Dirk Lever, AltaCorp Capital Inc.
We have talked in the past about building relationships with analysts and investors, and once developed, these relationships need to be maintained. But what about managing the relationships? It is great to have lots of relationships, as it certainly makes the job easier; conversations can be candid and feedback obtained – but what if the relationship gets too close?
Big Centres Less Likely to be an Issue
The bigger the centre in which you live, the less likely you are to have relationships that could be considered ‘very close’, based just on the laws of numbers. But it can happen.
Smaller Centres Can be Part of Everyday Life
In smaller centres, especially ones where there is a concentration of companies, analysts and investors in a downtown core, like Calgary or Vancouver, things get a little more complicated. An analyst or portfolio manager can be your neighbour, a member of your club, your children can be close friends, or you may have grown up together.
Years of Industry Experience
Over the years, even the buffer of distance can be effectively eliminated by the sheer frequency of meetings. As lots of us spend many hours at work, on the phone and in meetings with analysts and portfolio managers, let’s face it, many people on all sides of the industry become friends, and sometimes very close friends. It is just human nature.
Perception and Reality
We need to concern ourselves with both perception and reality. We need to ensure that our relationships reflect the highest level of professionalism – that we do not favour our friends and cannot be perceived as favouring friends.
When is a Relationship Very Close?
A relationship is likely very close when we feel we could easily feel pressure to put friendship first. Now that does not mean we should not maintain the friendship; if I thought otherwise, I would lose a lot of friends. But circumstances like these pose a potential problem, if we are not both careful and considerate. Here is how I have managed this challenge. I consider a true friend to be one who would never put me in a compromising situation with respect to my work and career, and vice versa. There must be mutual respect, and if there is not, the friend may not really be as close as you think. Friends do not get friends in trouble.
Consider that Some People Could Otherwise Never Have Friends
People working in corporate finance, especially those in M&A, are always involved in deals where information must be kept secret. They need to keep all inside information to themselves and not even indicate the industry with which they are working. Similarly, senior executives often possess material inside information and they, too, must be able to enjoy a social life while putting certain principles ahead of friendship and family interests.
Common Sense Must Prevail
We could take everything in life to an extreme, but we need to achieve a balance. Sometimes work and social lines do become rather blurred, as I am sure most readers have experienced. If IR professionals attend social events with portfolio managers or research analysts, perhaps they should include another person or two as well, such as in-house counsel or a senior executive from another department of the company. We can mix business with pleasure but the reality is that all parties should be on their guard.
Hint: If You Are Uncomfortable, Pass
You really need to size up the circumstances ahead of time. If you feel the other party is not as guarded as he or she should be, the right course of action is pretty simple: politely pass on such invitations to avoid potentially awkward situations. Also, if you feel that others could misinterpret behaviour, politely pass on related invitations; a good friend will understand. Take time to consider both the reality and the perception associated with any invitation, and act accordingly. And remember, a true friend would never put you – or himself or herself – in an awkward or compromising position.
Always Follow Company Policy
No matter what, if your company has a policy on matters of personal dealings with portfolio managers and research analysts, follow it to the letter.
Still Not Sure, Ask for Help
If you are not sure what to do, discuss the issues with in-house or external counsel. The truth is that lawyers face similar challenges and yet they can manage multiple clients; by having ‘the talk’ you should gain both a helpful professional perspective and the understanding of someone who has been in your shoes.
Dirk Lever is Managing Director, Institutional Equity Research, AltaCorp Capital Inc.