The prevalent theme at last month’s Niri annual conference was that investor relations officers are facing an unprecedented time of change. Sure, much of this change is related to Enron. But then again, much of it is not.
IROs could make a long list of major changes that are now affecting them on a daily basis. There are all the Enron issues such as auditing, accounting and corporate governance.
There are issues of pro forma and goodwill. There are questions on executive compensation, specifically whether options should be expensed, and – the perennial question made more urgent by the recession – how much compensation is too much? There is a movement afoot to radically retool the sell side. There are sweeping reforms coming from the SEC, FASB, the NYSE, Nasdaq and others. The list goes on.
And lest we forget, there is still that niggling little problem we had even before this storm of reform: a bull market. Even if the high-minded hijinks of all those acronyms succeeds in creating a better, more confidence-inspiring market, the question is, ‘What if investors won’t join the party?’ as the New York Times asked last month.
While all this affects Corporate America in general, none of the problems are IR-specific. Investor relations officers have an additional level of concerns to deal with. One change advocated by Niri is a two-tier disclosure system. The first tier would be a plain English summary of information contained in the MD&A section of regulatory filings; the second tier would be the more in-depth information found in the filings themselves. The point is to put the important messages up front, followed by all the supplemental numbers and details.
Niri is speaking to the essence of IR: clear communications. This practice is ever more important during this time of unprecedented change. Now, more than ever, it behooves IR professionals to ensure their audiences not only have all the pertinent information, but also the appropriate context.
There is precious little the average IRO could do to build investor confidence in the whole market, but there is a whole lot to do on a company-specific level. This is the IR equivalent of the environmentalist’s adage, ‘Think globally, act locally.’ Just as one company – Enron – had more to do with undermining investor confidence than any other, IROs are now faced with the challenge of rebuilding that confidence one company at a time.
