CHAPTER 3 METHODOLOGY
3.3 Interview Questions….…
3.3.4 Insights on IR practice in Taiwan industry
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3.3.3 “Having a seat at the table”
The issue of power relations in IR practice is another important topic in this study. To have a look at the current situation in industry, interviewees were asked to share their own experiences regarding IR’s influence and how IR is valued in their companies and their opinions on the arrangement.
Questions such as “How do you think about IR’s position in top managerial level and why?”, “What are the roles that IR play when top management team is making decisions?”, “How do your company value IRO’s opinions?”, “What would happen if IR brings up opposite opinions?” and “How do you interact with the top management (i.e. C-suites or BOD) when executing IR work?” were included (Berger, 2006; Reber & Berger, 2006; Dolphin, 2004).
Also, interviewees were asked to share their opinions on the roles of IR when the company is making significant decisions.
3.3.4 Insights on IR practice in Taiwan industry
At the final part of the whole interview, the interviewees were asked to share their opinions on IR’s development and environment in Taiwan industry. Guiding questions included “How do you think IR is valued in Taiwanese industry?” and
“What do you expect about the future for IR in Taiwan?” This part was to understand some facts of IR practice in Taiwan. Interviewees were also asked to share their own opinions freely in the end of the whole interview.
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CHAPTER 4 RESULTS
Although interviewees are from different industries and different companies, they share same opinions on most topics. The interview results are sorted into the following sections according to interview questions and research questions.
4.1 Backgrounds of Investor Relations Officers
All the interviewees graduated from college of commerce and many of them have an MBA degree. Only three of them majored in other non-financial related fields in undergraduate education (English literature, psychology and tourism respectively).
This is similar to many survey results that IROs mostly have a financial related educational background. This is closely related to the target audiences IROs face.
“Since our clients are portfolio managers or analysts, finance is a common language. If you are not equipped with this language, you might have difficulty working as an IR.” (Interviewee No.11)
In terms of working experiences, there is only one interviewee starting her career as an IR after graduating from school (Interviewee No.8). She was a finance planning specialists and at the same time responsible for IR tasks at that time. Most of the interviewees have other working experiences before becoming an IR. Their previous professions are often in financial related fields such as accounting, treasury, underwriting, securities analysts and etc. Only two interviewees have different work experiences before. Interviewee No.10 worked as a journalist before she became a securities analyst. She thought the training of journalist is helpful especially in terms of “information compilation, collection and analysis.” (Interviewee No.10)
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Interviewee No.12, a CFO from the tourism industry, graduated from tourism school and worked as a hotel staff at the very beginning before he studied in financial school.
“I started from working as a waiter, a bartender and then became a housekeeping staff and a duty manager. Afterward, I went to Australia to study cost controlling courses and became cost control manager in Taipei Hilton Hotel.” (Interviewee No.12)
IROs believed financial-related backgrounds are very helpful since financial knowledge is a must for IR work. Besides this, many IROs brought up the value of having knowledge of the industry the company is in.
“What is more important is that you need to have sufficient understanding about the industry. You also need to have passion to learn and discover your products and techniques.” (Interviewee No.9) Interviewees with non-financial backgrounds confirmed the idea and said that these experiences are useful since they can have “a thorough understanding of this industry and its operation.” (Interviewee No.12)
4.2 Functions of Investor Relations
Communicating and delivering company’s information to audiences is the core of IR tasks. The process consists of information production, information dissemination, and information collection. IR practitioners accomplish all these three parts to make sure the quality of information they give and receive.
To manage information delivery well, IR practitioners also work as researchers.
They monitor the markets their companies are in and study future trend. This activity is known as “market intelligence.” Market intelligence is crucial for IR to communicate with the investment community as well as to provide useful information
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to the management team.
4.2.1 Information production
Producing information is the base of information flow. Information production is important since it not only influences how the investment community views and evaluates the company’s current and future performance but also determines its corporate image.
Financial information is the key topic that the investment community is interested in. IROs interact with finance department very often to receive latest financial data and then think about how to interpret these numbers. Some IROs also cooperate with public relations teams to make sure they are on the same page.
IR is like the “makeup artist of a corporation.”
Non-financial information is another crucial part that IROs focus on.
Besides financial data, the investment community requires more non-financial information such as current operation situation, strategic plans and etc. Sometimes they also ask information that is not directly related to profit-making topics such as the development history of the company, shareholder structure and the members of BOD.
As a result, IROs need to have accesses to non-financial information including latest products, research and development, strategies and etc. They gather information from different parties and reproduce it to useful and understandable information to their audiences.
“Investors need more information than media. They want something more than news releases. Publicly traded companies have to serve
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investors and they have to provide a window that has a database to respond to investors’ needs. They care more about strategies instead of numbers only.” (Interviewee No.10)
In addition to talking about current situations, “you have to know how and what to talk about outlooks.” (Interviewee No.5) the outlooks should be compliant with securities regulations and give the investment community a proper expectation.
With all the materials and corporate information, it is IRO’s responsibility to produce a story that is proper and help build up a positive corporate image to win the investment community’s trust toward the company. It should also meet the requirement of transparency and the principle of equality.
“Transparency is the simplest word to describe information disclosure. There is a line in the concept of transparency. Defining where the line should be is what IR should help the top management. Companies have the duty to remain transparent but it is usually misunderstood or misuse. We need to educate and communicate what is right. IR should follow the principle of honesty, fair, and transparent when delivering information and at the same time compliant with the law and the top management’s expectation.” (Interviewee No.2)
“Telecom industry has the strictest standard regarding transparency.
[…] Comparing to other industries, telecom is more stable. To attract investors’ interests to a stable company, you need to let them feel reassured by being transparent.” (Interviewee No.7)
Though transparency is required, sometimes there are some confidential information that investors may ask but IROs are not allowed to reveal. Regarding this, IROs need to know how to differentiate what can be told and what cannot.
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“I think this is an ability or quality that IR should cultivate. For example, you cannot disclose sensitive information. Sometimes IR even has to advise your boss what should not be revealed. First of all, you cannot talk about NDA [non-disclosure agreement]. This is what everyone knows.
Secondly, you have to predict what might happen and what results you may raise if you give out the information.” (Interviewee No.8)
Based on the principle of equality, the information provided to every stakeholder should be the same.
“Information asymmetry should be avoided. That is, you should always tell your clients the same information all the time. You can tell the story from different angles, but the information should not be different.”
(Interviewee No.11)
In addition to principles of transparency and equality, IROs focus and deliver a story from different viewpoints when disseminating information to different parties.
“Different types of investors also put emphasis on different topics. If he/ she is a short-fund and focuses on quarter performances, he/ she will not care about long term issues. This is for sure.” (Interviewee No.5)
Interviewee No. 8 said that the key is to understand who the audience. An IR practitioner must know what his/her audience wants.
“Since I am the spokesperson, I have to deal with all different publics including retail shareholders, major shareholders, QFII investors, and even mass media. The key of IR work is to understand your clients well. You have to deliver different message from different angles to each client. […] They need different stories. […] For example, foreign investors may want to know the reasons behind financial numbers and journalists
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want quick and instant updates to write reports. […] For retail shareholders, who might be very short-term buyers, they only care about the stock price not the sales performance. You may need to listen to their complaint before you calm them down. You communicate in different ways with different external audiences. You have to know their needs and give what they want, not using a same method all the time.” (Interviewee No.8)
4.2.2 Information dissemination
“As the name ‘investor relations’ suggests, the ultimate goal for IR is to maintain relationships with the investment community, which is mainly through communication. Thus, communication is the most important task.” (Interviewee No.1)
This points out the fact that communication is the center of IR’s work, and information dissemination is the reason for communication.
Besides uploading material information to the Market Observation Post System (MOPS) to fulfill the requirement of the securities laws, company websites and email are the tools that used most often. In addition to numeric reports, some companies put videos of their conferences and quarterly analysts meetings on their websites as well.
Social media is a new topic drawing lots of attention. Nevertheless, in most interviewed IROs’ companies, they do not use social media to communicate or interact with the investment community. Many IROs also doubted if it is necessary or helpful.
“First of all, social media is not easy to control. It is important to ensure all information given out is consistent. Though social media can reach to different group of audiences and deliver information quickly, it
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is more difficult to control information quality and consistency from company’s point of view. On the other hand, audiences may think the same too. If companies think the channel is not easy to control, they tend to release standard information on it and avoid detailed information, which may be not very helpful for those who want to make thorough analysis.” (Interviewee No.9)
Interviewee No.13 also shared the same concern:
“There is one viewpoint I got from a speech that really makes sense.
It said, although twitter and Facebook is very popular now, do you really believe news from it so easily? There is too much information from social media, while the truth of the statements remains doubtful. Investors still need to reassure its authenticity from corporate websites or MOPS. That is, the official channels for corporate is still traditional media (websites, MOPS and email). […]Social media might be helpful for other corporate functions such as HR, but I think it is not for IR.” (Interviewee No.12)
Providing real-time information and feedback is one of the key features of social media, while IROs do not think it necessary either:
“I think there is still no urgent need to respond the markets so quickly through LINE or other social media. […] So far we do not see that need. Responding to investors through email or websites within a reasonable period of turnaround time, such as 24 hours, is enough.”
(Interviewee No.2)
Mass media is another important channel for IR. Financial journalists from newspapers are the key persons. Unlike institutional investors, the general public and retail shareholders rely heavily on mass media to receive corporate information.
Press release is the most commonly used tool to deliver news to journalists.
Although in companies with public relations teams, media related issues are
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taken care of by public relations, many companies have their IR and PR work together when releasing financial related news. For some companies without full-time public relations program, IROs need to write press release themselves.
“In our company, I am responsible for both PR and IR since I am also the spokesperson. In big companies, I think they would divide the two functions since they have different characteristics. […] It is convenient for me to handle and integrate information since I work as both PR and IR.
For example, when we announce monthly revenue, I am the first one to know it, writing news release and then spread it out. It is easier for me to handle if journalist or analysts ask related questions since I am fully informed. On the contrary, if IR and PR are separated, PR may only receive news release. He/she would not have deeper understanding of the real situation and the story behind financial numbers.” (Interviewee No.5)
Besides websites and media, IROs interact with the investment community directly very often. Investors and analysts visit IROs to do one-on-one meetings or group meetings to have a more thorough understanding about the company.
Conference call is also a common practice when face-to-face talking is not available. Talking with the investment community is a daily work for IROs.
In addition to passively taking meeting and phone call requests, many companies hold analysts meetings quarterly. IROs also participate in several conferences or non-deal roadshows (NDR) held by the investment banks every year. These are all basic activities that IROs do if the company wants to build up good relationships with the investment community.
When crisis or special issues happen, it is important for IROs to communicate with their external audiences initiatively as well.
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“The worst practice is to cover bad news. Transparency is important.
IROs should be able to communicate with investors timely, explaining the current operation and how the issue affects our company, and let them feel secure.” (Interviewee No.12)
These activities are important for corporations to communicate with the investment community. Through these methods, corporations maintain relationships with their current shareholders and discover their potential investors.
4.2.3 Information collection
Almost all the interviewees stated that IR plays the role as “the bridge between the investment community and the corporation.” The interaction between both sides is mainly based on the form of two-way communication. IROs not only give but also take information from their audiences. They provide information to the investment community and the investment community gives feedbacks to the company in return and the message is delivered to the senior management and related parties by IROs. IROs also combine opinions and questions from the investment community to provide useful information for the top management and let them know what their investors care about.
“IR work is about bridging. It’s about information exchanging. As a publicly traded company, it is your responsibility to reveal and provide your corporate information to investors. Investors on the other hand, give their opinions and thoughts about the markets. You can collect them and provide to the management team for reference.” (Interviewee No.9)
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4.2.4 Market intelligence
Information collection is not just opinions from the investment community.
Research and market intelligence are also routine works for IR. IROs have to update themselves with the latest market trends and information relevant to their companies; they must know the current situations of the industry their companies in as well as their peers, competitors, venders, and costumers since this kind of information is often asked by the investment community. That is, market intelligence is a must-do preparation task for IROs to communicate with the investment community.
Market intelligence also helps the management team a lot.
“Communicating with internal stakeholders is another important part of our work. Investors are just one part of the target audiences. There are also clients inside your company. Every department can be our clients and we need to fulfill their needs. Market trends, peers benchmarking and etc.
are all basic market intelligence. You have to follow whatever your company might be interested in. […]We need other departments’ supports and they want us to provide our advices as well.” (Interviewee No.9)
“It’s like information provider. IR can provide some useful reports to related RD persons. For example, when I see related analyst reports, I will pass to people who are in charge of that topic, and they feel pretty pleased.
It’s kind of like maintaining relationship. Also, they can understand what IR does. When they want to adjust strategies, they also come to me and ask if IR can help collect related information.” (Interviewee No.8)
4.2.5 Expectation management
According to the interviewees, one of the most crucial and difficult tasks for
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IR is to manage expectations.
“In some way, the most important task for IR is to manage investors’
expectation. For example, when they are expecting too much, even to the extent of becoming greedy, you have to calm them down. On the other hand, when everyone is fearing and pessimistic about the whole industry, you have to raise their confidence. IR has to manage investment community’s expectation properly.” (Interviewee No.4)
In addition to investors, IR also needs to manage the top management’s expectations toward the company. “IROs have to manage expectations from both sides [investors and the senior management] and reduce their doubt.”
(Interviewee No.9)
How to maintain or even raise the investment community’s confidence and interests in the company while at the same time not to make them over-expect is an important issue for IROs. On the other hand, how to manage the top managers’
expectations toward the company’s stock price and QFII holdings, which are usually key measurements for IR performances, is also not easy.
4.3 Investor Relations’ Audiences
4.3.1 Interaction with external audiences The investment community
The investment community, especially the professional investment community, is the main target audience for IR. IR represents the management team of the corporation and interacts with the investment community. The investment community includes different members from the buy-side (investors) and the sell-side (brokers). Though IR was originally designed for serving investors, IROs