Not everyone can design an effective investor communications plan. Fewer still can focus the diverse talents needed to craft an IR strategy that ranks among the world’s best. Those at the top possess a remarkable blend of discipline and skill uniquely suited to the job at hand. But they also have something extra: an ineffable essence that binds these qualities together and that rubs off at the meeting point between company and investor.
How does an IRO know he or she has it? The standard metric of success – consistent, generous salary increases – is, of course, ‘standard’ for a reason. But a more fundamental – and perhaps less confidential – measure of job performance is the opinion of an IRO’s ‘external’ clients: investors and analysts. Their collective judgment is revealed each year at the IR Magazine Awards.
Since 1998, IR magazine has commissioned an annual study to uncover the Canadian financial community’s opinions on the state of IR. The IR Magazine Canada Awards, held in association with the Globe and Mail, are part of a global series canvassing over 8,000 investors and analysts in over a dozen countries and regions. This year, unlike previous surveys, each of the 250 Canadian sell- and buy-side analysts and portfolio managers was interviewed by phone. Together with the opinions of 215 retail investors and 107 US portfolio managers and analysts, verbatim comments are contained in the Investor Perception Study, Canada 2006. Institutional contacts were provided by Thomson Financial, while PrecisionIR from WILink conducted the retail survey.
Overall, the survey found that members of the Canadian investment community recognize IROs at Canadian companies as playing an important role in their daily working lives. However, a minority of respondents lament the fact that some IROs in Canada are not sufficiently senior to answer all their questions. Several say this problem can be ameliorated by raising the profile of the IRO’s role within the company.
‘IR in Canada is nowhere near on a par with the US,’ says one buy-sider. According to another: ‘At meetings, an IRO may accompany the CEO, but we never see them on their own – they just facilitate and organize meetings.’
When asked if IROs should present directly to the board, 60 percent of those who responded said ‘no’ – and many were even taken aback by the question. ‘That’s a job for senior management,’ says one respondent, echoing the prevailing sentiment. Another adds: ‘Keep them as far away from the board as possible. IROs often want to show how powerful they are, and they end up overreaching themselves.’ One respondent remarks: ‘The problem is IR people don’t listen to us very well in the first place.’
Listen and respond
In fact, the ability to listen is a key element to being a successful IRO – 40 percent of survey respondents list ‘communications skills’ as an effective IRO’s most important attribute. Smart IROs know that communication is a two-way street. For example, Scott Lamb, vice president of investor relations at TD Bank Financial Group, which won two prizes at this year’s awards gala at Toronto’s Royal York Hotel on January 26, attributes TD’s award for best IR web site to ‘listening to our clients’. ‘We pay attention to the kinds of questions coming into the IR department,’ says Lamb. ‘If we can meet that information need on our site, that just helps us to be more efficient, and our customer base appreciates it. It is key to have a two-way flow of information.’
Listening skills are also critical for Flora Wood, IR manager and corporate secretary at Harris Steel Group. ‘Most of the people we’re serving – analysts, institutions and retail investors – will tell us precisely what the most important thing is to them when deciding to invest in our company,’ says Wood, co-winner of the award for best IRO at a small to mid-cap company. ‘But they won’t necessarily tell us that in the first conversation. So listening skills are important to get enough of their trust that they are willing to tell us what they are looking for.’
Wood says an IRO’s key attributes vary by sector and market cap, but it is always necessary to be close to senior management. ‘You must be treated as someone who needs to know, as closely as possible, everything that management does, then filter confidential information and communicate a subset of the whole,’ he says. ‘The other approach some companies take is to educate the IRO only in what’s going to be communicable to the market. That’s not the best approach.’
One way Wood stays close to the loftier decision-makers at Harris Steel is via her role as corporate secretary. ‘The CEO who hired me gave me that title,’ Wood explains. ‘Frankly, I wasn’t entirely sure what that was and wanted to give it back, saying I just wanted to be an IRO. He said, insightfully: No. While it doesn’t make sense for you to be a director, you have to be someone who sits at the board level. As corporate secretary you are at all the meetings and learn from that experience. At the same time, that allows the board to have whatever degree of interaction with you that they want on the IR side.’
Strategic adviser
The ability to be both a corporate communicator and a strategic adviser within the company has also been a pleasant and exciting opportunity for Robert Noorigian, vice president of investor relations at CN. ‘Simply acting as a meeting coordinator could not
be a very rewarding role,’ comments Noorigian, who won the award for best IRO in the mega-cap category (CN also took the prize for best investment community meetings and the Ciri grand prix for best overall IR, mega cap).
‘Board members will go through all the analyst reports and other written material provided to them, but they also want to talk to someone who talks to shareholders and analysts all the time,’ Noorigian continues. ‘They want to know what shareholders think about the direction the company is taking. More interaction with the board is a trend that will become increasingly important going forward. I do presentations to the board and I expect more IROs will do so in the future.’
According to Janet Craig, director of investor relations at ATI Technologies (which won the Ciri grand prix for best overall IR, large cap) and winner of the award for best IRO at a large cap, the IR person the investment community wants is ‘one who knows the business, can speak with management, and is responsive, proactive and polite.’
‘You are in a constant feedback loop as long as you have open relationships with analysts and investors,’ adds Sheila McIntosh, vice president of IR at EnCana, which won awards for best financial media relations and best retail investor communications. In fact, EnCana regularly does its own formal (and anonymous) survey of the investment community. ‘We do surveys at the end of each investor day – what worked and what didn’t, and suggestions for next time,’ says McIntosh. ‘Meanwhile, when we are talking to people on the phone, we can get a sense of whether people found things like conference calls informative or not.’
Another trait among investor relations officers that is highly valued by the investment community is specific industry knowledge and company experience. As one survey respondent explains: ‘The more familiar an IRO is with the company and industry, the more advantageous it is.’
Epitomizing this breed of IRO is Kim Nelson, investor relations manager at Langley, British Columbia-based biotech AnorMED. A former AnorMED scientist who spent five years in research, Nelson attributes her good relationships with analysts and investors to being able to answer questions with credibility. ‘Biotech is a difficult industry, and much of what we talk to investors and analysts about is our clinical data and the science behind the research,’ she says. ‘Being able to articulate that is a definite benefit.’
All in all, the survey results confirm that the anatomy of a successful IRO is composed of more than just communication skills and a flair for organizing meetings. Future award winners will be taking note.
