As Seen in CFO Studio Magazine Q2 2017 Issue
-By Jerome D. Kern, Vice President & CFO, Flexi-Van Leasing, Inc.
WHEN HANDLING INVESTOR RELATIONS, INFORMATION, NOT NUMBERS, IS IMPORTANT
You’ve just sat down in the big chair. You’re a new CFO. Congratulations! If you grew up on the accounting side of the house, investor relations may be new to you. Here’s what to keep in mind about this significant, new responsibility.
Investor relations is how a company communicates and interacts with external parties to ensure that your company’s financial story is being told accurately. While it may be a department reporting directly to the CFO, it may also be part of a corporate communications department. In either case, however, the CFO plays arguably the most crucial role for the company’s investor relations effort.
While investor relations is obviously important for public companies, it can be equally important for private companies, as even private companies may have to deal with equity owners and debt or credit analysts. Ensuring that external analysts have an up-to-date and solid understanding of the company allows the market system to work.
Timely and Fair
Remember that your goal in investor relations is not to prop up the stock price of your company. You’re not a salesperson. Don’t measure success in investor relations by stock price. Your goal is to ensure that information about the company — positive or negative — gets to outside parties when it is needed and in an appropriate way. Timely communications that follow the rules (the SEC’s Regulation FD, for example) are crucial to controlling news about your organization.
How do you get information to outside parties effectively? Press releases, earnings calls, presentations at conferences, and one-on-one analyst meetings are your main tools. What you’ll likely find is that there is a somewhat limited set of analysts that cover your industry or company size, allowing you to identify them and build a rapport. Remember, when developing these relationships, the kindergarten rule of “honesty is the best policy” holds true even here. You can be expected to present the company in a good light, but you must also present the company in a fair light. Don’t hide negatives, but be sure to present them in the right context. You wouldn’t be the CFO of a company you didn’t believe in, so make sure the people you’re talking to know the reasons your company will prosper — even in bad times.
When you’re talking to outside parties, the main rule of communication is: Know your audience. Different people will be focused on different things. An equity analyst or a portfolio manager may be looking for a growth story. That will get them the capital appreciation they crave. A fixed-income analyst will be looking for cash flow, either through dividends or debt coupon payments. A credit analyst wants to make sure you can repay your obligations. Tailor your comments to the person to whom you’re talking.
Overall, you should take on the persona of a professor. Teach people about your company. Be sure to not just be a numbers guy, though. Relate the numbers to nonfinancial metrics and build a story line. Stories are remembered. Numbers are forgotten.