Читать книгу Investor Relations and Financial Communication - Alexander V. Laskin - Страница 13

First of all, it is important to note that investor relations is a relatively small profession. The leading professional association for the industry, the National Investor Relations Institute (NIRI) has only 3,300 members. Furthermore, some of the members are academics and service providers rather than investor relations officers (IROs). As a result, the number of actual IROs in NIRI is under 3,000 members. However, these 3,000 members represent 1,600 publicly traded companies with more than US$9 trillion in stock market capitalization. Not every investor relations professional is a member of NIRI – some are members of other professional organizations such as the Public Relations Society of America (PRSA), which has a dedicated financial communications section, and some are members of the International Association of Business Communicators (IABC). In addition to investor relations, there are professional organizations for financial communicators working in other industries; for example, the Association of Fundraising Professionals (AFP) unites about 30,000 members working in the field of philanthropy and fundraising.

Even taking all this into account, investor relations and financial communication is a relatively small professional area. One of the key reasons is that not every company needs investor relations. Investor relations is required for the publicly traded companies – in other words, the companies in which shares of stock are available for people to buy and sell. These companies are called public companies because their stock is available to the public as opposed to private companies where the ownership is private. Public companies are also called publicly traded companies, publicly held companies, or publicly listed companies. Although the estimates vary slightly, the World Bank calculated that there are only about 4,100 public companies in the United States. This actually correlates well with 3,000 investor relations members of NIRI. The World Bank also estimates that globally there are about 43,000 public companies.

The shares of public companies are traded on stock exchanges or on the over-the-counter (OTC) markets. The New York Stock Exchange (NYSE) trades shares of 2,800 companies and Nasdaq lists about 3,300 companies. These numbers include US companies as well as foreign corporations that want to be listed in the United States. It is also possible to have dual listings – where a company can be listed at NYSE and Nasdaq, or at an exchange in its home country and at an exchange abroad. For example, BHP, one of the largest Australian corporations, is listed domestically at the Australian Securities Exchange, and at the London Stock Exchange in the UK. Carnival, a cruise line operator, is listed at both the London Stock Exchange and at NYSE.

All these public corporations are governed by a specific set of laws and regulations focused on helping investors make an informed decision about buying and selling the company stock. In order to satisfy these requirements, these companies employ investor relations professionals. Many large corporations would have a standalone dedicated investor relations department. These departments may have from just one IRO to 20 or more. The reporting structures vary widely – the investor relations department may report directly to the chief executive officer (CEO), or the department may report to the chief financial officer (CFO), chief communications officer (CCO), chief operations officer (COO), or even the head of Human Resources (HR).

At smaller companies, there may be no dedicated investor relations department. In this case, the investor relations function is commonly performed by the office of the CFO or the treasury department. In other cases, investor relations may reside in the corporate communication/public relations department. Since investor relations relies on both financial and communication expertise, if assigned to the CFO or to the CCO, the investor relations function must work closely across the corporate silos with departments that can supplement their missing knowledge and skills. It is also not uncommon for such investor relations programs to rely on investor relations agencies and consultants to, once again, make up for the missing skill set.

The person responsible for leading the investor relations department typically has a title of vice president of investor relations, in some cases, senior vice president or executive vice president. In large investor relations departments, there are also positions of director or senior director or associate director of investor relations. In those cases where the investor relations function does not have a dedicated department, the function is usually led by the director of investor relations. At the lowest level of the corporate chart, investor relations departments and programs employ professionals with titles like manager of investor relations, investor relations specialist, or investor relations analyst.

The average salary for a vice president of investor relations who is leading an investor relations department is over US$290,000. Mid-level investor relations roles pay on average US$201,000, and the manager/specialist/analysts jobs pay about US$140,000. According to a NIRI/Korn Ferry 2019 salary survey, the average IRO’s paycheck also varies depending on the industry and location. IROs working for consumer goods companies make on average US$284,375, while IROs in the life sciences industry make on average only US$226,974. The highest IROs salaries are in the northeast (US$267,824), and the lowest in the South (US$242,130).

Salary is not the only compensation that investor relations professionals receive. It is also common to collect some kind of performance bonuses: these bonuses average to about 30% of the IRO salary. It is also common to receive equity as part of the compensation – this may be stock options, restricted stock, or other types. The equity component on average varies from a quarter to a half of the base salary. All this makes investor relations a well-compensated profession. In fact, quite a few studies call investor relations the highest paid specialization in corporate communication.

The most common activity of investor relations professionals is providing information to the investors, shareholders, financial analysts, and regulatory agencies. In fact, investor relations professionals are responsible for assembling and filing key periodic reporting documents – quarterly reports (Form 10-Q) and annual reports (Form 10-K). These disclosure reports are required documents with specific guidelines for what must be included in them and when and how they must be filed. As a result, producing these reports is a complex and collaborative task. Although IROs take the lead, many other departments within the organization contribute as well. Working on these reports is almost a never-ending process – as soon as one quarterly report is submitted the work starts on the next quarterly report.

In addition to the periodic reporting, investor relations programs are responsible for nonperiodic filings, current reports (Form 8-K). If a company experiences a significant event that can influence its fair value, it is a responsibility of the IROs to notify investors about this event. IROs cannot wait for the next quarterly or annual report for such disclosure; in fact, in many cases, companies have only four days to inform the market about the new developments. In some cases, it may even be less than four days. Such events that can influence the company’s fair value and that companies must notify investors about are called material corporate events. Once again, IROs would work closely with the corporate legal counsel and other departments to prepare and file those reports.

In addition to the periodic and nonperiodic disclosures initiated by the company, it is also common for IROs to spend a significant amount of time responding to investors’, prospective investors’, and financial analysts’ queries. Since investor relations is built upon two-way communications, IROs must be available to and accessible by the investment community. IROs are the point of contact for those who are looking to better understand the company and have questions about its business model. Thus, IROs respond to email, phone calls, website communications, and other queries from the investors. As a result, disclosure is a mixture of proactive and reactive communications and is perhaps the most common activity for the investor relations professionals.

Related to disclosure is the IRO’s outreach to the investment community. It is common for IROs to organize and participate in one-on-one meeting with investors, where a current or prospective investor would have the chance to sit down with the IRO, CFO, CEO, and other top managers of the company in order to develop a really good understanding of the company. Such meetings are especially valuable for investors or financial analysts new to evaluating a particular stock. IROs also organize meetings with groups of investors, participate in investor conferences, and perform roadshows – large-scale events where top managers of the company visit its largest investors to provide updates on the company’s business.

All these efforts are part of building and maintaining relationships with the members of the investment community. Shareholders invest in anticipation of future returns and if there is no trust in the management team, the promise of the future returns does not mean much. Trust and relationships serve as the foundation for all the information being disclosed.

Sharing a wealth of information about a company and helping investors and analysts better understand a company’s fair value requires investor relations professionals to be exceedingly knowledgeable about the company, and also to have good working relationships with almost every single department throughout the organization. If a company’s research and development department (R&D) is on the verge of a technological breakthrough, it is important for the IRO to understand the details of this technology, and to understand how it may affect the future of the company and the industry in general. If one of the company’s factories is investing resources in buying new equipment, it is important for the IRO to understand why these investments are needed and how they might affect the company’s business in the future. If the marketing department lowers the price of the company’s best-selling product, the IRO should know and be able to explain what is behind this decision.

For example, if Tesla’s R&D comes up with a new “tabless” battery design, Tesla’s IRO should know what it actually means, what kind of technology is behind it, and how it is likely to affect future car design, production, and user experience. Only then, can IRO appropriately educate the company’s investors on all these details to help them properly understand how this new technology can influence the fair value of Tesla. As a result, a big part of an IRO’s job is learning about the company, meeting with key people at the company, being present at important meetings, traveling to various plants, facilities, and branches, and simply being in the know.

Finally, as previously mentioned, investor relations is a two-way communication function. The management team of the company makes IROs responsible for keeping them informed about the company’s shareholders and what they think about the company. The company’s management wants to know who the company’s shareholders are, how much stock they own, who is buying and who is selling the stock, what are the trading prices and volume, and what the reasons are behind the trades. IROs conduct shareholder research and monitor changes in the stock trading and ownership patterns. IROs may prepare reports for the management team indicating this information and provide additional details on large institutional shareholders. IROs also collect financial analysts’ and business journalists’ reports about the company competitors, and the industry, and provide that information to the management of the company. IROs are also responsible for collecting and, if needed, communicating any other feedback from the investment community to the company’s management. IROs are also involved in corporate governance issues, facilitating relationships and communication between the Board of Directors and the executive team.