The history of Investor Relations can look back on a 66-year history. Its origins date back to 1953, the year in which the US company General Electric launched a communications program aimed specifically at private investors. Its name: Investor Relations (IR).
Since then, a lot has happened in the area of responsibility. Today, communication with private investors is only a small part of our daily work. Whether annual general meetings, analysts’ conferences, annual reports, roadshows, investor presentations, analysis of analysts’ reports & financial market data or the subject of credit rating.
Investor relations today is no longer a purely outward-looking activity, but is also oriented towards the company: decision papers must be prepared for the Management Board and communication with the Supervisory Board must be maintained. The Executive Board and Supervisory Board are trained and informed about how investors and analysts perceive the company and its management. Contributions are written for the company magazine with the aim of giving the company’s colleagues a greater understanding of the subject of IR.
As if these extensions of the area of responsibility of the IR were not yet sufficient: In particular, the area of regulation has significantly expanded the IR area of responsibility through ever stricter regulations: ad hoc announcements, directors’ dealings, voting rights announcements, advance announcements: The requirements and stakeholder groups are becoming more and more numerous: the legislator, the stock exchanges, the Corporate Governance Code. Many companies today can hardly avoid capital market compliance in order to ensure that the numerous rules are actually observed, that employees are adequately trained and that colleagues are informed. This also includes appropriate controls to prevent misconduct by employees with regard to capital market rules.
As if all this were not enough, further issues are rolling towards IR: shareholder activism, the effects of MiFID II & Corporate Access, ESG, passive investing, further expansion of regulations:
Shareholder Activism: Here, shareholders with a substantial share of voting rights put the management of a company under pressure through massive demands. Such claims can go as far as the dismissal of members of the Management Board or Supervisory Board. In this context, IROs often have the task of analysing investors & media and their inquiries in detail and reporting them to the Management Board & Supervisory Board. “Influencers” have to be monitored, media contacts have to be cultivated so that activists can use the media less effectively for their purposes. The news situation on potentially risky topics must be reviewed and changes in the shareholder base must be monitored regularly.
MiFID II & Corporate Access: As MiFID II reduces the number of sell-side research, roadshows, organized by the sell-side and corresponding conference invitations for more and more companies, the IR departments themselves have to carry out investor targeting. This means organising roadshows themselves and seeking direct exchange with investors.
ESG: „Ethical pressures boost ESG funds“, was the title the Financial Times gave to the latest developments in the field of sustainable investments only in November 2019. And these funds are invested more & more in companies according to sustainable criteria. This leads to a further expansion of IR work: sustainability reports, sustainability roadshows, questionnaires from rating agencies, commitment investors who want to assert ‘their view of sustainability’ among companies.
Passive Investing: Passive investments continue to rise. In the past 10 years, for example, unbelievably high inflows of funds into passive investment vehicles have been observed. For IR, this means preparing for another group of investors. Because – even if it is difficult to influence a passive investor – he still has voting rights and can possibly exert a decisive influence at the Annual General Meeting. Long before the Annual General Meeting, it is important to seek contact with passive investors and address issues such as remuneration and governance aspects.
Further extensions of the regulations: Challenges include the Shareholder Rights Directive, an update of the Stewardship Code in the UK, new laws on employee representation in France, the trend towards corporate purpose, i.e. the setting of higher goals and a deeper sense of enterprise, and legislation on M&A. Further adjustments have been made in the area of overboarding.
Oh yes, and then communication with private investors & institutional investors is also a very important aspect. ….