CEO and CFO participation in IR

The active involvement of the CEO and CFO in the activities of the Investor Relations (IR) team is always appreciated by the market. Their presence creates an environment of transparency and proximity between the company and the market, offering the opportunity to better understand the internal workings of the company and make more informed investment decisions. At the same time, the CEO and CFO may learn from more direct interaction with the market, and better appreciate the impact of strategy on the stock price.  

Although the Investor Relations team will naturally have the most contact with the market on a day-to-day basis, there are several situations in which top management involvement is advisable. (The recommended frequency of top management involvement in IR naturally depends on the seniority of the IR team, and to be frank, the extent to which senior management cares about the stock price and its investors. In a family-controlled company it is perfectly understandable if the market and the stock price are not a big priority, and the CEO prefers to spend his scarce time on running the company).

That said, the following are our recommendations:

• Earnings reports and updates: the senior management team (CEO and CFO) should take the lead in quarterly calls to give more color to the market on the results and best answer the questions. Likewise, it is recommended that the CFO has a quarterly one-on-one call with the company’s main analysts and shareholders. In the case of the CEO, this interaction should be at least annual.
• Non-Deal Roadshows: allows senior management to express their opinions on trends in the industry in which they operate, communicate the results, vision, and goals of the management team for the company – and just as importantly hear feedback direct. It is recommended that the CFO participates in at least two NDRs per year and that the CEO participates in no less than one.
• Investor Days: in this case, key senior executives (CEO, CFO and at least two or three more C suites from core divisions) should meet with shareholders, analysts and potential investors to share the company’s strategic plan and objectives for the coming years. It is suggested to be held annually.
• Conferences: the main objective is to establish and maintain relationships with the market, share strategies and update on results, therefore, it is important to carefully select the events in which the management team will participate. It is recommended that the CEO participates at least once a year in those conferences classified as C-Suite, the CFO 2-4 times a year at industry or regional conferences and the rest of the IR team at least once a quarter.
• M&A: communication regarding the M&A process is key for transactions to have the desired effect on the share price and valuation. It is important for management to communicate effectively about the benefits that the transactions have for the company. Communication can be through a specific call to discuss the issue or it can be done on the quarterly call.
• Crisis management: during crises or significant events that impact the company, managers must be active in the market to address concerns and preserve confidence. By previous, it is recommended to publish a press release stating that the company is aware of the situation, to communicate the actions that will be taken to solve the problem and to follow up on any doubts raised by the market.  

The active participation of the CEO and CFO in the company’s activities is fundamental. The ideal is to build strong relationships based on transparency, honesty and long-term strategic vision. Effective interaction with the market, carefully chosen and timed, not only strengthens the company’s financial position, but also contributes to the personal and corporate reputation of senior management. As always, Miranda IR is ready to assist you in improving the communication and performance of managers at the events they attend.

Sources:

• IMS Investor Relations: https://institutionalms.squarespace.com/ims-blog/how-much-time-a-ceo-should-spend-on-investor-relations
• McKinsey: https://www.mckinsey.com/capabilities/strategy-and-corporate-finance/our-insights/communicating-with-the-right-investors
• Deloitte: https://www2.deloitte.com/mx/es/pages/dnoticias/articles/areas-de-relacion-con-inversionistas.html
• Provoke Media: https://www.provokemedia.com/latest/article/how-ceos-evaluate-speaking-opportunities