual report uses graphics and colors for easy reading. Heinz use of appealing colorful graphic designs with use of their products is high tech. Heinz technology usage examples are use of MySpace, FaceBook and Webcasts. Furthermore, Heinz employs PowerPoint presentation links and offer access to archived presentations.

Heinz has a direct link for Investor Relations The vision is clearly stated in several places, including annual report and global websites. Heinz’s strategy is visibly stated as “international business growth and aggressive partnership development.” Their potential to investors has up to date information. Heinz offers direct links to the media, stock history and transparency of information to the conduit constituencies.

The second objective is Ensure that expectations of the company’s stock price are appropriate for its earning prospects, the industry outlook, and economy. An example used to explain this objective is the Bank of New York Mellon. Looking at Bank of New York Mellon’s website they offer current informative information. The use of financial data, charts and graphs are clearly appropriate for its earning prospects. The industry outlook is transparent. The Bank of New York and Mellon International recently merged and their website explains the merger and the affects of such a strategic merge. There are many links to current economy investment conditions in today’s market.

The third objective is Reduce stock price volatility. Any organization would want to reduce stock price volatility by means of the indirect communication channels. Many companies publish their rating information from outside analysts from such companies as Standard & Poor's , Moody's Investors Service, or Fitch Corporate.

Framework: Company’s Investor Relations Strategy:

Types of Investors are “investors” and “intermediaries.” The “investors” consists of individual investors and institutional investors. Once again, using Heinz

and Bank of New York Mellon’s websites as examples, the current stockholders have an IR link for updated information. Also, potential investors and institutional investors have direct IR links, which provides information in various formats and contact information. The “intermediaries” are composed of analysts, media and rating agencies. Institutional analysts usually publish a list of rating agencies that analyses the company. Rating analysts will publish findings through the agencies. Companies normally provide direct links/ information in various formats for media and supply contact information strictly for media.

Conclusion:

In conclusion, investor relations is an important facet for public for-profit businesses. The strategy implementing the objectives is intertwined with a strong communication strategy. I believe communications is what makes any company successful. However, in writing this blog, I began to think about non-profit organizations and how would the investor relations component match into the strategy of such an organization.