Q- What is the relationship between IR and PR? We’re considering consolidating the departments under our CFO but I am unsure about what the best scenario is, as IR is currently in charge of its own press releases and communications is heading the product and marketing-type announcements. I know that a lot of companies consolidate the departments, but wondered how best to share the responsibilities across both functions.
A- There is a strong relationship between the IR and PR (not to mention legal) functions. We all know how important it is to speak with one consistent voice to all of a company’s key stakeholders, and unifying the functions can help accomplish this.
It’s important to separate the issue of combining the function from the notion of who each function reports to. Although it’s very common for the IR function to report to the CFO, it is not very common for the PR function to report to the same, unless we are only speaking about the financial communications aspect of PR.
Dividing the responsibilities is an easier matter: financially material releases should be handled by IR, while matters relating to product publicity, community affairs and certain non-financially material corporate activities will be handled by PR. Key releases and various initiatives should be shared within the department as certain elements will be common to both. Final approval for financially material releases should be the responsibility of the CFO, while all others should come under the jurisdiction of the head of communications, with the company’s legal team playing an oversight role to minimize risk to the organization.
Q- What is the best way to handle pre-announcements, whether negative or positive? We’ve tried to handle these in the best way possible, but it seems the market has a tendency to overreact.
A- ‘Good news, bad news, but no surprises’ – this old saying sums up my philosophy regarding pre-announcements. In the never-ending battle to maintain and enhance management credibility, this philosophy is paramount. Unexpected volatility will always be a factor, but for many companies, this notion garners more respect from the investment community because the latter feels the company is working to provide visibility into its business as soon as possible.
As I don’t know the size of your company or its capitalization, it’s a little difficult to zero in on the reasons why your company’s stock acts as it does in response to such news. However, keep in mind that small caps that are thinly traded will be subject to much more volatility than larger companies. Your industry may also be in the early stages of its development, making it difficult to forecast growth with any degree of certainty. When there is uncertainty, volatility is always close behind.
Hulus Alpay is senior vice president of New York-based IR and PR firm Makovsky & Company.
