CHAPTER 5 DISCUSSIONS AND CONCLUSIONS
5.1 Discussions
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CHAPTER 5
DISCUSSIONS AND CONCLUSIONS
5.1 Discussions
Through in-depth interviews with thirteen senior IROs, all research questions in this study have been answered. For the first research question, the external audiences for IR practitioners in Taiwan include the professional investment community (the sell-side and the buy-side), journalists from mass media and retail investors.
The interaction between IR and journalists is usually neglected by previous research since mass media is not considered the main target audience for IR.
Nevertheless, through in-depth interviews with senior IR practitioners, the current study finds that mass media is an important audience that should not be neglected since reports on mass media influence how the general public and retail investors views a corporation. News reports is an important information source for retailed investors as well as for professional investors. The relationship between IR and mass media is close especially when IR serves as the spokesperson or there is no separate public relations department in the corporation. This responds to Davis’ 2006 research result that both sides, the investment community and the corporations/IR practitioners, still use mass media.
For the second research question, internal audiences of IR include information providers from different departments, the top management, and also the public relations department. According to the interviewees of this study, IR’s relationships and interaction with other departments and the top management is similar to past IR studies by Gregory (1997) and Laskin (2006). All interactions are mainly about information exchange. The co-work between IR and PR teams is also interesting.
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Since they are both image builders and key contacts with external stakeholders for corporations, IR and PR ties closely and sometimes they are placed in a same department with a same supervisor. For corporations without an in-house PR program, IR takes the tasks of IR as well.
It is especially worth noting that information plays a crucial role in all of the issues. The core of IR work is communication, and the communication process is closely connected with the third research question—power relations. The power relations for IR is very unique as IROs need to be able to interact directly with the top management and be supported by all the business units or they might have difficulty when executing their missions. The following section will discuss more in-depth how information connects IR’ relationships with different audiences and how it influences IR’s power relations.
5.1.1 Information, communication and power relations
The roles and the communication function of IR is closely related to the issue of power relations, and all of these center on the transmission of information.
External audiences, especially the investment community, want to receive more information in addition to financial numbers. They care more about the company’s strategic plans, business development and etc. Information is the most important tool that IR has. To receive sufficient information effectively, IR needs to be valued in the corporation and included in a higher level or participate in top management’s meetings, which is determined by the issue of power relations—whether IR is involved in an appropriate position or not.
One of the interviewees, a CFO responsible for IR tasks, discussed the issue
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from a different point of view. He believed that IROs deserve to be positioned in a higher management level or with a better job title not only for information collection but also for the reason that IROs “represent the management team of the company (or the head of BOD him/herself).” (Interviewee No.12) This helps IROs to be more convincing and shows that the company takes IR seriously. Also, if IR cannot provide useful information to the investment community, it is difficult to build up relationships since information is what the investment community wants and the reason why they come to IR.
Besides the top management circle, information from different departments or business units in the corporation is also crucial. If IR is considered important, corporate members will be more willing to help and provide useful information. As one of the interviewee said, “CEO’s perspective on IR is crucial since it determines other heads’ attitudes toward you.” (Interviewee No. 4)
On the other hand, the relationships between IR and other business units should be mutually beneficial. IR practitioners ask other departments or business units for help to get sufficient information while at the same time IR practitioners provide market intelligence insights and opinions from analysts and the market to them.
The interviewees also provided their opinions on another issue of power relations: IR’s participating in decision making circle.
It is true that including IROs in the decision-making circle is important and can be beneficial, but the key is whether IROs can provide useful information and insights. IR has to make the best use of its role as the bridge between stakeholders inside and outside the corporation and gives useful information from the investors
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and the market trends. IR also needs to provide their professional knowledge in terms of topics related to the capital market. In addition to be empowered by the top management, IROs should show their professional competence and “earn their own seat.”
To sum up, IR’s communication function and the issue of power relations rely on not only top management’s empowerment and their perspectives towards IR but also heavily related to how IR practitioners can contribute to internal audiences and to the decision-making circle. The communication channel and the information flow should be two-way (Table 2). IR practitioners need to be valued and empowered by the top management while at the same time they need to prove their worth.
Figure 1 Information Flow.
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5.1.2 Roles of IR
For the fourth research question on the roles of IR in the current study, the frameworks of public relations roles can be applied on the roles of IR. The first one is Broom and Smith’s five public relations roles (1979). As a bridge between audiences from outside and inside the corporation, IR delivers information between different communities (communication facilitator). They collect information, do market intelligent research and design materials and stories to communicate with the investment community (technical services). When crisis or special issues happen, they serve as the expert prescriber and problem-solving facilitator for the management team. IR usually serves as the spokesperson or the member of the spokesperson team. IR represents the senior management and talks with external audiences (acceptant legitimizer).
For the manager-technician roles (Dozier, 1984), IR is a managerial role that manages the relationships with the investment community and their expectations.
IR also delivers information in a designed story and establishes a certain image for the corporation. IROs play the managerial role that make strategic plan for information and corporate image delivery. On the other hand, IR practitioners, especially the junior IR in the team, are also responsible for technical tasks such as routine information disclosure based on the regulations by Taiwan Stock Exchange.
Though the roles of IROs and junior IR are different, which also results to different power relations in corporate structure, all IR practitioners study all the time to catch up with the market trends and develop market intelligence.
Though the roles of IR can be reviewed with the frameworks of public relations’ role studies by large, more academic role studies is needed to clarify and establish a systematical argument since there are still some different functions and
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responsibilities between IR and public relations.
5.1.3 IR in Taiwan
IR has developed for about twenty years in Taiwan. IR now plays a more important role in scaled corporations. Publicly traded companies gradually realize the value of IR and understand that IR is a must-have program if they want to gain capital from foreign investors and push their companies to the global market.
However, there are still some problems should be noted. The first one is related regulations by the governance. Corporate governance has become a trend in the global IR practice in the recent years and the local governance tries to promote the idea and encourage companies to establish their IR system as well.
Nevertheless, some of the policies are too difficult to put into practice for corporations. Interviewee No.8 gave an example of bad policy during the interview.
She said that the governance were worried about the problem of insider trading and required publicly traded companies to record every meeting between IR and the investors. The regulation raised lots of complaints from companies and foreign investors and was canceled quickly since it was not reasonable and practical. There should be more interaction and discussion between IR practitioners, the investment community and Taiwan Stock Exchange when establishing related regulations to prevent similar incidents happen again.
The second issue is the cultivation of talent. In the past when IR was not valued much, IR was a part-time task done by an employee that speaks English.
Nowadays, people noticed that IR plays a more important role that bridges the investment community and the corporations, and it takes professional IR
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practitioners to execute the work well. Most corporations employ an IR with financial backgrounds. However, communication and relationships management skills as well as the practitioners’ own personality is also important. Corporations need to think about how to foster talents and build up an effective communication system or IR team to support IROs to manage their relationships with the investment community. On the other hand, IR is a field that had been neglected by college of commerce and communication for long time. It would be helpful if there are more discussion in the academia and related programs for college students.