Are IR teams becoming too powerful?

The investor relations industry has come a long way over the past 40 or 50 years. At the beginning, the function was manned by ex-financial hacks scribbling out press releases, while the reaction to someone who said they did IR was: ‘yes, but what is your full-time job?’

It’s a long way from the well-staffed, highly sophisticated departments now operating in public companies. As noted in our most recent cover story, the team at Roche features a heady mix of doctorates, language skills and MBAs.

The question that arises is: have companies – and IR departments – become too powerful when it comes to influencing market sentiment?

At a recent IR conference, retail analyst Tony Shiret complained that, on results day, the analyst is like one man fighting against an army of advisors employed by the company to push its message.

(His solution – not very surprising for Shiret – was guerrilla warfare, for example ambushing the CEO in a shouty manner at the results announcement.)

The audience at the conference concurred; over 50 percent said in a live poll that companies shape market opinion more effectively than analysts or journalists.

There was more evidence in today's Times, where Martin Waller writes that ‘an entire industry, investment relations, has grown up to lead them [analysts] gently by the hand to the “right” conclusion’.

Waller also notes that analysts ‘are incapable of producing their own “forecasts” without an awful lot of prompting from the companies they claim to understand so thoroughly’.

Companies have always been in the strongest position when it comes to shaping sentiment. They control what information is released and the manner in which it is disclosed. But, with the decline in quality of equity research witnessed over recent years, the balance is tipping further in IR’s favor.

On a different point, what’s this ‘investment relations’ Waller speaks of? If you’ve ever built a successful relationship with an investment do let us know!

By Tim Human
IR magazine

Comments

[Stefan Pettersson]

I think this notion is based on a misunderstanding of IR's role in relation to analysts and investors. The suspicion that IR is somehow hiding the truth ("pushing their message") is implicit in this argument ("CEO needs to be ambushed", etc...). Either that, or IROs are really not doing their job (i.e. they are not trying to achieve a fair valuation through transparent disclosure). "Powerful" IR should be a good thing if practiced properly...

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