New Challenges of Investor Relations

New Challenges of Investor Relations

New Challenges of Investor Relations 2560 1704 Le Yu

Lisa M. Fairfax, Professor of Law at The George Washington University Law School, once explained in her book Shareholder Democracy A Primer on Shareholder Activism and Participation that shareholders engage into the firm is actually “a bid for the corporation to be more representative and participatory by allowing shareholders to exercise greater voice within the corporation”. In such background, IR is regarded as increasingly important vehicle through which shareholders’ voice can be heard and mutual understanding between shareholders and companies can be enhanced.

One challenge of IR officers comes from the expanding topics which need to be taken care of. Nowadays enterprises are not exclusively evaluated by financial indicators. Non-financial criteria, for example, social responsibility, green production, gender equality, and employee protection are also heavily valued by stakeholders. More knowledge about a company’s corporate social responsibility (CSR) objectives, costs, outcomes and effects will influence consumers’ purchasing decision and increase their positive attitude towards the company. Actually, not only investors, for some years, analysts, governments, rating agencies, research institutions all begin to evaluate the performance of an enterprise from broader point of view. From investors’ perspective, though under the pressure of achieving financial return objective, some investors greatly consider and evaluate what impact of target companies’ business activities will bring to environment, society and governance.

Traditionally portfolio managers’ investment decision may exclusively rely on the financial data on balance sheet or stock price’s fluctuation. Nowadays, almost all investors believe that non-financial indicators, like corporate governance, will influence the performance of a company and thereby influence the investment decision of investors.

Except for that, IR also meets challenge due to the arrival of digital era. Nowadays, every shareholder, no matter institutional or retail, big or small, can use social media to complain, criticize or monitor the corporate governance of their portfolio companies. Under the assistance of various public digital platforms, information, positive or negative, could expand in very short period of time. Social media provides a much easier access for investors to publicly express dissatisfaction of firms. Activists campaigns can be largely expanded or intensified through internet. Online media could stimulate engagement in governance issues, and companies are expected to integrate stakeholder engagement into their governance structure to maintain strategic competitiveness.

Facing of the rise of shareholder engagement and the expanding tasks and challenges, IR becomes more essential in the business world. Investors rely on IR’s information to reduce its investment uncertainty while companies also rely on IR to transfer accurate information to shareholders. Building a long lasting, trust worthy and stable cooperation relationship between shareholders and the companies are IR’s and will always be IR’s essential task.