Effective Communications in Investor Relations

Corporations worldwide work daily to increase the value of their stock for the investing public. In order to exploit this value, businesses must constantly make every effort to extensively communicate to their investors and potential investors. In view of this, investor relations are a vital part of business strategy, principally in the area of communication. Corporate departments involved with investor directions must make a necessary connection between efficient communication and company goals. Since communication is starting to play such an important role in investor relations, corporate communication programs are being created not only to participate in financial areas, but also to take part in media relations and other public communication. Ultimately, the best way for corporations to understand communications for investor relations is to look at an overview of the investor relations function, know how to organize investor relations, learn about investor relations programs and be informed on investor relations advancements.

Investor Relations Communications

The significance of a business structure that effectively implements investor relations communication is vital, especially when handling worldwide operations. Communication, especially external communication with investors, is imperative for corporate growth in an economy that is evidently based on information, instead of industrialization. Investors expect a high level of communication and candor from the companies that operate in their community. In order to fully employ the investor relations function through communications, entities must strive to adequately establish and organize interactions within an effective corporate communications department.

The most important goal for a business seeking to implement successful communication should be to place the entity in a position to efficiently work for investor’s capital. Management may be hesitant to fully reveal information, especially in situations where management decisions could be to blame for inadequate performance. However, businesses must seek to communicate information fully and honestly. Initially, companies should relay as much information as possible to investors and potential investors.  The more you tell, the more you sell. The more a company makes investors aware of its existence, business and strategies, the more likely it is to increase sales of its stock. Making investors aware doesn’t mean a spin campaign, but a program to communicate and educate investors about the company’s market, its strengths and potential as an investment.

The need of   communications for publicly held companies to understand the appropriate expectations for the company’s stock in the scope of earnings, trade and the market. These companies must also strive to lessen stock price instability. The objective is for the investor relations department to fulfill the need for communications guidance in management’s decision-making methods. To understand appropriate expectations for company stock and to decrease stock unpredictability, integration [of departments] is a more respected approach, with public relations leading the mix. Public relations drive strategy and execution.

In general, communication within investor affairs should seek to honestly maintain the public’s view of an organization. There are four general objectives of shareholder relations: accurately present a corporation’s attitude, mold the identity of the corporation, justifying the established identity of the entity and keep safe the legitimacy of the company. These objectives should seek to provide transparent facts for investors. Presenting facts in context, instead of in a segregated manner is also important. Also the communication must fulfill the investor’s immediate need to become informed and take action, as well as answer “interpretation and ‘what if?’ suppositions [that] may follow”. Investor relations officers should also be able to answer questions of   What’s next? or What does this mean for me?.

Communication through Investor Relations Programs

Communication within investor affairs is most effective when implemented through investor relations programs. Depending on the size and the activities of the corporation, the investor relations program may be in-house and consist of only a few officers, or it may be entirely outsourced to public or financial relations firms. Communication programs are necessary for the majority of businesses; they help to place market status of corporate stock in the hands of investors, as well as limit control of stock price by management. Furthermore CEOs and their individual corporate investor relations programs must recognize that the market followings themselves are tiered; thus corporate advertising, direct mail and even telemarketing strategies can be beneficial. These investor relations responsibilities are carried out through the establishment of investor relations programs. These programs help to connect the entity to society, as well as build a line of proactive and reactive relationships with investors.

Proactive Communication

Proactive communication is necessary for companies seeking to add value to their stock. Proactively pursuing investors, especially valuable investors, is a key role of the investor relations program. A hands-on attitude is positive for increasing productivity of a firm, as well as constructively driving the decision-making process for management and investors.

If a company isn’t proactive at all with its investor relations efforts, some investors are still bound to find it. But many investors have a limited amount of time at their disposal. They will, therefore, invest in those companies they have heard of, are familiar with and can trust. When a company is willing to communicate, it decreases investors’ uncertainty and risk.

Also communication strategies should be intact for both expected and unexpected situation, such as mergers and crisis situations. A company that takes on a proactive communication role with investor relations is likely heading towards investee success.

Reactive Communication

Another important aspect of investor relations programs is reactive communication, which focuses on making use of investor responses, concerns, suggestions and preferences. One large petroleum company, Voyager Petroleum, made a special effort to acquire Marmel Communications LLC, a well-equipped communications corporation. This business decision supported Voyager’s desire to reach out for investor input. Voyager Petroleum (2010) announced, “Our team is inviting all shareholders to [an] exclusive investor controlled forum. Our staff and members have requested that all Voyager Petroleum shareholders join our community and share their thoughts on the company, its development and future outlook”. The main benefit of a company choosing to practice this type of reactive communication is to understand the mindset of their investors in order to know where the company can change and improve. The corporate forum method used by Voyager for reactive communication is beneficial by providing an area for a wide variety of feedback on all aspects of the entity. Reactive communication through venues like website forums is also important because investor and investee information is able to be presented in numerous forms, such as video, audio, pictures and text. Website forums also support multiple languages. Corporations that require their investor relations programs to use reactive communication will more quickly know the key to success.

Investor Relations Advancement

As technology advances, all aspects of the business world advance; this includes investor relations and communications. As manufacturing, information storage and many other areas of the corporate world advance, communications to investors also advance. Some companies seek to only become more efficient with familiar methods. Companies can use modern-day automation to develop more effective communication through typical actions: using advertising, employee letters, collateral, client letters and press releases. Advancements can be made by effectively carrying out other general practice such as shareholder votes, calls and letters. Some firms still advance in the area of presenting, recording and reposting speeches to investors.

However, many modern-day businesses are advancing in investor communications directly by way of technology and the internet. Communication such as speeches is becoming outdated, and that most similar methods of communication provide information or form, but rarely both. In general, the internet is taking over the investor relations function by offering convenient form and necessary information. Companies such as Chevron are combining investor relations, communications and marketing through the use of emails, blogs and social networking websites. Chevron is among the many companies that not only hosts an official [investor relations] Twitter feed, but promotes it on the company’s “Media Resources” page online. Cisco is another company that hosts an [investor relations] presence on Twitter; the company has multiple Twitter sites, including ones such as “CiscoGeeks” and “CiscoEvents”.

Twitter is a social networking website where information is quickly and easily released live to the internet for millions to see on mobile phones, computers and other electronic devices. These companies also communicate to the public through Facebook, a social networking website available to anyone with an active email address. Firms that are jumping on the technological bandwagon are advancing investor relations communications exponentially. For a corporate department that thrives on providing timely and accurate information, the internet has revolutionized, and will continue to revolutionize, the investor relations function.

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