Calling all CEOs - are you investing in investor relations?

Investors play a vital role in the success and growth of a company of all sizes and it’s imperative for companies to maintain strong, transparent relationships with investors. The good news is that management teams can outsource the investor relations function from early on up to the point when an internal investor relations department makes sense.

The Investment Relations Society of South Africa defines investor relations (IR) as the communication of information and insight between a company and the investment community. This process enables a full appreciation of the company’s business activities, strategy and prospects and allows the market to make an informed judgement about the fair value and appropriate ownership of a company. 

CEOs and CFOs can put some time back into their pockets when they plan their communication strategies and investor interactions a bit better. This will allow them to devote more time to activities that contribute to reaching the goals they have set for 2023.

According to a report by Mckinsey and Company, a CEO or CFO should devote time to communicating only with the most important and knowledgeable intrinsic investors. Although it is the responsibility of top management to engage with and inform stakeholders, it is not their responsibility to prepare and compile the resources needed for these interactions - no matter the size of the company. 

The investor relations department or an outsourced investor relations professional should identify the most important investors, review the list regularly, and protect management from the telephone calls of analysts and mechanical investors, who are not a high priority. 

Executives should talk to equity analysts only if their reports are important channels for interpreting complicated news; otherwise, investor relations representatives can give them any relevant data they require, if available.

Availability of information, or rather the lack thereof, can tie executives up when it comes to communicating with investors. This is where technology can play such a critical role. Information management systems and procedures allow a third-party access to leverage existing data to compile the relevant information and create successful investor relations communications. By developing a clear communications plan and utilising systems, you can keep in contact with key stakeholders without constantly tying up your key executives.

JSE-listed organisations such as Purple Group, Renergen and recently de-listed PSG are examples of investor relations teams who have built strong relationships with their stakeholders and regularly communicate outside of traditional bi-annual financial reporting. These teams regularly stayed in contact with stakeholders and developed a thriving two-way dialogue with new and existing shareholders, feeding a cycle for successful growth in the organisation. While their senior executives regularly participated in the dialogue, the communications team were aligned with the messaging to be able to field and action enquiries. 

A.G. Lafley, the retired CEO of Procter & Gamble, writes in a Harvard Business Review article that the CEO is the only one that is held accountable for the performance and results of the company, and not just according to its own goals but also to the measures and standards of diverse and often competing external stakeholders. Taking time to report on the performance stalls their progress to take the company forward. 

To reach your business goals in 2023, invest your time wisely. Do the work necessary to ensure that results can be utilised to tell a story of value investors feel comfortable to support.

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Ané Bresler is the head of Decusatio Investor Communications Solutions, a division of advisory firm Decusatio. She is responsible for working with organisations to deliver high-quality communications strategies to their stakeholders. You can reach her on ane@decusatio.co.za .