Investor Relations

“If shareholder value is the key objective of a business entity, then positive perception is probably second most important value building block, performance being the first.”

A business, which generates positive cash flow year after year, still may not be able to create value if it does not manage its perception well. And it is information that forms perception. Business economics as well as investment preferences rapidly change that reliable information motivates restive investors. Investor Relations is regular communication between businesses and investors.

United States companies that maintain a high pace investor relations seem to have better credibility within the financial community. While the globalization of capital markets have widened the investment managers’ geographical horizon, has allowed money to flow across continents and capital markets are more accessible.

Managing investor perception is probably one of the most important corporate activities in recent times. “Several years ago, nearly two-third of the market value of a company came from the tangible assets it owned. Today, an analysis of the S&P 500 companies in the US shows that 85 percent comes from intangible assets. And these intangibles are not just value of brand or human resources but also corporate reputation built over years.”

Currently investors’ main concern is not just the evaluation of financial performance but how credible the numbers are.

“Any discussion on Investor Relations is incomplete without mention of GE, the world’s largest business enterprise by market capitalization. GE attributes much of its corporate success to its highly proactive and responsible investor relations program.”

GE was facing problems in regards to its strategy in 1988. This affected the stock, which caused analysts to state that GE did not know where it was going. Of course this caused the strategic capabilities to be questioned.

“Still, in 1988, to what the company believed was inaccurate perception, the CEO, Jack Welch accepted the partial responsibility by admitting that the real problem for the misperception could be GE’s communication failure rather than that of investors/media’s understanding. This acceptance by Welch was an exception to the norm, as corporate managers usually shy away from communicating strategic issues. Instead, they view Investor Relations as a financial communication exercise. While some fear of disclosing too much to competition while some feel it is not necessary to communicate strategic issues. The worst are those who assume that most investors already know their vision and strategy so there is no need to repeat them again.”

Investor Relations is more than financial communication. That investor relation requires companies and managers to reiterate their business and financial targets, while updating investors on the progress of the company. Communicating to investors the strategy of the corporation creates value with shareholders and improves financial performance.

Although Investor Relations have become “net driven” due to companies embarking on technology through the usage of corporate websites, emails in order to update and target investors. It is extremely important to have a balance between human interaction and technology and the ability to gather vital feedback from investors is basically what investor communication is all about. Therefore, for Investor Relations to be successful; the audience needs to be identified as well as the perception of the company. This will assist a corporation the capability of reaching out to current and future investors with a consistent and credible portfolio that will have a measurable impact on its market capitalization.


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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).

• 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.irmagazine.com - IR magazine

It is important that companies articulate accurate information to investors in order to develop a strong foundation and continue growth. Taking a moment to consider what experience and or knowledge I could draw upon regarding investor relations, I recall applying for a Program Director's position with a Boys & Girls Club several years ago. Looking back, this would have been considered one of those jobs that you felt as if you were thrown to the wolves. My first week on the job was simple, get to know the 'kids', check the programs out and come up with ideas for new programs. Also, the Executive Director (my boss) was on vacation that week. By Wednesday morning, I was informed that the Executive Director was fired. Wednesday afternoon, I received a call from United Way, a major donor to the Club, asking if the organization was going to apply for funding that year an the grant was due on Friday with an in-house interview the following week. With no experience in grant writing, I gathered the previous years grant and any information I could locate regarding the Club's programs. To my surprise the information in the grant and programs did not match, not even close to matching. From an investor's standpoint, this is an absolute nightmare. The only recourse I could do was to state the facts, as accurately as I could determine. Although this could have gone differently, I was grateful that United Way did grant the Club the same amount of funding from the previous year, although with stipulations for continued operations.