IR Jobs on the Rise?

In a webchat held on Monday April 19th, 2010, NIRI President Jeffrey Morgan said that the current employment for IRO's is picking up from where it once was last May. Although the job market isn't as stable and open as it once was just a few years back, it's definitely improving.

After reading Dominick Jones' blogpost today, maybe his analysis of the poor performance done by IR departments in monitoring social media, will further increase the improving IR job market. Jones' research has found that the lack of social media knowledge and poor monitoring activity by IR departments is potentially putting their respective companies at legal risk.

There are many social media compliance risks and if IRO's aren't carefully monitoring the flow of information on their company and industry, as well as keeping up to date with regulations, this could result in a legal issue. According to Jones, current IR departments are not as knowledgeable as they should be and are not actively engaging in online discussion about their company.

Maybe that's where we, Class of 2010 graduates, will prevail. As an emerging member of the class of 2010, with an interest in Investor Relations, I hold a vital piece of experience that even IRO veterans may not possess, social media knowledge and the ability to quickly adapt to changes within it.

Apple CEO looks Sick

An issue I am considering to write my final case study on is about Apple CEO Steve Jobs and shareholder reaction to his sickly appearance. Apple released news of Jobs' pancreatic cancer when he had his surgery to remove it. Since then it has been a situation closely monitored by investors. Essentially many believe that Jobs is the driving creative force of the organization and thus heavily weight his health on the success of the company.

Although there are no legal requirements to submit updates on the health of the company's employees, shareholders still should probably be informed on the health of upper-management. If handled correctly, shareholders can generate more trust in the IRO's, but moving forward if Apple denies serious health questions for being only small issues of concern and it turns out Jobs is not doing very well, then it could result in a serious dip in share price.

Conference Calls

Conference calls is an easy way for IRO's and members of a company to meet with investors, without LITERALLY meeting with investors in person. However, Reg. FD has put restrictions on how businesses conduct conference calls with investors and analysts.

Conference calls are beneficial to investors because they can hear their top management speak and really learn what they are doing with their money. They can also potentially get non verbal cues, to give them a better idea of what is going on.

Reg. FD has put restraints on conference calls, ensuring that they have to be conducted with all investors, or at least attempted. This puts a great deal of pressure on IRO's to plan these meetings well in advance with their constituents. At first, it lead to a massive decrease in IR conference calls.

IR Releases and their Effects

An extremely interesting article, titled "Are Investors Influenced By How Earnings Press Releases Are Written?" written by Elaine Henry takes a look at IR Releases and their effects on those who read them.

The article was written based on the two part study she had conducted. The purpose of the study was to gain an increased understanding of the firm-investor communication process. The first part of the study looked at genres of IR releases. She took a look at how the length, usage of numbers, complexity of information and tone of article had an effect on how readers reacted to the article.

The second part of the article used event studies to gauge the effect of the releases. Effects in share price, specifically abnormal returns. Abnormal returns are whether a firm's stock exhibited higher or lower returns around the time of an event.

Conclusions of the study found that longer press releases had less of an impact than short, concise releases. Positive tone induced a positive reaction. However, if the tone had overly praised the company or was too overboard with positivity, it contributed to a negative feeling. Numerical intensity could potentially create negative effects. Again, the amount of numbers used needed to be easily understood and couldn't flood the article.

Importance of Relationships

It is extremely important to have a strong relationship between your company's IRO's and the rest of the business community. In this context, the rest of the business community involves the company's investors, financial analysts as well as the rest of the financial community that can be potential investors.

Many IRO professionals believe that the relationship between an investor and an IRO means more than the actual numbers on Wall St. A strong relationship will overcome a dip in share price and the negative media attention of a scandal or situation that involves your company.

But how do we measure relationships? We can directly ask investors and financial analysts of their experience with your company and the IRO's they've dealt with. You can also ask all investors to give feedback in the form of questionnaires. Also, it's most likely that a relationship is strong if an investor has invested with the company for an extended period of time.

Let's take two companies, Disney and Apple. Disney is more likely to rely upon these relationships because they are not frequently coming out with new products that have a direct effect on their share price or brand in the eyes of the consumers. Apple however is constantly coming out with cutting edge technology that is re-inforcing its brand image and affecting its share price.

Disney needs to consistently engage in strong relationships and reinforce their "family experience" and "strong and reliable" share price. Apple doesn't have to rely on relationships as much as its cutting edge products will attract consumers and keep it in the fore-front of its consumers and investors minds.

SOX Act

The Sarabanes Oxley Act was initiated in 2002. Most say it was response to the fraud involved with the Enron scandal. Regardless, it is to be followed by all public companies. The Act has 11 Titles.

I. Public Company Accounting Oversight Board
II. Auditor Independence
III. Corporate Responsibility
IV. Enhanced Financial Disclosures
V. Analyst Conflicts of Interest
VI. Commission Resources and Authority
VII. Studies and Reports
VIII. Corporate and Criminal Fraud Accountability
IX. White Collar Crime Penalty Enhancement
X. Corporate Tax Returns
XI. Corporate Fraud Accountability

To me, the most important part of the SOX Act is title V. This ensures that the auditors must not be connected to the organization and completely impartial. This is an attempt to bring legitimacy to the auditing process. Unfortunately this has brought up additional costs to companies. Each title adds significant costs to each companies' responsibility in order to comply with the SOX Act.

Good for us, as investors, but does it only hurt the companies that were conducting ethical and trustworthy business?