New corporate climate has changed the IR role forever

The world of corporate communications is changing - rapidly - and it's especially affecting the investor relations discipline.

The world of corporate communications is changing - rapidly - and it's especially affecting the investor relations discipline.

Many of the changes, in some cases seismic, have been caused by the corporate environment of the past few years and a host of other securities-related headline issues. It also has been impacted by legislative and regulatory actions which continue to unfold, especially Sarbanes-Oxley and Regulation FD.

The changes flowing from the combination of these many events are bringing about significant changes in who oversees corporate communications, especially investor relations; and, what is demanded of IR pros.

Conversations with clients and other observations have made it clear that more compliance, legal, and audit executives are being assigned greater responsibilities for communications activities, including IR.

In fact, the communications function has become more holistic and the performance bar has been raised, twice. Financial-oriented pros must now communicate better, while communications pros must now know more about financial issues.

As an example, a senior IR exec at one major US-based global company was recently placed in corporate communications because the company recognized that, given the issues it faced, its financial story was crucial to the overall effort.

More broadly, the result of the change in oversight responsibilities also means that IR executives in general are becoming more involved in the broader communications function.

In addition, it is obvious that C-suite members are turning more to savvy corporate communications and IR executives as they face often uncharted - or at least cloudy - waters. They understand the need to be much more precise in what they say and how they say it. They also understand the need to be much more attuned to what they can say and when they can say it.

For those reasons alone, communications pros are being brought in under the information-tent earlier and are being provided with proprietary and critical material earlier in the process.

Meanwhile, given the environment, individual investors, as well as those on the institutional side, are asking more detailed and incisive questions than ever before - not only of senior executives, but of the communications and IR staffers. Even the basic post-earnings-release conference call has become much more challenging for communicators and requires more knowledge of the financial statements.

In fact, institutional investors appear to have growing respect for knowledgeable communicators and see them as much more valuable to the information process than even a few years ago.

All this means is that to be successful in the most senior posts in corporate communications today, practitioners must be much more knowledgeable about all those "unexciting" corporate areas where the caricature depicted the stereotypical man in the green eye shade with his sleeves pulled up by arm bands.

The senior-most executives in corporate communications will have to be much more knowledgeable about finance. They'll need to talk much more articulately and confidently than ever before about the financial aspects of the organization.

Moreover, it's not a stretch to suggest the most successful rising corporate communications executives of publicly traded companies are going to be required to have at least a working knowledge about financial modeling. For IR pros, of course, that already is a must in the list of credentials.

Given the landscape, too, communications professionals will have to make some hard decisions about whether they want stay on the path to the top corporate communications jobs.

And, part of the decision, regardless of years of work history, will require getting additional formal training in finance one way or another - either going back to school or, at minimum, taking an extensive series of classes in finance and similar subjects at specialized institutes and through specialized programs.

Those who are specifically planning to take the IR road to the top of corporate communications, meanwhile, will have virtually no option but to earn an MBA in finance or accounting - regardless of what other graduate degrees they hold.

It is rare today for a client not to list an MBA in finance as a minimum requirement for consideration in a senior IR role. Some also require that potential candidates have already passed licensing exams such as the Series 7, the basic registered representative exam, as well as other regulatory tests.

In short, on-the-job training is no longer a serious option.

  • Bill Heyman is president and CEO of Heyman Associates, an executive search firm.

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