Platform: The coming of age of investor relations - Investor relations is growing to meet the increasingly influential role of shareholders in corporate strategy, says Andrew Mills

In many ways the practice of investor relations is still a child of the massive changes in the structure of the financial markets since the mid-1980s.

In many ways the practice of investor relations is still a child of

the massive changes in the structure of the financial markets since the

mid-1980s.



A diminution in the role of the corporate broker, a rise in

institutional power and much greater visibility of performance

measurement have given birth to the profession. The question now is when

will it reach full adult status?



Investor relations first became recognised in the UK in the early-1980s

when companies realised that investors needed to learn more about the

businesses they were investing in. The industry is now on its way

towards achieving similar focus and importance within major companies as

that accorded to the profession in the US.



The increasing emphasis on shareholder value within large companies and

the debates on short-termism have all served to highlight the importance

of good investor relations. Conformance with good corporate governance,

as outlined by the Cadbury and Greenbury reports, is an increasingly

important part of the wider evaluation of CEO effectiveness and more and

more companies are seeking to excel in this area as they compete for the

investment pound.



The individuals involved in investor relations are responsible for

managing their company’s interface with the City.



A company’s investor relations effort should be seen as the way it

influences the determination of the cost of its capital by the

market.



The increasing concentration of institutional money into fewer larger

fund management groupings, the consequent growing interest in corporate

governance and the emphasis on investment performance have accelerated

the growth in the importance of investor relations.



Institutional investors now expect to have regular, direct access to

corporate management teams in order that they can assess for themselves

the competence of the people in charge and their strategy to take the

business forward.



Somewhat ironically, the investor relations professionals facilitating

this process are increasingly being drawn from the stockbroking and fund

management community as companies upgrade the skills they need in order

to handle the interaction with the City.



Not only do the investor relations professionals represent their company

in the investment community but they also have important internal roles

to provide strategic input and participate in mergers and acquisition

activity.



They drive communications with investors proactively, concentrating on

financial and strategic issues and setting the tone for the company’s

messages to its other audiences.



There is every reason to expect the relevance and importance of investor

relations to continue to grow. The ease with which investors can measure

the creation of shareholder value, along with the underlying company

performance, and the trends affecting corporate governance are

determining this.



The institutional owners of companies now have an efficient and direct

route into the top management that enables them to make their views

known on strategic and operational policies. This ability for investor

relations to close the communications loop has been recognised and will

be further exploited by both the corporate and institutional sides of

the equation.



However, the profession is still evolving and will only reach full adult

status when senior level investor relations officers are the norm in all

major companies.



Andrew Mills is investor relations director at Kingfisher and the

newly-appointed chairman of the Investor Relations Society



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