How a new president, social media, and the expectation of regulation overhauls are changing the rules of IR engagement.
The role of investor relations professionals continues to change as US President Trump introduces new regulations and rollbacks that are impacting traditional transparency standards for investors. This, coupled with the growing trend of CEOs, and the president himself, using social media to share commentary, performance information, and expectations, has generated profound effects on shareholders as well as corporate governance communication strategies.
In order to understand the evolving role of IR professionals, as well as how companies need to assess their communications strategies in today’s fast-paced world, Toppan Vintage commissioned Mergermarket to interview three leading experts.
Toppan Vintage question: How do you see the accelerating news cycle and the roll back of regulation, reporting and transparency requirements by President Trump changing the duties of today’s modern IR professionals? How should IR teams react to these changes when their investors have become accustomed to such measures? 3 leading experts weigh in...
Gary LaBranche: We are optimistic that the SEC will delay or roll back some of the Dodd-Frank requirements that seek non-material information or are unnecessarily burdensome, such as the CEO pay ratio rule. Until that happens, IR professionals will continue to work with their companies’ corporate legal advisers to ensure that all the SEC’s disclosure requirements are being met. Our members report that many investors find more value in the voluntary disclosures that companies make during non-deal roadshows, earnings calls, industry conferences, and other events, which IR professionals will continue to provide.
Richard S. Levick, Esq.: There was a widely anticipated rollback of regulation, but we haven’t actually seen a rollback of regulations yet. Yes, some by executive order, but nothing has passed the House. I think the recent Comey hearing indicated just how hard it will be from a leadership point of view, and from an IR point of view, if we look, I think too many of the analysts were too optimistic about the change that they would see. And I found remarkable just how optimistic so many were during the transition period about what was going to happen. I don’t think there was any real sense of where consumers or shareholders were in terms of the level of fear or the level of anger. What IR professionals need to be thinking about now – and it’s true for legal, it’s true for communications, it’s true for government relations and PR – is that there has to be collaborative thinking, they have to
work together. IR needs to understand Washington in ways that it never
has before, and it doesn’t mean they have to be experts, but they have to be comfortable with asking questions, having others in the room, not operating in a vacuum, and reevaluating enterprise risk management in a way they never have before. There’s a greater grassroots focus on what companies are doing holistically — not just for shareholders and customers — but on where companies are advertising, on their CSR, on candidates they are supporting financially – there’s greater transparency. And I think the environment is quite different to what enterprise risk professionals are used to or that they are comfortable with.
Devin Sullivan: Keeping up with the news cycle has always been a responsibility for IR, and we must have a strong grasp of the
issues. For example, if a long-standing regulation has been repealed, we should be prepared to start the conversation by discussing how its implementation initially affected our operations to date: what steps did we need to take; what was the cost (human, capital, opportunity); how did it change our business? It is also important that we put things in the proper context for today, and discuss the short-, medium-, and long-term outlook for our company and our industry following such a change. Above all else, we need to be proactive in our communications with shareholders. If an event is expected to have a material impact on our
operations, get out ahead of it and quantify to the extent possible. Although we must respect our investors and acknowledge their expectations of us, we also must be careful to avoid being forced into saying or doing something before we have all the facts. Otherwise, we put our reputation and valuation at risk. The president can change laws with a stroke of his pen; most businesses require more time.