CHAPTER 4 RESULTS
4.3 Investor Relations’ Audiences
4.4.1 Investor relations in corporate structure
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the top management or you cannot receive the latest information.”
(Interviewee No.5)
As a bridge between the investment community and company, IROs give opinions and feedbacks from outside and provide information from market intelligence to the senior management.
4.4 The Issue of Power Relations
4.4.1 Investor relations in corporate structure
In most of the interviewees’ companies, IR is placed in the financial department and their direct supervisor is CFO. This is mainly because that CFO is often the spokesperson of the company, and “the work of IROs and the spokesperson are related so they are often in the same team.” (Interviewee No.1) This arrangement is also closely related to the reason that the main external audiences for investor relations are the investment community. Financial numbers are basic information to them, and thus placing IR team in financial department is the easiest way for IR to get financial data.
In some cases, the IR team is placed in the same department with the public relations team. Sometimes IR and public relations teams are in the same independent department named “Investor and Public Relations (投資人關係暨公 共關係處)” (Interviewee No.9); sometimes they are under a department named
“Corporate Governance Center (公司治理中心),” (Interviewee No.5) “Corporate Development Division (策略發展處)” (Interviewee No.2 and 3) and etc. The head or director of the department manages and integrates both teams and the department reports to CEO directly.
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In either way, it is clear to find that IR interacts with CFO or CEO closely and there is no complex levels between them.
“We do report to CEO or Chairman directly sometimes. It’s just about the frequency. However, we think the arrangement is okay since we interact with CFO closely, and the results we discussed with our CFO will be reported to them [CEO or Chairman] monthly or quarterly. I think it is good enough.” (Interviewee No.3)
Interviewees said that in which department IR should be is not the most important issue.
“It is related to company’s strategy. If the company thinks that IR should play a more important role, IR would be lifted to a higher position. I think there is no so called best arrangement since every company is in different stages and they need different things.” (Interviewee No.2)
It depends on the corporation’s scale and its strategy. What really matters is whether the top management takes IR seriously and whether IR team can get sufficient assistant and be able to handle their works smoothly.
“When a company wants to go global, it needs to fulfill the requirement of the international market. For example, when a Taiwan stock wants to publish ADR in USA, it has to follow USA’s regulations.
They have strict regulation about IR function, […] so it is impossible to assign a part-time IR to do the tasks only.” (Interviewee No.9)
However, IROs also believe that IROs should be positioned in a proper level /suitable title or be supported by the top management to get information smoothly.
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“The level that we are involved in is high. Since our current CEO was our CFO, who was our former boss, he knows the functions of IR and IR’s needs very well. He knows what questions IR may encounter with, so he lifts us to be able to involve in high management levels. He also requires each department to support IR.” (Interviewee No.6)
Interviewee No.12, a CFO had the same opinion:
“An IR’s job title cannot be too junior. If it is junior, he/she cannot receive some strategic plans of the company. Basically, some information will be passed to IR practitioners during the decision-making process.
IROs seldom give direct opinions since IROs are not a member of BOD.
IR is the bridge between investors and the company. It is more difficult for them to participate in decision-making. However, they can reflect investors’ message to the company and let them know what investors hope the company to improve.
4.4.2 “Have a seat at the decision-making table”
Normally, IROs are not directly included in the decision-making circle and do not considered one of the senior management team.
“Some IRs in USA or some globalized companies are placed in a high level such as within the BOD since they think IR should be included in the corporate strategy or planning process. Most Taiwan companies still do not reach that stage. Most IR are placed under finance department.”
(Interviewee No.7)
“We are not included in the top management. Only CFO, the spokesperson and our direct supervisor is included.” (Interviewee No.13)
IROs are usually invited to participate in meetings with the top management.
Though IROs join in the meetings as an auditor most of the time, this helps them receive important information and have clear understanding about corporation
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strategies. All the interviewees agreed that participating in important meetings is definitely necessary even if they do not speak during the meetings.
“I believe many IR practitioners are not included in BOD meetings, but I think IR should at least participate in the high management teams’
meetings and know their decision-making process. Even if he/ she is not the core personnel, it is better to understand the process and sit in the meetings.” (Interviewee No.6)
Though IROs are seldom one of the official members of the senior management circle, they play the role as consultants or information providers that bring in investors’ opinions, their professional knowledge about the capital market, and the research results from market intelligence.
IROs said that of course they would like to join in the strategic level and provide some supports. Since IROs interact with the markets constantly, they bring information from outside and usually play the role as a “whistle blower.”
(Interviewee No.9)
“I think this is one of the important functions of IR, as a ‘whistle blower.’ Actually, I think there should be one whistle blower in every business unit in the company. Evidence speaks. Numbers and analysis reports would show what should be done and what should not. IR can provide this to the top management and helps them make decisions. […] IR is like the anchor. He/she should know situations both inside and outside the company better than others. If he/she participates in the board meetings, he/she needs to have even more abundant knowledge about the industry.” (Interviewee No.9)
In addition, IROs’ opinions are especially important when encountering issues related to the investment community such as quarterly analysts meetings,
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annual general meetings, dividend policy and etc.
“We still participate in the decision-making process sometimes. For example, when it comes to dividend policy, the top management will ask IR for opinions and feedbacks from investors. CEO, chairman and BOD usually take our viewpoints into consideration when making decisions.”
(Interviewee No.13)
When crisis, unexpected events or huge issues like mergers and acquisitions happen, the top management consults IROs for advice as well. It is not only about the event itself but also because the senior management wants to know how the investment community would react toward the issue.
“In fact, we can provide our own opinions. For example, when it comes to dividend policy or corporates’ financial planning, we bring in investors’ concern to the senior management. Our opinions are influential mainly on issues related to investors.” (Interviewee No.2)
“We mainly participate in some general decisions, not detailed issues. For example, profit sharing, pay out ration, cash dividends and also fund raising. Besides, M&A plans. You can tell your boss how investors might think or react to this M&A. However I think you have to give your boss this kind of concepts usually, such as sharing your thoughts when you see some cases, instead of telling your idea abruptly only when things happen.” (Interviewee No.8)
As a communication professional, IROs also prepare themes and story for the top management to talk to external audiences in occasions such as quarterly analysts meetings. IROs play the role as communication experts and plan communication strategies. What to talk about and how to tell the story are important since every public speech or report on mass media may influence
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corporate image and the investment community’s attitudes toward the company’s stock. This is especially important for a company without a public relations team;
IR takes the responsibility as a public relations’ role as well.
“I review and revise my communication strategies every year. I think IR also plays the role of advisor. Sometimes I would advise my boss what to do. When a new issue happens, you have to come up with some plans to deal with it. […] You need to use some tactics and think about if the way you talk and the contents you deliver are proper. Information you release should be fine-tuned. It’s not just about transparent. You also need to assist the top management how to interact with investors. They can only count on you.” (Interviewee No.8)
An interviewee brought out an interesting viewpoint when asked about the issue of whether IR should be included in the senior management:
“It is not just about whether IR should be included in the senior management but whether the senior management should be involved in IR works. In our company, we invited our CFO or CEO, (of course not BOD), to meet investors regularly. This can be important for investors since they want to talk with the top management about the company’s financial performance and strategic plans from time to time. I think this is an important issue.” (Interviewee No.7)
4.5 Investor relations in Taiwan