What is investor relations?

What is investor relations?
How does investor relations tie into public relations?

These are questions we’ve often received at SHIFT, so it’s worth taking a few minutes to address them.

Nasdaq Take 5
Photo credit: Julien Min

Briefly, investor relations (or IR) is a specific sub-discipline of public relations that revolves around how a company communicates with investors, shareholders, government authorities, and the financial community. Unlike standard public relations practices, investor relations practices have to be tightly integrated with a corporation’s accounting department, legal department, and top executives such as the CEO, CFO, and COO.

The purpose of investor relations is ultimately to ensure that a company’s stock is being traded fairly through disclosure of key facts that allow investors to assess whether a company is a good investment or not.

Investor relations as a formal discipline has been around as long as publicly traded companies, but became much more important in the United States in 2002. In that year, Congress passed the Sarbanes-Oxley Act (also known as the Public Company Accounting Reform and Investor Protection Act) which drastically increased the reporting requirements of any company that was publicly traded on a stock market exchange. This occurred in response to a number of serious corporate scandals with shadowy accounting, shell companies, and a variety of other practices, most notably by the Enron Corporation.

What does investor relations do? Public relations teams and agencies that handle investor relations typically do tasks like coordinating shareholder meetings and press conferences, release financial information (one of the most common uses of the press release today) to the investor community, conduct financial analyst briefings, publish quarterly and annual reports, and handle any crises that arise as a result of financial disclosure. Investor relations teams and firms also need to be well-versed in different regulatory requirements such as quiet periods, when you cannot talk about certain aspects of the company, and advise internal and external marketing and PR partners about what they can and cannot do.

When does a company need investor relations? The best time to engage an investor relations firm and start to build out your investor relations team is the moment you start thinking about going public as a corporation with an initial public offering, or IPO. You can’t wait until you’ve filed an S-1 form (to register your intent to go public) to start thinking about investor relations; an investor relations program should be built in lockstep with the IPO process from the very beginning. As you establish formal corporate governance, investor relations teams should be codifying them and preparing them for eventual release. As you conduct internal financial audits, investor relations teams should be involved in the discovery process so that any unpleasant findings can be handled and disclosed both within the bounds of law and with care.

Ultimately, investor relations is a vitally important part of a publicly-traded company’s communications program, both for compliance and relationship-building purposes with the investment community. If it’s well-run, not only do you meet all regulatory requirements, you also have great relationships with key financial and investment analysts.

Disclaimer: this article was written in the context of United States financial law, as regulated by the Securities and Exchange Commission (SEC). If you’re a friend of SHIFT in a different nation, your financial laws are almost certainly different.

Christopher S. Penn
Vice President, Marketing Technology

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Posted on August 29, 2014 in Investor Relations, Public Relations

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About the Author

Christopher S. Penn is an authority on digital marketing and marketing technology. A recognized thought leader, author, and speaker, he has shaped three key fields in the marketing industry: Google Analytics adoption, data-driven marketing and PR, and email marketing. Known for his high-octane, here’s how to get it done approach, his expertise benefits companies such as Citrix Systems, McDonald’s, GoDaddy, McKesson, and many others. His latest work, Leading Innovation, teaches organizations how to implement and scale innovative practices to direct change. Christopher is a highly-sought keynote speaker thanks to his energetic, informative talks. In 2015, he delivered insightful, innovative talks on all aspects of marketing and analytics at over 30 events to critical acclaim. He is a founding member of IBM’s Watson Analytics Predictioneers, co-founder of the groundbreaking PodCamp Conference, and co-host of the Marketing Over Coffee marketing podcast. Christopher is a Google Analytics Certified Professional and a Google AdWords Certified Professional. He is the author of over two dozen marketing books including bestsellers such as Marketing White Belt: Basics for the Digital Marketer, Marketing Red Belt: Connecting With Your Creative Mind, and Marketing Blue Belt: From Data Zero to Marketing Hero.
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