Picture it - a nice corner table for four at the 21 Club in New
York, a martini or two, followed by a hardy merlot, and somewhere
along the line a healthy dose of "earnings guidance" to a favored
analyst from the Investor Relations Director and the Chief
Financial Officer.
Sound familiar? It should - if this were 1999.
But, as anybody who works in corporate public relations and
investor relations today can tell you, such intimate conversations,
and the resulting stock spikes, have gone the way of dot-com
synergies - and that's for the best.
It's not that the financial side of business is any less
important - in fact, the reverse is true. As a result of a series
of key developments over the last eight years, IR professionals
today have to think beyond narrow financial matters and more about
the impact of investor issues on institutional reputation and image
- and PR experts have had to become more attuned to the overarching
influence of Wall Street on how and why people buy a company's
products, and not just its stock.
Put simply: external relations in the current environment is all
about reputation (of the company, the CEO, and the Board of
Directors), which has always been squarely in the province of the
public relations/corporate communications department.
Driving this integration are three trends. First, the emergence
of individual investors as a powerful force in the marketplace as a
result of the hundreds of millions of dollars they have to invest.
Second, the parallel development of a new news media niche to cater
to this audience. Third, the implementation of regulatory,
legislative, and legal mandates that provided an additional
catalyst for change.
The first step on this road occurred with the mass marketing of
The Nasdaq Stock Market in the mid-1990s. With the slogan "the
stock market for the next 100 years," the Nasdaq campaign ushered
in a new interest in the financial markets and made it cool - and
often profitable - to own shares in individual companies. Aided by
the rapid deployment of the Internet, high-speed data networks, and
more powerful and inexpensive computers, investors were quickly
empowered to take maximum advantage of the booming economy.
Individual investors' thirst for access to the equities markets
was immediately quenched by the news media. The result, as every PR
and IR professional knows, was a boom in business programming
(CNBC, CNNfn, Bloomberg TV), investor-focused websites
(TheStreet.com, CBS MarketWatch), and a host of start-up magazines
and newsletters designed to provide unique news and advice to
eager, cash-rich investors from Bangor to the Bay Area.
And while this tectonic shift in corporate ownership filled the
coffers of investment banks with new assets and made day trading a
real profession (at least for awhile), it also profoundly changed
the fundamental relationship between companies and their owners.
This new breed of stockholder had invested their money and their
trust in individual companies and expected immediate financial and
reputational returns.
The final death knell for the historic silos between IR and PR
came with the passage of the Securities and Exchange Commission's
(SEC) Regulation Fair Disclosure. Now, with selective disclosure
specifically illegal, communications to Wall Street analysts,
bankers, and brokers had to be open for all to see. Coupled with an
eroding sense of trust in corporate America highlighted by
everything from the collapse of Arthur Andersen, to the failures of
Enron and WorldCom, to revelations about the bias in investment
banking research, the imperative to rebuild damaged corporate
reputations become acute and the solution clear - PR and IR would
have to work together to get the job done.
To date, progress on this front is reassuring. CEOs are
increasingly demanding a better reputation and are driving the need
for integration down through their organizations in order to
achieve it. In fact, a number of companies large and small are
realigning their organizational charts to put a number of IR
communication initiatives - if not the entire function - under the
broad PR umbrella in order to ensure investors receive the
attention they deserve, keep message control centralized, and
direct all efforts toward supporting the rehabilitation of the
company's reputation across every audience.
These new external communication responsibilities carry
challenges for traditional PR departments as well. Not usually
steeped in the nuance of Wall Street and the marketplace,
communications professionals need to become increasingly sensitive
to the effects financial issues have on a company, and adopt the
same strategic thinking they have always used to support other
corporate functions to accommodate this changing dynamic. PR pros
also have to stay on guard to prevent the infiltration of too much
"happy talk news" into critical investor communications to ensure
that important market news is not overlooked or ignored.
It's clear that all of these challenges can be overcome - and
the sooner they are, the sooner the IR and PR professionals can
dine together at the same table.
By Michael W. Robinson, Counsel to Levick Strategic
Communications. Robinson, the former Director of Public Affairs and
Chief Spokesman at the Securities and Exchange Commission, can be
reached at 202.973.1300
Next week in PR NEWS: How can companies create better links
between the Web and more effective communications? We'll tackle the
question as part of our special report on Interactive PR. Coverage
includes an examination of Web trends for both internal and
external communications and a close look at the (booming) market
for search engines. Have a great Web PR story to tell? Contact
Editor Matthew Schwartz, 212.621.4875.