Executive search consultant explains how the role of investor relations has evolved from financial communications to encompass activism defense, strategy, finance and much more
Smooch Repovich Reynolds, managing director of the investor relations and corporate communications practice at ZRG Partners, has spent more than 30 years working as an executive search consultant specializing in investor relations and corporate communications roles. During this time, she has seen more than one generation of IR talent grow up, mature and move through higher levels of seniority.
As the talent has grown up, so has the profession and management’s expectation of IR. In this Q&A, Reynolds talks about how IR came into its own in the aftermath of the 2008 financial crisis and what the future may hold for IROs.
What has been the biggest change in IR during the course of your career?
IR is a relatively new profession compared to the chief financial officer and chief legal officer professions, which have been around for centuries. Thirty years ago there wasn’t even an official title for the role because it had not become a critical part of the relationship with the investment community. When companies finally realized that they needed to invest in their brand and how they communicated with investors, the first official title was financial communications. And today we know those responsibilities to be only one aspect of the overall IR area.
There have been many diverse shifts that have dramatically reshaped the IR function in the past 10 years alone. The skillsets required to address brand definition and the corporate narrative that is conveyed to the investment community, as well as the quantitative acumen required to engage with the financial markets in a highly productive manner, are today’s benchmarks. If I had to select only one, it would be the requisition that IROs be extremely well-versed in finance. The IRO of today must have a foundation based in finance such that the IR professional understands not just the vernacular of finance, but to the degree that the individual can easily switch between a corporate business model and that which the analyst community may offer.
In addition, the level of broad business acumen and savvy that boards and management teams expect an IRO to have is at the highest level ever. The most highly respected IROs today are considered corporate influencers whose ability to provide neutral and savvy advice to management is a part of their hallmark qualities.
What have been the most positive changes you have seen in IR?
The most positive changes are punctuated by the elevation of the IRO role in the minds of boards and management teams. Today, more than ever, there is a recognition that the IRO is a key contributor to the overall wellbeing of an enterprise and how both internal and external constituencies perceive it.
What have been the most negative changes you have seen in IR? What are the gaps that need to be filled in the next 10 years?
That is a difficult question to answer because clearly the positives far outweigh the negatives. In my opinion, the only negative would be that there are still management teams that are not acknowledging the importance of this role. As a result, they insert talent into the IRO role who are ill-equipped with the knowledge and wisdom to be additive. Long term this can damage a company’s valuation and reputation.
One other gap clearly tied to a professional’s personal preference is the continued lack of foresight on the part of IR talent to recognize that the IR role can be a springboard to nearly any leadership team role they choose for their future success. IR in the last 10 years has migrated from being a necessary evil to being a role that can fuel one’s aspirational career goals. I am not sure the lion’s share of IROs understand that – this profession has advanced well beyond where many have thought it would go.
What advice would you give someone coming into IR today?
The advice would be to have a broad, diverse and solid foundation in finance. There is just no getting around that subject anymore – IROs must have broad finance knowledge to be successful and valuable to a company, and not just finance for the IRO role.
In addition, it is imperative for IROs to hone their intangible leadership attributes, whether it is gravitas, organizational influencing abilities, intellectual curiosity or organizational awareness, such that they emerge naturally as leaders in their organizations. Management teams and boards want to see their IRO as a thought leader and not just the IRO.
Thinking about the last decade of business, since 2008, there have been many shifts in the capital markets and US companies faced the headwinds of the great recession. What are some of the lessons learned in the IRO community and do you have a sense of what some of the people who have moved out of IR have gone on to do?
First let me address the last decade by highlighting the notion that when an economy is in trouble and companies are collapsing in size due to economic headwinds, there is still a great opportunity to be recognized. Management teams learned that without a highly respected IRO in place, the investment community could be less forgiving as their organization faltered financially due to circumstances beyond their control. This experience supported the need to have the right IR talent in place to validate the credibility of the brand.
Second, in just the past five years there has been a significant increase in the demand for IROs who bring activist shareholder experience as an intentional strategy to thwart activists becoming aggressive with a board by proactively cultivating relationships with those entities as they initiate investment in a specific company.
Third, I feel compelled to acknowledge that there are so many lanes of career opportunity for those contemplating leaving IR, whether by choice or not. This is a significant advantage for the IR profession. Some of the roles that I have seen IROs migrate to are ones in corporate development, strategy, general finance, CFO roles, etc. And, success post-IRO tenure is largely a factor of the IRO’s mindset about the myriad of possibilities and their own career aspirations. The truly progressive IRO tends to worry less about each next step, rather he/she focuses on serving in roles that will ultimately lead to management viewing that individual as a corporate athlete – this, in turn, ultimately leads to increasingly senior leadership roles of different sorts.
What do you envisage being the most important change the IR industry will face in the future and why? What do you think the next decade will look like?
I believe that the most significant changes in the IR profession are going to be a direct result of the impact that the shifts in the global capital markets will have in the future as that industry evolves. It might be a bit of a domino effect as the investment community changes its business model, that in turn will affect public corporations’ responsibilities for picking up the slack.
In fact, as I contemplate what the future looks like as far as an IRO’s knowledge base and future responsibilities, I think management teams will expect that IROs will need to:
- Acquire a bit of global economist expertise and become increasingly savvy about the impact of global political and economic shifts and how that will affect their company’s business, therefore how that will impact the narrative and positioning with the investment community
- Become increasingly savvy about working with activist shareholders, with the first line of defense being to build relationships before the activist makes aggressive overtures
- Serve comfortably as a corporate influencer as a direct result of the span of knowledge and relationships an IRO should have in an organization
- Participate constructively across all C-suite functions as it relates to anticipating topics that the investment community will pursue, before the financial markets approach a corporation about them.
We have also begun to see an increase in interest on the topic of ESG, and I believe that an increasing number of investors are going to expect the IRO to be influencers inside their companies to advance the development of smart, retention-focused human capital strategies. This is an area outside of the IRO’s current purview, but one that is becoming critical on many levels.