I CAUGHT NYSE-Euronext CEO John Thain’s presentation at the NIRI Annual Conference last week via webcast and found his views on the challenges facing the U.S. investor relations profession in an increasingly global market most interesting.
He spoke at some length about the changes taking place for global stock markets and about doing investor relations in an environment of 24/7 trading and international shareholder bases.
During the Q&A after his presentation, Thain said he believed IR departments would require more resources so that analysts in different parts of the world would have constant access to companies’ IR departments.
He said U.S. companies probably should think about setting up international offices to provide analysts with access to someone locally so that they’re not calling New York at 3:00 a.m.
While it was good to hear Thain recognize the need for IR departments to have greater resources, there are two things I didn’t like about his remarks.
1. IR is not a glorified call center function for a select few
Thain’s remarks suggest that he, and likely many senior executives at public companies, see IR as a glorified concierge or call center function for a small group of professional analysts and portfolio managers. IROs answer the phone so that senior executives don’t have to.
Although it is probably a true reflection of what IR is today, I don’t like that definition. It is too narrow and portrays the profession as elitist. It implies that companies treat people differently based on their perceived importance and professional status.
I also think it’s becoming increasingly difficult for IR departments to define who is an analyst or professional investor and service them all on an individual basis.
To be clear, I accept that analysts and professional money managers need someone to call with their questions. And I believe it’s important for companies to have highly knowledgeable IROs available to help them. But that shouldn’t be the only focus.
A successful IR department must service both those with the power to move a company’s stock on their own, as well as the multitudes who can move the stock when they act together. Paying too much attention to one audience at the expense of the other is to fail at the job of investor relations.
Interestingly, there were far too few sessions at the conference focused on how to communicate with the multitudes. One was a session on new media by David Meerman Scott, and he gives the impression that many in his audience sat with folded arms staring at him with hostility.
2. Before opening IR offices abroad, use the Web
Before companies start thinking about setting up international IR offices to answer phone calls, they could do much to address the needs of ALL their investors — at home and abroad — by making better use of technology to improve access to timely, relevant information. For smaller companies, this may be the only option.
Certainly, there may still be a requirement to have IROs stationed abroad, but this is an expensive approach that only makes sense when a significant portion of a company’s shareholders are located in a particular region.
We already have a model for this among large-cap interlisted foreign companies that trade in New York. Many have U.S. IR offices with IR headquarters back in their home markets.
But I also know that many of these companies will tell you that the Web is probably their most important channel for communicating with their investors. And for that reason, they’ve put substantial resources into their sites, including having dedicated investor relations website managers.
Based on our assessments of international companies’ online corporate reporting practices, it’s clear that companies outside of the United States are much more aware and ready for an era of global investor relations. Northern European companies are leaders in this regard, while some of the bigger companies in Canada, Japan and even emerging markets like Brazil and South Africa are catching up.
As I reported recently, foreign companies delisting from U.S. exchanges and ending their SEC registration say that easier cross-border trading, international accounting standards and improved corporate governance have reduced the need for them to maintain multiple listings.
These companies are confident that they can attract foreign investors without having to have foreign IR offices or even foreign listings. When I think of U.S. companies that could say the same thing, the list is very short indeed.