In the age of Sarbanes-Oxley and Reg FD, senior PR execs have to
know how to read a balance sheet, understand profits-and-loss
statements, and own a solid grasp of financial lingo -- areas that,
in the past, would simply have been deferred to the
investor-relations crew.
However, in the last several years as trust and corporate
reputation have become just as important as profitability (if not
more so), the nexus between IR and PR has grown much closer, driven
in many cases by those chieftains who realize that the two
functions need to fit like a hand in a glove. And for PR execs
seeking to bolster their value, the relationship with IR should
only grow closer in the months and years ahead.
"These are forces that go way beyond SARBOX," says Lou Thompson,
president-CEO of the National Investor Relations Institute
(Vienna, Va.), which in the spring will release a white paper
detailing how to integrate corporate messaging between IR and other
communication functions.
Paul Argenti, professor of management and corporate
communications at the Tuck School of Business at Dartmouth,
along with Bob Howell, distinguished professor at Tuck, are
currently crafting the white paper. They interviewed CEOs, CFOs,
corporate communications executives and heads of IR and PR from 11
different companies, including Dell Inc., FedEx
Corp., JetBlue, and The New York Times Co., about
how they go about communicating the corporate strategic
message.
"It's an opportunity to bring the functions together from a
professional development perspective," Thompson says, adding that
30%+ of NIRI's 4,300 members have a communications/PR background,
while 55% have a financial background. "People who are strong on PR
can learn about finance and vice versa. It's not going to be easy
but, for the investor market, the pendulum is swinging back to a
more integrated model."
Thompson says the white paper will be a major component of the
NIRI Center for Strategic Communication, which focuses on the
professional development and how-to aspects of integrated corporate
communications. He points to Baruch Lev, a professor of accounting
at the Stern School of Business at New York
University, who posits that more than half of a company's
market value now is driven by such non-financial factors as quality
of management, research and development, human capital and
intellectual property.
"When companies talk to investors, they are primarily talking
about financial performance and are missing an opportunity to
discuss non-financial factors, " Thompson says. "[And]
institutional investors are paying a lot more attention to these
areas."
Historically, IR execs have reported to the head of finance and
PR execs reported to the chief marketing officer, for example.
That's unlikely to change because corporate structures are so
entrenched. Nevertheless, it's important that both sides recognize
that the IR and PR disciplines are converging at a rapid clip, and
in the context of communicating financial-related information
protecting one's IR or PR turf no longer cuts it, particularly when
the demand comes from the inner sanctum.
"The current generation of CFOs understands the dynamics of
communications and appreciates the communication function better
than their predecessors," says Rick Anderson, senior VP &
partner at Fleishman-Hillard (New York City), which
represents 14 of the largest publicly traded homebuilders. It's not
necessarily to whom they report "but more of a question of how well
[IR and PR] work together."
At the RBC Financial Group (Toronto), for example, David
Moorcroft, senior VP/head of communications, reports to the bank's
head of branding while IR reports to the head of finance. But
Chethan Lakshman, senior advisor/corporate communications, works on
a regular basis with IR and then reports to Moorcroft.
"The conversation has improved so the messages are aligned, and
we're not saying one thing to investors and another to the media,"
Lakshman says. He huddles with the head of IR on any "material"
matter that is communicated to investors, and he also works closely
with IR on quarterly reports, acquisitions and divestures.
"Everybody understands that there's give and take when
communicating critical messages," he says.
Moorcroft says Chethan has "earned the right to be credible to
IR, and IR seeks out his opinion," adding, "If someone wants to be
a cowboy, it's not going to work, and if you don't have the buy-in
from the top of the pyramid, it's not going to work either."
The rub is how to articulate the facts and figures that were for
years under the purview of IR. "You don't have to be a CPA, but
[you do] need strong communication skills to match the numbers with
the words," says Dave Armon, COO of PR Newswire. "[But] if
you can't be an intelligent equal to IR colleagues, you're going to
be relegated to a fringe role."
Armon amplified comments by other sources that PR and IR can
best gel if they are sitting side-by-side at the same table,
empowered by a CEO who "gets it" on why the two functions need to
be closely united.
In interpreting numbers, it's key that PR execs keep their
promotional nature in check. "In presenting a financial picture,
less is more," Fleishman's Anderson says. "As a result of
interacting with the investment community, it's better to present a
qualified view of the numbers rather than a totally enthusiastic
view. Instead of looking at the glass half full, look at as half
empty."
Anderson adds that communicating executive compensation is the
next frontier for PR, which will be a lot tougher than writing up
quarterly reports. "The most difficult thing for an IR/PR person to
do is stand up and defend CEO compensation."
Contacts: Rick Anderson, 212.453.2306, andersri@fleishman.com; Dave
Armon, 212.282.1930, dave.armon@prnewswire.com;
Chethan Lakshman, 416.974.9463, chethan.lakshman@rbc.com;
David Moorcroft, 416.974.0520, david.moorcroft@rbc.com; Lou
Thompson, 703.506.3572, lthompson@niri.org