There’s a simple rule to follow in investor relations: communicate effectively in good times and bad. Everyone knows it, few follow it.
The main problem is that most IROs are human and, after putting the rule through the self-interest filter, it can become a bit distorted. The result? A tendency to communicate wildly and freely when the news is good, but to shuffle around looking embarrassed and quiet when times are tough.
And times are undoubtedly tough. The tragic events of September 11 put paid to any talk of a US turnaround and there has been much tightening of belts across the globe ever since. Unfortunately, as any IRO from the airline industry will tell you, a lot fewer of us are tightening the belts on their planes. Aside from being incredibly bad news for the airline industry, it’s also bad news for effective investor communication across the globe.
In the immediate aftermath of the US attacks there was an understandable and desirable need to cancel investor events. Yet the impact on IR programs will be much longer lasting. Many meetings, roadshows and conferences are still being canceled and some annual events will simply drift off the calendar. Worst hit are likely to be those extra hand-holding meetings for foreign investors outside of the major markets.
It is not simply a case of IROs being scared to get on planes, although that’s affecting many travel plans. The economic slowdown is a far bigger factor. A survey of US companies conducted in late September by the Business Travel Coalition reveals that 97 percent of companies were then advising employees to cut back on business travel. Many had already sent out those memos prior to September 11. IR travel costs, in particular, are viewed as easy to scale back by a lot of chief executives because they don’t show hard returns and most IR meetings are over and above what’s required by financial regulators.
Some companies will use all this as an excuse to cut back on communication. The UK’s Financial Services Authority has reminded companies that they have an obligation to keep investors informed of ‘material developments in their business’ in the wake of the attacks.
It is almost as bad to think that some companies will benefit from terrorist attacks – but that is the nature of business. While airlines watch their stocks slide, defense companies are on the up. In the IR world, new demands have also been created and service providers are jostling to fill the gaps. We have not yet reached the point where the majority of IROs view videoconferencing and streaming video as serious tools of the trade. But if IROs are more reluctant to get on planes or don’t have the budget for global tours then they are likely to accept new technologies to bridge time zones. And if those technologies help ensure that companies continue to communicate effectively when the news is bad then that, at least, is a good thing.
