Investor Relations

By: EconomyWatch   Date: 23 November 2010

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Investor relations refers to communication between a company and the investing community regarding developments that couldhave a bearing on the company’s stock valuation. Investor relations is considered a management responsibility and severaldisclosures are required by law. Such disclosures may include quarterly or annual financial reports, change in the topmanagement of a company or strategic alliances. These days, most public traded financial entities and corporations havedepartments dedicated to investor relations. This department also addresses and resolves queries from potential investors.The investor relations department may be headed by a treasurer or the chief financial officer. Effective investor relations contributes towards a company's stock achieving fair valuation.

 

History of Investor Relations

The evolution of investor relations covers three eras, namely 1945 to 1970 (the communication era), 1970 to 2000 (the financial era) and from 2000 onwards (the synergy era).

In the communication era, investor relations and issues were handled by press agents or other publicists. The lack of financial expertise and strategic management were the weak areas of this era. In 1953, it was Ralph Cordiner, the chairman of GeneralElectric, who created a new position for handling shareholder communications, which is today known as ‘investor relations.’

In the financial era, professional investors became important. Finance professionals and accountants handled tasks related to investor relations.

In the synergy (current) era, an effective combination of communication and financial skills are utilized to contribute to investor relations. This two-way communication enables the company and investors to share information and helps to improve understanding on both sides.

 

Current Trends in Investor Relations

The current trends in investor relations involve the easy flow of information to support investor meets. The Securities and Exchange Commission (SEC) favors the use of electronic communication tools by companies and investors. Popular tools include blogs, electronic shareholder forums and proxies.

Travel budgets have begun to shrink, thanks to conference calls and new web tools that have made shareholder interactionssmoother than before. Companies are also eager to let investors access valuable information and provide instant feedback. Increased awareness of transparency requirements and the introduction of XBRL (Extensible Business Related Language) have remarkably impacted the possibilities for further growth and expansion in investor relations.


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