Imagine that instead of doing investor relations with all the constraints of an existing function, established practices, and a set of rules that may or may not make sense, you could reinvent the function completely, setting your own priorities. What would you do?
When IR leader asked several experienced IROs this question, some of the answers were surprising. No one asked for a bigger budget. No one pined for a much larger IR team. No one fantasized about cutting-edge IR technology tools (and in fact, a few mentioned that social media and the latest Internet developments were not particularly important). And although some IROs wanted to work smarter when setting up investor meetings, no one wished to dramatically expand travel budgets.
In fact, the most often-heard ‘wish’ concerned an opportunity to behave differently internally. Many of the IROs interviewed felt extremely grateful for their access to the C-suite. And where they hoped to place added emphasis was on time spent with internal business leaders and decision makers, drilling down deep into strategy so they could share any insights gleaned with analysts and investors.
“If you want to be valuable as the chief spokesperson, you need to understand and spend time with the business teams. That’s really how you can create value,” says David Carey, Senior Vice President, Capital Markets, for ARC Resources in Calgary. “Remember that investor relations is about relations.”
This desire to be granted the time to cultivate more meaningful internal relationships seems to be fairly widespread. In “The Future of Leadership in Investor Relations,” a 2015 survey by the Korn Ferry Institute, one example of “what IROs want” is “excellent inroads into the rest of the business.” The report notes that IROs are keen to build deep relationships with business unit leaders.
Looking Inward
Carey believes that the temperament of an IRO is a critical ingredient for success, and so while financial, communications and business knowledge matters, so does personality. “You need the temperament to build relationships internally,” he says. “You’ve got to work well with others.”
Carey, who retired at the end of July, says that his 20-plus years of IR experience have taught him that the travel schedule has to be balanced with spending time at headquarters, keeping a finger on the pulse of what’s happening internally.
“On the road, I’m missing important meetings in the office,” he laments. Carey, for instance, finds it invaluable to attend Tuesday morning meetings in which ARC’s vice presidents in engineering and operations present projects for approval. He not only gets a sense of strategic priorities but also bolsters his existing relationships.
For Carey, an IRO must foster successful working relationships in order to divert some investor questions from the CEO or CFO, leaving them more time to concentrate on operations.
Janet Drysdale, who was Vice President of IR at Canadian National Railway Company for seven years before becoming CN’s Vice President, Corporate Development, on March 1, describes herself as “a CN person first and foremost.” She attributes her IR success to her strong internal network. “The difference between top IR teams and the teams that aspire to be so is the depth of knowledge of the business,” she says.
Isabelle Adjahi, Vice President, Investor Relations and Corporate Communications, at WSP Global Inc. in Montreal, agrees. Eighteen years ago, when she found herself tasked with building an IR function, she began by learning “the company upside down.”
She continues: “The last thing you want is to start talking to analysts and investors when they know the company and you don’t know anything about the company. You look stupid.” She therefore began her crash course in IR by creating one-page, high-level fact sheets for retail investors. “Getting to know the company starts with the absolute basics,” she says.
Nearly two decades later, Adjahi views the opportunity to work closely with legal and finance as a distinguishing feature of an ideal IR function. By forging close ties with legal and finance, she is convinced that she can talk knowledgeably about the company’s growth strategy.
Take, for example, Brexit, an unexpected event with sweeping implications. For Adjahi, having in-depth knowledge of WSP’s British holdings, which account for 15% of operations, was critical so she could immediately quote numbers of WSP employees in the U.K. and other operational facts that were suddenly critical once the U.K. had voted to exit the European Union. “I had to know everything about operations in order to explain to the market what is the potential impact of Brexit,” she adds.
For Adjahi, IR success doesn’t come from high-tech bells and whistles but from old fashioned communications. “We’ve been presented with all these tools, but what works best is picking up the phone and being proactive and talking to investors.” She continues: “Glossy presentations? Yes, investors like those. But what they really want is that when you know something is about to happen – something like Brexit – you get in touch with them to provide a brief overview of market opportunities and risks.”
An Ideal Function
As many have observed, a finance background is increasingly prized in IR. In Korn Ferry’s survey, 31% of respondents had prior experience in investment banking and 25% are qualified chartered accountants.
That said, many seasoned IROs think the pendulum should swing back so that communications skills are once again given their due as well.
Lorne Gorber, Executive Vice President, Global Communications and IR at CGI believes that his IR role is nearly perfect because he isn’t expected to perform a purely financial role, but instead to “put the context around calculations.” He also has the liberty to spend time with investors interested in going deep, rather than those preoccupied with short-term results.
Others observe that reporting directly to the CEO is a key ingredient for IR success. Adjahi, who reports to her CEO, says: “I don’t want to be someone who provides access to the CEO and checks with his assistant to see if he has a spot available in his agenda.” The job is rewarding only if she can answer investor questions herself.
Drysdale expresses similar sentiments, noting “I don’t want to be a concierge service. With 20 years in the company, I didn’t want to be booking meetings.”
Gorber points out that IROs increase their odds of finding a satisfying IR role if they choose their employers wisely from a cultural perspective. For Gorber, it makes a huge difference that he reports to CGI’s CEO and that all employees in the company are owners (and therefore investors, too).
And yet the reporting relationship isn’t the only measure of corporate stature. Gorber is pleased that he is one of just 12 who sit on an executive team at his 70,000-employee company.
Although such an exclusive seat at the table may be rare, executive committee exposure is an attainable goal. Nearly two thirds (63%) of IROs in the Korn Ferry survey say that while they’re not formally part of their companies’ executive committee, they do attend ExCo meetings when appropriate.
Surprisingly, the size of the IR team doesn’t seem to matter to IROs when they imagine their dream scenarios professionally. Gorber is part of a three-person IR team. And Carey, whose IR team annually completes on average 300 one-on-one meetings, 50 group meetings, and 15-to-20 conferences, says that a team of three to four is perfect.
Shaping the Conversation
When describing their ideal functions, IROs mention self-determination with surprising frequency. Many are interested in actively shaping the terms of the investment conversations with both the buy- and sell-sides, encouraging analysts and investors to consider a longer time horizon.
Greg Waller, Vice President, Investor Relations and Strategic Analysis at Teck Resources Limited, emphasizes the importance of trying to get investors to take a longer-term perspective. One way he does this is by forgoing a more traditional investor day and holding instead a modeling workshop for financial analysts. Instead of just furnishing numbers, he enlists executives from accounting and marketing to help sell-side analysts create a better financial model for Teck. “We have long-life assets and we try and reflect those in the modeling,” says Waller.
Drysdale also advocates making the effort to initiate more strategic types of investor conversations. Since CN is compelled by its regulators to report volume data on a weekly basis, analysts issue weekly reports on the stock. “I want to be talking about our five-year history, not the quarter,” she says.
“The more attention I put on the short term, the more short term the investment perspective becomes,” says Drysdale. For this reason, she carved time from her hectic IR schedule to ensure that she was addressing a longer time horizon.
In the end, savvy IROs emphasize that the ideal IR function is one that operates with the company’s strategic interests front and center at all times. “Changes have come over time,” concludes Adjahi, “and so investor relations is really more and more a strategic position.”