Investor Relations. Why?

Investor Relations is defined in Wikipedia as a strategic management responsibility that is capable of integrating finance, communication, marketing and securities law compliance to enable the most effective two-way communication between a company, the financial community, and other constituencies, which ultimately contributes to a company’s securities achieving fair valuation.

Agree that fair valuation of securities is a very important in this era of profit maximisation. The source of increase in valuation is essentially the growth. Growth needs to be the focus. Growth in its widest possible definition. A corporate can grow in the real sense of term if all its direct stakeholders also grow. Customers, Employees, Shareholders, Suppliers, Channels, Government, Media, Bankers, Tax Authorities, Financiers, are all important. Great companies have always taken all their stakeholders in a trajectory of growth as much as their own financial growth. In fact, for a large part, the growth in shareholder value has been a sort of by-product while they grew in truest term. Staying in constant touch is important. Constantly communicating with all stakeholders is important. Under-communicating with a particular stakeholder can also be harmful. Growth also needs to be measured in a Company’s overall perception across all stakeholders.

There are a few more stakeholders who contribute to growth indirectly. Country, city, communities in neighbourhood, environmentalists, NGOs, political leadership, regulators, policy makers, law enforcement agencies, right up to the father of young talented girl employee are also important. In a well networked world, one Tweet by an opinion maker or one Facebook post by a whistle-blower can cause substantial erosion in shareholder value. The damage is already done before the Company reacts. At times like these, only a Company with solid reputation can stay protected.

Reputation is important. For a great reputation, regular communications with entire stakeholder spectrum is important. Investor Relations can only be a part of an overall relationship building effort across all stakeholders. Among these publics, the Company can give more weightage to shareholder communications, when compared to others, for obvious reasons. It cannot only focus on luring gullible investors to buy shares at artificially inflated prices through working on their greed. Such Investor Relations, at best, can be a get-rich-quick scheme for some promoters and their other vested interests. There are laws and there is a regulator. The market is a great leveller too. When the cookie crumbles, it does very fast. It is certainly not a good strategy during depressed market conditions when there is a limited scope for revival of sentiments in a short-to-medium term.

True, the temptations will be many. Company’s vision works as a great lighthouse while wading through such turbulences of considering short term gain versus long term value creation. It is like a cat who can never catch its tail intentionally. But if it chooses to walk straight, the tail will follow.