The relationship between IROs and their company’s board may not always be smooth, with each serving audiences and stakeholders that have different demands and priorities.
But Ilja Graulich, head of investor relations and communications at mining resource company Tharisa, says his company’s board greatly respects the direct link he provides to Tharisa’s investor base.
Like many IROs, one of Graulich’s main responsibilities is to help spread the company message and ensure it is ‘airtight’ when addressing investors. Feeding back what investors want to the board helps cement that line of communication.
‘Mining is quite easy, but also quite complex as there are a lot of geopolitical issues, local issues and infrastructure problems from our more exotic locations,’ he explains. ‘As an IRO you need to be aware of all these challenges and be able to speak to the board and keep it informed about progress in dealing with ESG matters that arise.’
Would he want a seat on the board himself? Graulich says for him and where he works, the answer is no, but he thinks IR should sit high up within the company structure.
‘I’m very conservative on how many executive directors you should have, and how many non-executive directors have an understanding of the governance side of things,’ he adds. ‘The IR role is certainly part of the very senior management team, but I don’t think there’s a need for the role to be at board level as we have so much access to the board anyway.’
Serving the investment community
Thinking about ways in which IR professionals can make themselves more visible in the eyes of the board, Graulich says they need to be very conscious of what the company does and be as accessible as possible to investors, which will always have questions.
‘You need to understand what the investor is looking for; I don’t think there’s a particular skillset [for that] but what I can say is that accessibility is important,’ he says. ‘You are here to serve the investment community. I don’t have a mining technical background, but I’ve been doing this for more than 20 years so I understand mining well enough to answer questions investors may have.’
Echoing Graulich’s sentiment, Fredrik Erlandsson, senior vice president for corporate communication and investor relations at Thule Group, an outdoor and transportation products company, says being able to speak to investors daily is key. Feeding back the investor perspective is also crucial to help the firm’s board with decision-making and the governance process.
‘I always say the biggest threat when communicating a topic is if you know the topic too well, you know it probably a million times better than the person who knows it second best,’ Erlandsson says. ‘When you then try to explain or comment on your area of competence, there is always a major risk that you get so [bogged down] in the details, it becomes difficult for others to understand and adds only a limited amount of value. So IROs can help explain the topic and message a lot more clearly.’
When discussing the importance of IR in the eyes of the board, Erlandsson adds: ‘When I was hired, my boss at the time asked me why I thought I was in the group management team, and I said, It’s because I’m vice president of corporate communications. Then he explained that it was because the IR role has valuable insights to bring to the table.’
Lighthouse approach
Considering the strategies and initiatives IROs can employ to bolster their visibility and impact within the company board, Erlandsson says it’s important to think not only about IR in general but also the business as a whole.
‘First of all, understand the bigger picture and take some kind of lighthouse approach to the business in which the shareholders play an important role,’ he suggests. ‘But also keep in mind all the other things happening, such as wider ESG measures, global regulation and macroeconomic trends.’
For Robin Sidders, head of investor relations at insurer IGI, the IR profession is key for providing critical feedback to the board on how investors think, make investment decisions and what’s important to them. ‘The IR person is there to provide the shareholder perspective, the investor perspective, and can influence and challenge not just management but also the board,’ she says.
When asked how much communication the IR role should have with the board, Sidders says the IRO should be engaging with the board on at least a quarterly basis.
‘The board should have a high level of feedback from the IRO in order to make the right decisions,’ she explains. ‘IROs provide balance. They understand the priorities of investors, how investors think, how your observers are going to respond or react to a decision. It’s up to the IRO to find the best answer for investors with the least negative impact. It’s a challenging role.’
Sidders says the idea of an IRO entering the boardroom has been floated for some time. ‘I do hear from IROs from time to time, depending on what company they’re in, about where IR should sit and I think it’s important for the IR professional to have a voice and influence with the board but in the right context,’ she says.
For IROs with an eye on the boardroom, Sidders says asking questions is the best start. ‘Talk to your CFO to understand what the IR role really does, what the scope of the IR responsibility is, the regulations you are governed by and where the IR role can grow to,’ she says.
‘I’ve been doing this for a long time and some of the most helpful conversations I have are with other IR people. There are courses you can take to learn the basics of income statements and other financial information. Talk to the operational people in your company, sit down with them and figure out what drives their particular area of the business. Don’t wait for an invitation because there will never be one – you have to find out the information yourself.’
Lifelong learners
When it comes to taking courses to learn the basics, one IR professional who has already taken action is Andrea James, an adviser at manufacturing company Axon Enterprise, who also led its IR program for six years. She took part in a board-readiness course this year.
‘We are all lifelong learners, no matter how much great experience we have,’ James says. ‘During my time in senior finance leadership roles, I came to admire our board greatly. My work with our board inspired me to pursue board service.’
She agrees with Sidders that the work of an IRO is highly relevant to board work. ‘It is common for an IRO to regularly interface with the whole board, the audit committee, the compensation committee and the M&A committee, for instance,’ she points out.
‘As a key member of the finance team, the IRO has a front-row seat to many board interactions and brings a shareholder lens to the table. As a baseline, any high-performing IRO will bring financial literacy, how to evaluate a corporate strategy and how shareholders think about governance matters to his or her board. These are competencies boards are seeking.’
Talking about adapting existing IR skills to fit the board room, James says the work an IRO does across constituencies, including with the investment community, the company’s general counsel, the SEC reporting team, the CEO and CFO, ‘fosters highly relevant skills for board service’. IROs also contribute to the board by serving as one of the front lines of activism defense and by remaining intimately familiar with proxy advisory opinions from ISS and Glass Lewis, she adds.
During proxy season, James says the IRO should be highly involved in how shareholders vote, ensuring that directors are re-elected as well: ‘It’s important to understand the role of the board of directors and how the IRO can assist as the key liaison with shareholders. The benefit of such activity is not always immediately apparent, but I promise that it matters greatly in ways that go beyond stock valuation.’
Offering some final advice to IROs who may want to enhance their visibility with the board, James says that while IR professionals may be familiar with how shareholders evaluate a company’s financial statements and strategy, they may not be as familiar with ‘the governance side of the house’.
‘This is an area any IRO can level up and seek to add more value,’ she concludes.
