What every director should know about investor relations

Abstract

As a result of new legislation, regulation and litigation, corporate boards of directors are increasingly focused on share price as a barometer of their performance, and thus on the investor relations activities through which corporations communicate to current and prospective shareholders and the investment community. The authors, both advisors to corporations on investor relations policy and practice, argue that boards of directors need to take into account the disparity between the long time frame applicable to most-board level decisions, and the short time frame of most professional investors' shareholdings. Furthermore, they need to clearly enunciate a ‘value proposition’ that describes how the corporation will create value for investors, recognise that the market rewards most highly superior performance that sustains over long periods of time, and should not allow their corporations to put their perceived integrity at risk in order to meet investor demands for information or guidance. In addition, they should periodically assess the attitudes and investment criteria of the professional investors most committed to their corporation, sector or industry.