According to the professional organization of investor relations officers, National Investor Relations Institute (NIRI), the definition of investor relations is defined as “a strategic management responsibility that integrates finance, communication, marketing and securities law compliance to enable the most effective two-way communication between a company, the financial community, and other constituencies, which ultimately contributes to a company’s securities achieving fair valuation”
The goal of IR is the improved understanding of the company among investors and analysts. The communication travels from the corporations to investors and back from investors to the corporation. Moreover, feedback from investors is actively sought and shareholder research is conducted. Then, the feedback is analyzed at the highest level of the organizational hierarchy and is used as a part of both the decision-making and strategic planning processes.
The goal is not high value of stock, but fair value of stock because overvaluation can be as bad as undervaluation. It can lead to a sudden drop in price and to increased price and volume volatility when additional information becomes available.
IR professionals view information about corporate strategy as the most important and most frequently communicated. This includes financial indicators that provide information about past performance and that focuses on the future earning potential of a company. Therefore, this information is valued quite highly by investors. However, information on top-management is the most important for the financial community when making decisions about buying or selling a stock. This information is most often communicated in one-on-one meetings.
On the other hand, the public relations is responsible for promoting the company’s products and services to industry analysts, media, customers, partners, prospects, and employees. PR success is measured by the number and quality of articles that are secured for the company. The PR firm also monitors the latest industry trends and uses the information to position company experts as thought leaders with the media.
The two can and should work together, but often do not. If they do collaborate, it would strengthen and clarify the company’s message while also increasing visibility. This would result in more sales and stronger partnerships. Furthermore, if PR executives advised the IR staff on trends and sent fact and quotes from team experts beforehand, then the investor relations team could confidently respond to shareholder calls following an industry event.
Additionally, each group would benefit by knowing the other’s key dates to ensure content is available for multiple purposes. While PR agencies focus on press releases, trade shows, presentations at events and awards, their Investor relations counterparts look toward quarterly results, scripting earnings calls and end-of-year 10K releases.
By being aware of what the PR professionals are doing, Investor-relations staffers could use the materials for items that would be of interest to their key audiences. One example is that large investors put a great deal of value on awards. If this information was sent to the investor relations team, they could promote it during their next discussion. This would generate greater interest from prospects and investors and reduce overlapping effort that is expended by both teams.