The recent Michael Jackson trial underlined the dangers of having valuation tied to a name and face. Despite the not guilty verdict, the value of Jackson’s brand has been sullied by accusations of child molestation and his admitted obsession with all things fantastical and child-like. And all those who profited from his pop icon empire will feel the loss.
Which brings us to IR. One of the strongest arguments for the function being strategic is that it gives analysts and investors someone to talk to when the CEO is unavailable, indisposed or out to lunch, both figuratively and literally. What if your CEO admitted to a favorite pastime of spending hours up in trees? Investors might not feel as comfortable with his or her leadership strategy or even start hoping that someone else was steering the ship.
That’s an extreme example but there seems to be an inordinate amount of value linked to CEO reputation, which can be a dangerous thing. As the face and name of a public company, a CEO’s credibility is inherently tied to share price performance – so when he or she goes down, so does shareholder value. This effect can be mitgated in various ways: by building the public profile of other members of top management; by having a robust succession plan; and by ensuring the IRO is seen by the investment community as a credible source and someone who has insight into the company’s strategy and prospects.
One IR person recently recounted a story about a European roadshow where management decided to take off on holiday in the middle and left this person to complete the trip on his own. While not ideal, IR should be prepared to do investor and analyst meetings solo and should work to develop a relationship with the buy side and sell side that can withstand any changes at the top.
While they may demand access to the CEO, investors and analysts really want detailed and informed responses and might slow down on their requests if the IR person is fitting the bill. After all, celebrity CEOs and pop icons may come and go but IROs stay for the long haul.
