Investor Relations and Financial Communication. Alexander V. Laskin
agency would have the CEO of the whole organization and, sometimes, a chairperson .
This variety of titles and levels may seem confusing and unnecessary, but it is actually important for agencies to have such a structure because work at each level of this hierarchy is billed to the client at different levels. For example, a typical financial communication agency would charge about US$100 for an hour of work of an account assistant, while it would charge US$200 for an hour of an account executive – double the hourly billing rate. If an account requires involvement at the level of a vice president, the billable rate may be US$400 or US$500 an hour.
Billable hours are the lifeblood of an agency – it is important to track and monitor all the work in order to bill the clients fairly for all the work. Many agencies celebrate and reward employees who produce the most billable hours in a week or in a month. Most often agency employees work on multiple accounts at the same time. It is not uncommon in the agency world to work on four or five accounts at the same time. As a result, it becomes important to monitor closely how employees spend their day so that appropriate clients can be billed the correct amount of hours at an accurate rate.
Education and Training
Most people working in investor relations do not have an educational background in investor relations. It is not surprising considering there are pretty much no majors in investor relations. At best, one can find a standalone course in investor relations, financial communication, or business journalism. Only a small number of educational institutions have minors or specializations. For example, Newhouse School at Syracuse University launched a financial and investor communications emphasis that prepares students for jobs in investor relations, financial services, and corporate communications. As a result, just taking a class or two in investor relations or financial communication already puts a student ahead of many other job seekers. Some students interested in investor relations build their own program of study combining courses from accounting, finance, law, and strategic communications. Such students may major in communications to hone their writing and public speaking skills, while minoring in accounting to develop a good understanding of financial statements.
A study of IROs who are members of NIRI found that most IROs today have a business background. More than two-thirds of IROs in the survey reported having their bachelor’s degree from one of the business school majors – finance, accounting, or management. IROs with communication education were in a minority. Some IROs also reported having no business and no communication education – instead they grew into their investor relations job from an operational background and, as a result, they reported education in medicine, chemistry, aeronautics, engineering, and so on. Since the investor relations job requires an IRO to be an expert in what the company does, it is not much of a surprise that a specialist in the company’s business could become an IRO. Who better to explain the complexities and potential of a new chemical compound for future production of medicine than a chemist or a medic?
At the same time, investor relations is its own profession that has unique and challenging demands. As a result, many professionals once they become IROs seek additional training to professionalize themselves in this occupation. In fact, the same survey of IROs, reported that almost 70% of all IROs had a second, graduate, degree. It is a good idea to supplement the skills and knowledge learned during undergraduate studies and acquired throughout professional experience with a graduate degree. It gives the chance for a person with degree in communication to learn about finance and accounting, and it gives the chance to a person with a business degree to learn about communication strategies and tactics.
The variety of educational backgrounds and professional experiences in investor relations also makes the role of professional organizations in the field exceptionally important. For many IROs, a professional organization is the only place where they can actually learn about the profession itself. NIRI, the leading professional organization in investor relations, takes this responsibility seriously. NIRI organizes a lot of training sessions, seminars, and webinars. One of the most popular among these educational opportunities is Fundamentals of Investor Relations, a must-attend event for people new to investor relations. No matter what previous education or occupation a person has had, this seminar brings everyone up to speed on the practice of investor relations, covering key components of investor relations – finance, communication, marketing, and law. NIRI also maintains an investor relations accreditation, the Investor Relations Charter (IRC). IRC is important recognition in the investor relations profession and has a requirement for continuing professional education to maintain the credential.
Ethics and Professionalism
NIRI and other professional organizations play an important role in developing and promoting an ethical and professional code of conduct for investor relations professionals. NIRI’s investor relations Code of Conduct consists of 12 points:
1 Maintain my integrity and credibility by practicing investor relations in accordance with the highest legal and ethical standards.
2 Avoid even the appearance of professional impropriety and act as an advisor to colleagues to avoid unethical, questionable, or inappropriate behavior or situations.
3 Recognize that the integrity of the capital markets is based on transparency of relevant financial and non-financial corporate information, and will to the best of my ability and knowledge work to ensure that my company or client fully and fairly discloses this important information.
4 Provide analysts, institutional and individual investors, and the media fair and equal access to corporate information.
5 Honor my obligation to serve the interest of shareholders and other stakeholders.
6 Discharge my responsibilities completely and competently by keeping myself abreast of the affairs of my company or client as well as the laws and regulations affecting the practice of investor relations.
7 Maintain the confidentiality of information acquired in the course of my work for my company or client company.
8 Not use confidential information acquired in the course of my work for my personal advantage nor for the advantage of related parties.
9 Exercise independent judgment in the conduct of my duties and responsibilities on behalf of my company or client.
10 Avoid any professional/business relationships that might affect, or be perceived to potentially affect, my ethical practice of investor relations.
11 Report to appropriate company authorities if I suspect or recognize fraudulent or illegal acts within the company.
12 Represent myself in a reputable and dignified manner that reflects the professional stature of investor relations, and comply with the provisions of NIRI’s Participation and Engagement Code of Conduct and NIRI’s eGroups Code of Conduct.
Although NIRI does not have much power to enforce these ethical guidelines, the association can terminate the membership of anyone who is found in violation of these principles and who has been sanctioned by government agencies or judicial bodies. NIRI also maintains an Ethics Council that can provide guidance to IROs on issues involving ethical decision-making, offer educational opportunities, and develop recommendations to NIRI’s Board of Directors.
Financial communicators engaged in other aspects of the communication industry outside of investor relations often belong to other professional organizations with their own training resources, accreditation processes, and codes of ethical and professional conduct. For example, many financial communication professionals in the banking sector are members of the Financial Communications Section of the PRSA. The PRSA Code of Ethics focuses on six professional values:
1 Advocacy. We serve the public interest by acting as responsible advocates for those we represent. We provide a voice in the marketplace of ideas, facts, and viewpoints to aid informed public debate.
2 Honesty. We adhere to the highest standards of accuracy and truth in advancing the interests of those we represent and in communicating with the public.
3 Expertise. We acquire and responsibly use specialized knowledge