7.5: Investor Relations

A very specialized form of public relations is investor relations. People who work in this area have only one public to worry about – the investment community, broadly defined. That includes institutional investors, such as the people who buy and sell stocks for mutual funds or certain other publicly traded companies; securities analysts, and the general public. They are also responsible for insuring the company complies with legal requirements set forth in the Securities Act of 1934 and other laws, regulations of the Securities and Exchange Commission, such as “quiet periods,” and state agencies.

Investor Relations is the department responsible for:

• Preparing the company’s quarterly report that is distributed to the press, investors and the public (including being posted on the web). Here is Walt Disney Co.’s second quarter earnings report.
• Preparing the company’s full-year report that is distributed to the press, investors and the public. Both the quarterly and full-year reports are generally distributed by being posted to the investor relations section of the company’s web site. Here is the full-year report for Walt Disney Co.
• When a company releases its earnings report it also conducts a conference call with securities analysts to discuss the report. Investor Relations is responsible for insuring that the call is scheduled, for announcing how investors (including members of the public) can listen to the call. The chief investor relations officer typically introduces the people who will be participating in the call, such as the company’s chief executive and chief financial officer. Here’s an announcement from the Walt Disney Co.
• Preparing the annual report that is distributed to all shareholders. The report is also sometimes distributed to media, potential employees, government officials and others with an interest in the company. Here’s an annual report. This annual report is, quite frankly, a sales tool designed to highlight the company’s achievements.

There’s a second type of quarterly and annual report, which is filed with the Securities and Exchange Commission. This report provides much more detail about the company, including the risks of investing in its stock. It is prepared by the company’s legal department. Here’s a sample of an SEC filing. Serious investors, securities analysts and business reporters will study both types of reports, but especially the SEC filings.. .

• Companies also regularly take part in conferences sponsored by banks, investment firms or media. If the conference is aimed at investors, Investor Relations likely provides support to the people participating. Here’s an announcement that Walt Disney Co. is taking part in such a conference with a link to a recording of the presentation.

As you can see, the Investor Relations person or team performs a very specialized form of public relations. Investor Relations is generally housed within Corporate Communications, but in some cases may report to the chief financial officer or it may be a stand-alone department. The investor relations officer must work in close alliance with accounting, legal and the chief communications officer as well as the chief executive officer and chief operating officer.

PRACTICAL EXERCISE

Find the investor relations part of the website of a company that you are interested in, if it is a company whose stock is held by the public. If it’s a privately owned company, pick a public company in which you have some interest. Go to the investor relations tab, look at the various materials available to the public about the company’s business and finances. Do you think an investor would be well informed about the company?

Now, take a look at how the company’s news is covered by some of the major financial news services. Use the search feature on each of the following websites:

• Wsj.com (Wall Street Journal)
• Bloomberg
• Standard & Poors