The informed, articulate board.

• Author: Johnson, Johnnie D.
• Position: Effective communication with shareholders

How the investor relations executive and the board can work effectively together in communicating with shareholders

The role and quality of a corporation's board of directors have become the focus of institutional investor activists, one of the latest issues of corporate governance. Increasingly, institutional activists are demanding more access to a company's board. An informed, articulate, and supportive board is a great asset to a company and shareholders. Equipped with information and resources, board members can be ideal representatives for a company.

To this end, the investor relations executive's chief role as spokesperson for the company is to disseminate corporate information externally, to provide timely communications with shareholders. Concurrently, and equally important, the IR executive's responsibility is to communicate internally, to provide management and the board of directors with market intelligence on the company and the industry.

Because many board members are faced with limited time and resources, one outside director or a committee could act as the liaison between the investor relations executive and shareholders. The audit committee, which is already dealing with outside and internal auditors, may be an ideal contact for shareholders.

Meetings between the investor relations executive and the board or contact group should be established and implemented on a regular or as needed basis. At the beginning of each fiscal year, the investor relations executive should present to senior management and the board an investor relations program plan that outlines proposed events for the year and reflects the company's goals and strategies. Feedback from the board should be incorporated whenever appropriate into the plan.

In an effort to increase the board's understanding of the company and the industry and the trends that drive the valuation and performance of the stock, a board may need to review how the equities markets work. A detailed presentation may include a graphic demonstration of relative stock price performance to the broader market, industry indices, and the selected peer group.

Additionally, a discussion of the dynamics that drive stock price performance, including an analysis of shareholder composition and the changing shareholder base as a result of the IR program and how investors obtain market information to value the stock, is important for the board to know. Detailed information such as new research reports...