Once upon a time, Asia needed IR like a fish needs a financial advisor. In the heady days of economic skyrocketing, when growth could be mapped against the north face of K2, what was the point?
‘IPOs were always oversubscribed,’ remembers Sue Gourlay, investor relations director at financial PR and IR agency, Forrest International in Hong Kong. ‘Red chip [state-owned] companies would hold results briefings and 60-70 analysts would turn up without them doing a single thing to bring them in.’
The inconvenience of a whopping financial crisis popped the utopian bubble and represented a firm slap across the face of corporate Asia. That stung, putting paid to the blase approach fairly sharpish. Suddenly, the notion of investor relations acquired importance and interest in the discipline has since blossomed. ‘The economic downturn has provided something of a catalyst,’ considers Gourlay. ‘Companies now know that they have to communicate to stand out from the pack.’
Moreover, even those companies which already harbored IR leanings have had to accept that investor relations is a bigger deal than they first thought. ‘People are learning that IR is not just about pumping up share price. It’s about good communication and managing expectations.’
Good intentions
An awareness of the value of IR is all well and good but there’s an old adage that reads: the road to continued Asian financial crisis is paved with good intentions. IR needs IROs. And, despite a global trend toward genetically modified farming, they don’t grow on trees.
‘There is a lack of expertise,’ says Gourlay. ‘There are very few people around who combine financial knowledge with good communication skills. The financial knowledge is fairly common but it’s the communication skills they lack.’
Felix Miao, managing director at Citigate Dewe Rogerson in Hong Kong, accepts that the region lags behind Europe and North America but offers some mitigation: in relative terms, Asian IR is still in its salad days. ‘The function over here is still pretty young,’ he says. ‘It’s only about ten years old. Most of us are learning by making mistakes and firms are still getting used to it.’
Besides, perhaps the current scale of IR in the west has distorted reasonable expectations. And people’s memories are short. ‘When IR was taking off in North America and Europe, it had similar problems,’ Miao reminds us, ‘and it took a long time for people there to learn the ropes too. In the blue chips over here, IROs are pretty decent but they had to pay their dues over ten years or so and learn by trial and error. IR in Asia is certainly improving.’
Gourlay concurs, but suggests the premise that Asia has switched on to IR and is now frantically scavenging for quality IR professionals isn’t quite reality. She is at pains to add, ‘I wouldn’t overstate this growth. There is a greater interest in IR but I’m not sure how deep this runs.’
Fudging it
What Gourlay will accept, though, is that a veritable shortage exists. In what is still a fledgling function in Asia, IR vacancies outweigh IROs. So who’s filling the breach? It seems that many companies are fudging the issue. Be it down to recruitment apathy, misunderstanding of the function, or pragmatism, many Asian companies are simply foisting their IR programs onto other reluctant, often bewildered, staff.
‘It’s common for the CFO or finance director to run the program,’ explains Gourlay. ‘Either that or it’s dumped on the PR department with the CFO overseeing it. It really is quite rare to find a company with a dedicated investor relations function.’
Rare but not impossible. ‘We do have decent IROs over here,’ insists Miao. ‘There are a few old timers, particularly in blue chip companies.’ But he does accept, ‘In most small and mid-cap companies, the job is either pushed onto the corporate secretary or the public relations department.’
On the other hand, there are Asian companies who will look fairly far afield for quality. Some take their investor relations functions seriously enough to draft in foreign talent. ‘In terms of IR expertise, there really is no-one homegrown in the area,’ remarks Gourlay. ‘We tend to contact our affiliates in the States and say, If you know of any good IROs who wouldn’t mind moving to Asia, then let us know.’
Canada and the UK are also fairly fertile breeding grounds with mature investor relations communities. But, with many Asian companies racing Stateside for their secondary listings, the US would seem to be the target-rich environment for those hunting IR professionals with trans-pacific savvy.
Miao, however, doubts the region will see an incoming tsunami of western mercenaries. ‘The thing is,’ he points out, ‘families control the majority shareholding in many Asian companies. For example, only around 30 percent of Hong Kong businesses are publicly floated; the remainder are family-held firms. Even the best IROs need the absolute trust of the board and the problem with imported IR professionals is that the board often thinks Can you trust a foreigner? That’s a huge dilemma for Asian companies and probably the main hurdle in employing imported investor relations officers.’
‘There’s certainly a natural reticence in Asia,’ suggests Gourlay, ‘especially in firms that are family-owned or run.’ And it hardly needs saying that such reluctance is not a cosy bedfellow with the qualities of openness and honesty that characterize good IR.
Get in training
Investor relations is a speciality. But it isn’t so tricky that the necessary skills are god-given. Surely there’s scope for training in the discipline? Right, but for Gourlay one of the most worrying things about the dearth of talent is the lack of urgency it musters in the region. ‘Nothing is being done to train people in investor relations,’ she says. If this is accurate then Miao hints at the reason why: it comes down to simple cost-benefit analysis, he suggests. ‘Training does tend to go on in IR agencies,’ he says. ‘But this leads to the next problem. Once people are trained-up, they just leave and move to in-house positions.’
Anyway, according to Miao, an insufficient pool of technical nous isn’t the problem. The issues, he reminds us, are historical and cultural. ‘Learning the ropes is easy,’ he argues. ‘You can pick up the details of disclosure laws and financial regulations, etc, very quickly – there are securities law training sessions, for example, every week. The difficulty is getting the trust of management. If you conducted a poll of all public firms, you’d find that they’re very insular and that’s what determines the amount of information an IRO is trusted with.’
Lacking the means
Simple economics also acts as ballast to the rise of the Asian IR industry. The ironic effect of the region’s financial crisis was that, something like alcohol, it managed to provoke the desire but take away the performance. Impoverished firms lacked the means to fully embrace the IR revolution. The region’s blue chip companies have a shareholder base that unquestionably requires IR and they have the means to fund it. For other companies it’s something of a luxury – but even they fork out something. ‘You really see the gap when you start looking at mid-cap companies on down,’ explains Miao. ‘In Citigate Dewe Rogerson’s Hong Kong office, I’d say 95 percent of our clients are state-run enterprises which can’t afford full-time investor relations resources.’
To talk of the IR recruitment process in South east Asia is affording it more structure and method than it actually possesses. There remains little structure and little common method. Many companies either shun the function through distrust or indifference. Others refuse to identify it as a distinct function at all, fobbing it off on the public relations or finance arm of the firm. Others still – those with an attitude of openness – might shop around for experienced hired help from abroad, in lieu of an adequate production line in their own country. Others look on enviously from the wings, unable to shell out on their own full-time, in-house IRO.
But, as Miao points out, these are early days for Asian IR. Experienced practitioners in the west who fancy a turn in Asia might find themselves in high demand in the future.
