We live in an age of multiple information channels.
In the old days, information for investors was principally delivered via paper in the form of press releases and annual reports, supplemented at times by a company actually speaking to an investor. Those were simpler times when markets moved at a slower pace.
Today, investor relations departments need to think in terms of their message being conveyed via a number of channels, each with its advantages and disadvantages. What follows is a brief overview of the main outgoing communications channels available to IR personnel, leaving aside a detailed discussion of the use of social media and blogs, which are a subject for another day.
Traditional Written Communications
Regulatory filings, press releases and annual reports are part of the core written communication tools available when communicating with investors. They offer the benefit of being completely within the control of the issuing company (at least until newspaper editors get hold of them) and are therefore most useful when conveying detailed or complex information. They also offer the benefit of being stand-alone pieces, by which I mean that any questions they raise with investors can be handled in a private phone call rather than in a public forum, lessening the chance of a horrendous PR gaffe.
On the down side, traditional written communications are often over-edited by the issuing companies, resulting in tightly controlled information, which often raises more questions than it answers. Additionally, this editing process slows response times down, meaning that press releases move far more slowly than stock markets.
One way to think about this type of communications is that it is similar to long-form journalism, to be used when voluminous or complicated information needs to be disseminated.
Electronic Communications
Today, much information moves in electronic form. And not just a single electronic form, but a variety of methods, most designed for speed rather than detail. Some of this is simply a quicker conduit of traditional written communications, as when wire services send press releases to internet content providers. Other electronic means, such as Twitter, pick out snippets of information and quickly place it where the entire world can see it. Some forms of electronic communications that today seem almost old-fashioned, such as email, carry the burden of being easily forwarded and continually stored in someone’s computer or server, which should give pause to any IR officer concerned about things going to unintended recipients or information getting taken out of context at a later date. (This is also true of email’s younger cousins, instant messaging and texting.)
We are just now at the point where some companies are using their web sites as their primary distribution point for important company information, but undoubtedly this trend will continue.
Verbal Communications
Although old-fashioned and sometimes limited in scope, nothing can convey management’s credibility better than verbal communications. Verbal communications can be broad-based, as when done through television and radio interviews and conference calls, medium in scope, as when speaking at a conference, or personal, as in one-on-one meetings and phone calls. Institutional investors continue to rely heavily on this type of communications as they are committing large sums of money and doing due diligence requires that they “look management in the eyes”.
What all this means for companies engaged in investor relations is that the choice of communications channels can be as important as the message itself. For example, if the company is faced with a crisis, the choice of both a press release to get detailed information out quickly, coupled with a conference call so investors can judge management’s credibility makes sense. On the other hand, routine matters may require only a press release or perhaps a simple posting to the company’s web site. The point, as with all good communications, is to consider how to best accomplish your communications objectives while meeting the needs of your audience.
John recently retired as a Lecturer in Management at Rice University’s Jones Graduate School of Management, where he taught investor relations. Prior to that, John was in charge of investor relations for Sysco Corporation and Walgreen Co. He holds a MBA from the Kellogg Graduate School of Management at Northwestern University and a law degree from Loyola University of Chicago.
You can learn more about John’s thinking about investor relations at his blog, Investor Relations Musings.
