The new investor relations game.

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More and more, financial executives are finding the investor relations function on their slate of responsibilities. Even those executives who have always managed their firms' IR function are devoting significantly, more time to it today. How can these high-level corporate players gain control of this task - and maybe even influence the company's standing?

Financial Executives Institute's Santa Clara Valley Chapter put together a panel on the subject. The following is an adaptation of that discussion.

The Meaning Is

Not the Message

Investor relations has gone through massive change since that October crash in 1987. Instead of being driven by the need to merely provide information and disclosure, investor relations today is strategy-driven, with managements recognizing the need to manage stockholder mix, to manage supply and demand, and to target carefully. This has been accompanied by a dominant new investor relations philosophy - asset management.

Ever since the crash, IR executives around the country have risen in status, and significantly expanded their budget and staffing. Indeed, today IR is an asset management function rather than simply a communications function. A company's market capitalization is now managed daily with the same intensity as is the cash balance or any other critical asset. Further, in the past two years, the IR philosophy has moved to protecting the company against unfriendly actions, such as those by large institutional investors that lobby for a key voice in management.

So how do you measure the effectiveness of your investor relations program? The key is to state your objectives in measurable terms. You want the stock price to go up, or you want it to be in the top 10 percent in your peer group, or you want it to be in line with the S&P 500. In each case, you've got a benchmark to measure against, and you can do the same regarding your investor relations objectives for volume, volatility, stockholder mix, and other stock behavioral characteristics.

Who your IR audience is depends on your objectives. I've divided the IR world into 21 different types of investors. The traditional four that you hear about are stockbrokers, institutions, international, and individuals. But, of those, only stockbrokers are a homogeneous group. The rest have to be divided into subgroups before you can predict behavior with any accuracy.

For example, banks are different from pension funds, insurance companies, and mutual funds in terms...