Posts

Socially Responsible Investor Relations

Companies are often encouraged to disclose their do-gooder ways when it comes to environmental, social and governance principles, known as ESG. After all, an increasing number of investors are basing their investments on these traits. More than a quarter of the $88 trillion assets under management globally are invested based on ESG policies, according to a McKinsey & Co. study. So why aren’t investor relations professionals held to similar standards? IR folks must confront ethical issues daily.

We are often conduits to investors making significant decisions that have implications for people’s retirement or college tuition savings, and yet there isn’t a governing body (except for the SEC in extreme cases) that consistently assesses the way IROs handle their business. For example, how often do IROs tout financial results when the results actually suck? Obfuscating the truth does no one any favors.

To get the conversation going on what principles should apply to IROs from an ESG perspective, following is an attempt to construct the beginnings of a manifesto for socially responsible IR:

Put management teams in front of the right investors. We’re all busy and stressed out trying to please our bosses. Don’t let lack of genuine investor interest lead you down the path of quick-fix meetings with toxic money.

Don’t bury the lead. If financial results are bad, do not wait until 10 paragraphs later to discuss why in a news release.

Call investors back in 24 hours. Who you gonna call? Your investors. Yes, they are important no matter how big or how small. Never let too much time pass before calling them back.

Think about what’s in the best interest of shareholders when advising management. Simple rule to follow but difficult to implement when agendas conflict.

Attend investor conferences strategically. Management teams should only attend investor conferences if they serve to enhance exposure among an important group of investors. Do not attend conferences if the schedule is anemic.

Provide guidance that is realistic. Guidance can be a very slippery slope. An honest assessment of what the company can achieve will enhance credibility.

Do not underestimate the power of social media. One word: Tesla.

Rely on your colleagues to tell a company’s story. From CFOs to CMOs, your colleagues can help you craft a compelling narrative. Monologues are boring. Breathe life into a story with different voices.

Announce news that’s really news. Or else it’s just noise.

Speak up. IROs are often privy to conversations that may have dire consequences for the company and its shareholders. Never withhold information from people who can help rectify an issue.

— Evan Pondel, epondel@pondel.com