Shaping the capital market through investor relations

When we talk about professionals involved in the capital market, these usually come to mind: investment bankers, fund and portfolio managers, underwriters, analysts, securities brokers, stock transfer agents, lawyers, and accountants. In more mature and developed markets, the investment relations (IR) profession has emerged. This is in line with the need to maintain strong and transparent relationships with investors as they play a vital role in the success and growth of a company. Recognizing the importance of strengthening and nurturing their communications with their investors, the larger and more mature Philippine publicly-listed companies (PLCs) have created investor relations units and/or appointed investor Relations Officers (IROs) to effectively manage the flow of information between the company, its investors, and its stakeholders.

Understanding the role of IROs

It is important for businesses to communicate effectively and honestly with investors. To this end, companies typically build and rely on an IR department to keep the lines of information open. Depending on the size and scale of a business and the number of its investors, an IR department may be limited to one person or extend to a team.

IR departments help companies achieve the optimum share price reflecting its fundamental value, represent the company to investors and vice versa, provide financial and non-financial information to all investors in a timely and accurate way, monitor the regulations of the securities agencies and stock exchanges, present investor feedback to company management and the board, and help build receptive capital markets.

IR departments and officers also wear several hats:

• Communications portal: The IR team is typically the portal through which the company communicates with stakeholders as the CEO and CFO are involved in day-to-day tasks. Requests for information are usually funneled through the IR team who will then evaluate how to properly respond, whether directly or with other units in the organization. You could say that IR is the face of a company in the capital markets.

• Translator: IROs serve as the translator of the language that markets speak and understand. IROs convey to a company’s executives how the company is perceived by the market and its investors. IROs work to relay several aspects: from a company’s assets and flaws, to the changes needed to be made, and the information that needs to be explained – ultimately working on what will drive the value of shares based on current and predicted investor wants and needs. In turn, IROs translate back the company’s values, interests, positions, and responses in “investor language”: as profit margins, projected goals, earnings per share (EPS), and dividends.

• Coordinator: In line with its communications role, IROs help with the logistics and preparations for investor and analyst briefings and roadshows, meetings with the press and other events. They often act as a spokesperson, deal with regulators and exchanges, and participate in the release of information.

Because IROs fulfill multiple duties and functions in various capacities, it is essential that the team stay fully integrated with nearly every other department in the company.

The need for investor relations

Due to more stringent regulations regarding financial reporting and disclosures, most publicly-traded companies now have dedicated IR teams to ensure compliance with reporting rules. As there continues to be a consistent push for companies to evolve and become more transparent and honest with investors, a strong and efficient IR team has become an absolute necessity to provide the company the benefits of a loyal shareholder base, wider access to advice–especially during a crisis, long-term credibility with the investing community, and a more receptive capital market.

The SharePHIL IR program

In line with its goal to become a thought leader and premier advocate of shareholder welfare, SharePHIL has embarked on a program to advance the investor relations profession through the SharePHIL IR Circle. We believe our interests are aligned with IR practitioners, as we both want investors to better understand their rights and investments, and further view the capital market as a means to secure their financial future.

Through the SharePHIL IR Circle, we aim to:

• Foster professional development by providing education and networking opportunities for IR practitioners and hosting a professional forum for sharing ideas, insights, and best practices that will advance the practice and competency of IROs, particularly in engaging with retail investors.

• Assist IR teams in developing and/or implementing minority shareholder programs and other initiatives for PLCs, and encourage Philippine companies to innovate and improve corporate practices for the benefit of its stakeholders.

• Encourage more individuals to become IR practitioners and more companies to implement an IR program or improve their current IR operations.

To kickoff 2023, SharePHIL hosted a fellowship event for IR professionals last Jan. 20 to introduce the organization and its goals for the IR community, as well as invite them as members to support the realization of our goals for the profession. The event was quite successful with 51 IR practitioners representing a collective market capitalization of over P6.2 trillion in attendance, many of whom have expressed their commitment to support this initiative.

As SharePHIL aspires to become the most preferred non-profit organization that serves as a source of investor knowledge and a strong advocate of investor rights, we hope to elevate the IR profession in the Philippines by aligning with global best practices through the SharePHIL IR Circle.

In the coming months we will announce activities for the IR community, including upskilling and fellowship programs in support of the formation of the SharePHIL Investor Relations Circle. If you are an IR professional and wish to join, please contact [email protected].

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The author, Ma. Aurora Geotina-Garcia is a torchbearer of many advocacies: investor education, corporate governance, women’s economic empowerment and diversity, equality, and inclusion. She is chairperson of SharePHIL, vice chairperson of the Institute of Corporate Directors, and Founding Chairperson and president of the Philippine Women’s Economic Network. She is president of Mageo Consulting, a corporate finance advisory firm.