The last few years have seen some of the United Kingdom’s largest companies get into serious difficulties because of their failure to communicate effectively with the financial markets. Some companies were engaged in a deliberate attempt to mislead; others were guilty of negligence and ignorance.
The crisis that hit Tesco plc in September 2014, and is still being played out as this book is being published, demonstrates the need for listed companies to regularly update both their own forecasts and market expectations. Communication is not enough, however. Tesco misunderstood its own customers and grossly underestimated the ambition and ability of two relatively small competitors who quickly seized the opportunity presented by changing customer values. The Tesco debacle illustrates the two aspects of IR: the communication aspect and the analytical aspect. IR (like public relations) is not just a communication function, but also an analytical function. IR helps management to understand its own environment, and then conveys that understanding to the financial markets. Endless books on “communication” get this wrong because they suggest that communication is virtuous in itself, and that most problems are simply communication problems. IR does not just communicate the performance of the firm; it facilitates the performance of the firm by providing the management team with both the analysis of the financial markets and its own analysis, based on a deep knowledge of the firm, its products, investors, customers, and competitors. IR has great potential to contribute to corporate success, investor wealth, and society at large. The study of IR, however, poses significant challenges. IR is a complex, discrete and highly context-dependent activity, which takes a different form in every corporation in which it is practiced. The paucity of IR-related books is not surprising, but is a major obstacle to the development of IR as a profession and as a field of study.
This book presents a methodology for investor marketing which is the product of both wide research and personal experience. This book aims to provide IROs (investor relations officers) with ideas and principles of action, but no book on IR can provide the steps that the reader needs to take at the moment of reading; the work of the IR practitioner is far too diverse for any formulaic guidance. The good IRO has to base his or her actions on his or her own environment, and use good judgment sharpened by experience. If this book encourages readers to review their IR practices, then it will have served its purpose.
Daniel Valentine
Hertford College, University of Oxford
March 19, 2015