At the heart of investor relations best practice lies the concept of information disclosure, broad dissemination and transparency – the possibility for all investors to have equal access to the same company information, on an equal footing with other investors, and on the basis of that information to be able to make informed investment decisions.
This is the philosophy, transparency and fairness for investors despite the natural tendency of the management of some companies to want to hide or not discuss unpleasant facts.
The more informed investors are, the more likely it is that confidence in the integrity of the company will be built up and thus the support for the company’s stock will improve accordingly. The wider the dissemination of information, the wider the range of investors potentially interested in investing in the company.
The communication must be a widely disseminated communication that complies with the regulations issued by the financial market supervisory and management authorities, and requires considerable expertise in the production of written documents: press releases, Annual reports, presentation for conferences with analysts and investors, for 1-2-1 meetings for roadshows for investor conferences for conference calls, as well as market note, corporate website and the Annual Shareholders’ Meeting.
Best practice would also require the company to ask itself when it issues information whether that information is information that can move the stock up or down, thereby inducing an investor to buy or sell its stock. I.e. price sensitive information that can influence the course of the stock.
In issuing the information, the company must always make sure that the information disclosure is always clear, understanding and exact.
To help build a climate of security and trust that reduces the specific risk perceived especially by small- and mid-capitalisation companies, which by habit tend to communicate to the market only what is required by regulations.
Key functions of investor relations today:
- Building confidence in the company in the investment community.
- Communicate the equity story and differentiators consistently, comprehensively, and accurately with existing and prospective investors.
- Manage and align expectations via clear, consistent dialogue with the markets around earnings, net debt levels, shareholder remuneration, corporate strategy, and market conditions.
- Maintain relationships and communications with analysts.
- Establish, build, and maintain relationships with shareholders to reinforce management and company credibility.
- Find new, good-fit investors for the company to diversify the shareholder base.
- Build internal awareness of the investor relations function and its benefits.
- Understand and keep management aware of market perception and possible issues.
- Develop and maintain the investor relations strategy and program.
- Ensure compliance with regulatory requirements.
- Develop and maintain corporate disclosure policy.
Best practices create over time a reputational factor on the company that is a sensitive factor for the company as it is part of those assets of an intangible nature that are increasingly seen as essential by institutional investors today.
The good reputation of a company – the esteem in which one is held by others – that the company enjoys in society derives from ethical behaviour towards market players financial, is always linked to the responsibility and credibility of the management in the exercise of the management of the company’s programmes and the correct, wide and timely disclosure to the public of relevant information of both a positive and negative nature.
But what does accountability of information consist of? Responsibility for information concerns the content of the information itself, which must be true, honest and unbiased, it must be accurate and relevant, it must not raise false expectations in those who receive it, in this case the investors. It must represent the facts well for what they are in their breadth.
It is also a criminal liability because the company is legally liable, but above all it is an economic and social liability because potential investors can be induced to invest on the basis of such information, which, if it does not correspond to truth, honesty and impartiality, or is represented in such a way as to mislead, is a harbinger of damage, not only economic, to a large number of investors, with potential repercussions of a widespread social nature as well, and consequent alteration of the integrity of the financial markets.
CONCLUSIONS
Proper and responsible conduct based on good best practices helps to build a good stock market reputation that all companies should pursue in order to foster the investment process in the company’s stock and create positive investor relations.
Listed companies that follow these guidelines are better positioned to attract investment and sustain long-term growth.
Bianca Fersini Mastelloni
Bianca Fersini Mastelloni is Chairman and CEO of Polytems HIR. She is a seasoned consultant in Corporate Communication with extensive experience for over 35 years. Since 1999 she is active in Investor Relations and Financial Communication for companies listed on the major financial markets. Bianca provides strategic IR, corporate access in Italy, Europe, USA, investor’s market intelligence, profiling investors, critical communication and reputation. A scholar of issues pertaining to Communications and Investor Relations. Bianca studied at SUNY – State University of New York, Buffalo and at Boston University, Boston, and she works as lecturer with some Italian University. Bianca is author of the book Investor Relations ed Etica , Efficacia e Vantaggi Competitivi - edited from Guerini e Associati - as of as several articles about Investor Relations and financial communication. Bianca has been selected as the most influential CEO 2023 in Italy for Investor Relations and Financial Communications by CEO Monthly, the international publisher of AI Global Media.