Sharpening the tools in the investor relations evaluation tool box.

AuthorCollinson, Mark
PositionInvestor Relations

When it comes to reviewing a company's investor relations function, its role in annual or long-term planning or the bid for funding, those responsible face a familiar set of challenges. IR must direct the communication of the company's performance and prospects in ways that are clear, consistent, compliant and credible.

These IR activities must result in the highest sustainable stock price earned by the company's performance and prospects. While that much is agreed, it is also important to ask whether IR activity has been efficient and effective.

In what ways did the IR function get the company closer to those communications goals than would have occurred without any IR function? What are next year's IR goals, what are the expected outcomes and what resources are necessary for success?

There are many excellent metrics in most company IR evaluations, but adding the following five measures may prove a useful addition to the evaluation toolkit that can assist chief executives, chief financial officers, investor relations officers and board members in assessing the company's IR function.

An Investment Thesis Map

An investment thesis is a set of reasons for investing in the company. The first objective is to find the investment highlights in the company's communications. Whether this proves easy or difficult will be a check on its clarity. Create a (able with each column headed by one investment thesis point. If there are more than 10 points, a busy portlolio manager will not recall them. Ideally, there should be four to seven investment points.

Next, make rows of communications channels and events that disclose and discuss these thesis points. Among the examples would be the 10-K, at the annual shareholders' meeting, at an analyst day, in the investor presentation for conferences or non-deal road shows, on quarterly conference calls and on the company's website.

By now, there will be a series of boxes in the (able. The column titled, "Dominant Market Share in the Asia Widget Market," for example, will have a row for "Non-deal Road Show Presentation." In that box, apply a score from 1-5 for clarity and profile. Is the point made clearly and forcefully in the presentation deck?

Once the table is completed, consistency of delivery will be readily apparent. If consistency of message is shown across channels, then there is reason to expect awareness of the point to show up in the company's annual or bi-annual study of investor perception. If there...

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