The first time I came across the phrase ‘Investor Relations’ I was not too sure what it meant. Did the company only ever accept investment from relatives? Or were relatives of the investors being catered to in some way? Or maybe it simply was a case of making your investors your relatives and the money within the family! Seriously. Try as I might, I could not get to the bottom of the investor relations phrase.
It was only later that a friend in the communications business, and financial communications at that, who told me what investor relations really meant. In short, investor relations was about maintaining good relations with your investors. If you are a mega brand with thousands of employees and hundreds of offices, you might not realize the importance of investor relations. But ask any small company with a handful of investors. And they will tell you the true worth of investor relations.
It is a well known fact that investor relations can make or break a company. Not just small ones, even bigger ones. Remember Enron? Well, that surely wasn’t a small company. Yet, when news of the non compliance within the finances of the company hit the street, the investors were among the first ones to try and pull out. Now a good investor relations division would have handled the situation better. While there is little they could have done to manage the mismanagement in the first place, there is in fact a whole lot they could have done to communicate this information to the investors.
Effective investor relations can add much more to a company than it takes from it. For one thing, it can smoothen the cash flows of a company without making it hinge on the moods and idiosyncrasies of the investors. Many companies in their first few years of having investors assume that as long as the investors get their share of the profits, they will all be happy and everything will be hunky dory. But the important thing they forget, and which every investor relations professional is trained to remember, is that investors want to feel loved and respected and want the company to be grateful to them for having invested in the company.
And if this basic need of theirs is not met, they might not really care about the financial repercussions. They might just pull the plug on their investments. Only one thing can stem such actions and that is effective investor relations.
