Mediterranean markets have been slow to grasp the concept of IR. Admittedly the profession is relatively new to southern Europe, but the region’s exchanges are seeing a growing concentration of flotations. Although IR is not as crucial in markets rife with companies that are majority-owned by families, changes are afoot, particularly in Spain and Italy. And as family industries get sold off, companies are gradually wising up to IR’s role in improving share price.
In Greece, however, only a small proportion of listed companies have IR divisions: not even a third of the 40 companies listed on the Athex Mid 40 has an official IR function. ‘Many companies fail to recognize the need for IR and are reluctant to fork out the cost for such a department,’ says the Iro of one large Greek industrial company, who asked to remain unnamed.
She believes large-cap companies have a greater need for IR as they have bigger budgets and more exposure to foreign institutional investors. ‘Even so, in many companies the role of IR falls either to the Cfo or, in the case of family-owned groups, a member of the family,’ she adds.
Spain and Italy are also home to companies that either undertake IR via their Cfo or don’t fully appreciate the need for it. ‘IR is most often seen as an appendix to the finance department; its usefulness in affecting the company’s perception in the markets is not entirely understood,’ explains Luigi Lubelli, Iro at Spanish insurance company Mapfre.
In short supply
Even businesses clued up on IR’s value are far from guaranteed a vast supply of competent candidates, however. Cristina del Castillo, Iro at Barcelona-based water company Agbar, argues that although Spanish companies are beginning to realize the need for IR, there are not enough able Iros on offer.
‘There is not much demand for IR professionals in the market, as listed companies prefer to recruit people internally,’ she explains, adding that Iros need to have been trained within the company and managers. ‘Trust is the most important component to consider when selecting an Iro because the role involves handling highly confidential information,’ she says.
Companies favoring external appointment of an IR professional over internal promotions often struggle to find candidates with enough experience. ‘Italian businesses are hard-pushed to find anyone with more than three years’ experience in IR,’ points out Giada de Mattia, Iro at Benetton Group. Even the more mature markets, such as France, are not exempt from this problem.
According to Anne Guimard of financial communications agency Fineo, the ideal candidate should have 10-15 years’ experience. ‘Unfortunately, we see only junior players,’ she laments.
There is currently little scope for injecting fresh blood into the also have a financial profile that enables them to speak the same language as the analysts and the pool of Spanish Iros. ‘Everyone constantly watches the market because the only way to change job is when one position moves to another firm,’ observes Rafael Cavanillas, the recently appointed Iro for budget airline Vueling, which floated on Bolsa España last year.
Southern European IR professionals tend to come from business administration and legal departments, with experience in financial research and investment banking. ‘In Italy, they typically start by doing IR for 60 percent of their time, before going full time,’ explains De Mattia. ‘A few junior positions are now being filled by PR experts, but these individuals will not necessarily be familiar with the IR industry,’ she warns.
Market drivers
Greece still lacks IR professionals with analyst experience, according to the aforementioned Greek large-cap Iro. At her company, the head of IR studied business in the US, another IR colleague studied economics in France, and she herself studied economics in Wales, then took an MSc in international banking in the UK. Most accomplished Iros in Italy, Spain and Greece tend to be business or economics graduates, or hold an Mba.
A specific IR course began running at Università Iulm in Milan in 2005-2006. ‘The masters degree was set up in a bid to address the shortage of Iros in Italy,’ says De Mattia. Yet barely a year later, the course has mysteriously been dropped from the curriculum. ‘We are reworking the structure to give it more of a professional orientation,’ explains course director Laura Pizzi.
The true stimulus for IR’s proliferation should not come from the creation of industry professionals, but from the market itself. Over time, southern European markets are becoming increasingly ready to absorb the IR industry. In Italy, regulation has gone from strength to strength since 2004, when legislation was passed in response to the major accounting scandal that brought quoted food company Parmalat to bankruptcy. ‘Some Italian businesses, like Telecom Italia, are very upfront with their IR now,’ says De Mattia.
‘Banking and insurance groups are more complicated sectors, so larger teams are needed.’ Benetton is one of the 11 listed Italian companies that are subjected to stringent Sox regulation, as it is listed on the Nyse.
Demand for Iros in Greece has been increasing, and there are currently twice as many companies with IR departments as there were three years ago. According to the large-cap Greek Iro this is partly due to companies performing better on the Athens Exchange since 2003, after a three-year down period.
‘Investor confidence has been restored and Greek companies are increasingly realizing the need for an IR department to attract foreign funds, represent management views and build relationships with the investor community,’ she remarks.
Since the Hellenic Capital Market Commission decision in 2000, Greek companies have been obliged to house shareholder service departments. The regulation was introduced to harmonize the legislative framework of the Athens Exchange with EU guidelines, requiring firms to issue press releases and fulfill requirements toward general meetings, shareholder registry and dividend payments.
The implementation of the European Transparency Obligations Directive has taken regulation a step further, despite the speculation it has provoked. ‘Legislation has become tighter and there is more need for IR departments in general,’ says the Greek large-cap Iro. ‘Borsa Italiana has been far more vigilant since the passing of the European transparency directive,’ adds De Mattia.
Making management aware
The precise nature of the Iro’s role is naturally decided by management, and profiles can vary wildly from company to company. As well as his Iro title, Lubelli is also responsible for funding on the capital markets. ‘The role of Cfo is split across several people, but we are aware this is not a common occurrence,’ Mapfre comments.
When Cavanillas worked as Iro at Transportes Azkar, he depended on the communications manager; now he reports directly to Vueling’s Cfo. ‘This is more typical and its puts me in a better position to get to the most relevant information from top management,’ he remarks.
As Vueling’s management owns 11 percent of the company, it has a vested interest in the stock performance. ‘Iros need to be familiarizing management teams with stock exchange activity and the company stock to help them make intelligent decisions and create shareholder value,’ says Cavanillas.
As more companies list and Mediterranean markets mature, IR will gain in importance. In the meantime, before candidates start training to better understand IR, Ceos need to acknowledge the benefits Iros can bring to company share price performance.
