12 March 2024

It’s not only C-level leaders who are in high demand these days. Executive Search firms are also on the hunt for specialists in hidden corners of the business world – functions critical for success, yet notoriously difficult to fill with the right talent. Today, we’re shining a light on one such role: the Head of Investor Relations.

Investor Relations has grown in importance and in step with that it is becoming increasingly important to find the right people to lead and develop such a business.

Through an IPO (Initial Public Offering), companies are given the opportunity to expand as they can gain access to new capital. The companies also receive more attention while having to comply with the laws and regulations that apply to listed companies. At that stage, listed companies often have to look externally to find the right skills.

Let’s take it from the beginning

In order to coordinate the information and regulatory compliance, the listed companies have created a function called Investor Relations and abbreviated IR.  The term could be translated as “investor relations.” 

The first time in history that the position appeared was in the early 1950s when General Electric established a position within the PR department that would work with communication in relation to investors. Over time, how companies develop has gained an increasingly greater news value. There are more listed companies than before. 

The requirements for IR have been raised as companies and the outside world have developed, share ownership has broadened and economic journalism has developed. The investors have become more numerous, larger, and international. The possibility for private individuals to save and mainly save for pensions in funds at banks, insurance and fund companies has also created an increasing need for listed companies to communicate financial information.

Two types of corporate financing

Companies can finance themselves in two ways. Either they reinvest their profits or they get financing via the capital market. The capital market is usually divided into the credit market and the stock market. The credit market consists of banks that lend capital to companies. The stock market consists of investors, who can be individuals or professionals. 

If a larger company wishes to finance itself via the stock market, they choose to list their shares on a stock exchange. It is an effective way to raise capital from many different investors. The company thus becomes more visible. Many also feel that a company that is listed on the stock exchange has greater credibility, as there are stricter information and accounting rules. However, there are disadvantages to being listed. 

Public companies are surrounded by stricter rules that require greater transparency. This entails increased costs, greater risks of hostile takeovers and so-called quarter capitalism. Therefore, there is a focus on a listed company’s valuation being reasonably fair. What a fair valuation is is a vast question, which I will not go into here.

Investor Relations is responsible for contact with various stakeholders in the broadest sense and not just the listed company’s own shareholders. Those who are the main stakeholders when it comes to the company’s financial information are, among other things:

  • The stock exchange
  • Analysts
  • Brokers
  • Banks
  • The media
  • The authorities

The purpose of Investor Relations

The purpose of the information is multifaceted. The main goal of IR can be considered to be to capture the market’s expectations and inform the top company management so that the communication is adjusted correctly. 

You can say that it applies to the questions that the capital market wants answered so that their valuation models will work as correctly as possible. In addition to the strictly financial issues, they want to take good care of current and potential shareholders. A good turnover on the share with reasonably large fluctuations is also usually a goal, so that buyers and sellers find each other easily. Consistency and transparency are therefore required on the part of the company. You have to inform in good times and bad and meet the capital market regularly and be credible.

It is in the nature of things that the IR function must be closely linked to company management. The IR function may report directly to the CEO, but more commonly it falls under the Communications or Finance department. The important thing is the direct access to the company management. To reach out with the information, annual reports and quarterly reports are the basis. 

In addition, press releases, road shows, capital market days, emails and phone calls are used. Being able to respond quickly has become increasingly important, especially if the company risks being exposed to a sudden negative event that impacts the company’s stock price.

The IR role can vary in its focus areas, but usually it is informative, image-creating, missionary, relationship-creating and sometimes defensive. An important task for IR is also to educate internally about the regulations.

In a smaller listed company, only one person is responsible for IR. The title is usually Head of Investor Relations. It could be an internal or an external person, sometimes a hybrid. At large listed companies, there is a whole team. Sometimes one of the employees is stationed abroad.

The IR role today requires a person who has a combination of knowing the capital market and who is good at information and relationship building. The background is usually that you have been an analyst, informant or broker. Which person is right depends on the listed company’s requirements and wishes. Or maybe you are faced with a listing and then you want someone with that experience.

 In any case, companies have goals and results that must be achieved and it is more the rule than the exception that they wish to develop their IR function to top class. This is where we come in and find the right person for the client company’s mission. 

Finding the Perfect IR Fit

AIMS International can help identify candidates with the right experience and skillset to achieve the company’s goals. Does your company need help finding the perfect IR leader?  Get in touch with us to discuss your specific requirements.

About the Author:

Börje Hammarling

Börge Hammarling, Senior Consultant, AIMS International Sweden

Börje has 30 years of investment banking experience. He has worked for Swedish, Scandinavian and international financial companies as Head of Sales & Marketing, Stockbroker and in Institutional Sales. Börje has been active in Executive Search companies for several years and has extensive experience within international recruitment. He studied economics and finance at the University of Stockholm.