Investor relations text-books. Review.

I would like to thank everyone who sent me their recommendations of the investor relations text-books. I would like to provide a short overview of the ones I already looked at.

1. Marcus & Wallace. New dimensions in investor relations. Pretty decent books. Some chapters are quite good - the chapter 1 as an intro into IR can do the job. Chapter 3 - review of audiences involved in investor relations (analysts, portfolio managers, lawyers, etc.) - is based on a good idea but classification is somewhat confusing and descriptions of characters do not add any value. We need to know what their goal and how to deal with them. Other chapters I did not find very useful. Some of them are simply irrelevant at this point in time such as chapter 6 - computer in investor relations. But the old age of the book is clearly noticeable in many other chapters as well; after all, the book was published in 1997. The big drawback of the book - no discussion of measuring and evaluating effectiveness of the investor relations program - yet, this should be the cornerstone of any professional education.

2. Ryan & Jacobs Using investor relations to maximize equity valuation. I would not recommend this book because of the information presented and the language used. It starts quite nicely with a part describing various players relevant to investor relations from sell-side to the mass media. These are pretty decent chapters. After that the book reads as a sale-pitch to promote the authors' own investor relations agency. Out of 25 chapters in the book, only one talks about actually how to do investor relations - chapter 13 - Positioning IR to succeed. Following chapters are often repetitive to early chapters in the book - like in Chapter 24, Event Management, we return back to overview of capital markets players and talk about analysts, short-sellers, etc. and then talk about guidance (despite the fact that there is a separate chapter about guidance). I find the second part of the book very confusing and poorly structured. And again not a word about measurement and evaluation.

3. Rieves & Lefebvre Investor relations for the emerging company. Again, somewhat outdated book as it was published back in 2002. Yet, it seems to have a good structure. Part one defines investor relations, players on the market, and investing theories. However, the focus is on micro-cap; it is appropriate for the book about emerging company, but maybe not so much for a general IR course. Part 2 talks about disclosure. Part 3 discusses some random bits and pieces of the investor relations practices - conference calls, news releases, presentations, etc. I wish it talked more about overall strategy rather than specific examples. And I wish it would talk significantly more about measurement and evaluation - it has half a page where it simply lists financial metrics for measuring company's performance rather than investor relations effectiveness.

If I had to choose out of these three books, I would probably go with the last one - Investor relations for the emerging company. But maybe there is something else out there?..

What is the best investor relations text-book?

As I am preparing to teach an undergraduate investor relations course in the Spring semester, I face the issue of selecting a text-book for the course.

The situation is also complicated by the fact that I am going to have half of the students from the public relations department and half from the finance department. Plus, I might have a few from management and accounting.

So, the more I look the more I believe that there is no text-book available to me. In fact, some of the faculty and practitioners who teach investor relations at Colleges and Universities (and there is just a couple of them!) say that no such text-book exist. However, before I settle for a collection of random academic and professional articles instead of a text-book, I would like to at least give a try to finding such a magic book.

So, if you know of a book that can provide a general overview of investor relations, please share this info with me.

Investor relations course in the Spring

It looks like this Spring I will be teaching an undergraduate investor relations course. Due to the interdisciplinary nature of IR, the course will be listed in both business curricula and communication curricula.

It will be my second time teaching a course in investor relations, but still I feel pretty excited. After all, investor relations is what I do research about and where I acquired most of my professional experience.

Anyway, any recommendations about the course are welcome!

Also, consider guest-speaking to the class. We are in Hamden - almost half-way between New York and Boston, convenient location for travel by train or by car. It is a chance to give back to the profession and help shape future investor relations officers (they might be working side-by-side with you in one, two, three or ten years!).

Don't confuse investor relations with publicity!

On a blog of one highly respected investor relations practitioner I was shocked to read the following:

"As an investor relations person, I’m not part of the negotiating process for corporate deals. Folks who do negotiate the deals earn the big bucks – but that’s OK. My job is to communicate a deal once it’s done."

My shock was even stronger as the person writing these words was a long time member of NIRI and a president of a successful investor relations agency.

However, I have to conclude he is not an investor relations officer. Maybe a publicist. Maybe a journalist-in-residence. But not an investor relations officer.

Because if he were an investor relations officer, he would be part of a negotiation process. Investor relations must be involved in making a deal, representing the company's investors and defending their interests before the deal is carried out rather than simply communicating about a deal "once it's done." Maybe in this case the officer will deserve earning "big bucks" as well...

Are investor relations officers management's advocates?

I am back from my trip to Russia and trying to catch up with all the readings and emails I missed during three weeks without accessing the Internet (well, to be honest I did look and respond to some emails).

Anyway, I came across an interesting post at the Investor relations musings blog: What makes for great investor relations? There, John Palizza writes: "Some people like to think of investor relations as an advocacy position, similar to the way our trial system works." This phrase caught my attention because this is exactly what I was finding when I was conducting my research on the history of the investor relations profession. I identified three periods in the IR history, the second of which spanning from about 1970 to 2000, is exactly that: advocacy. IROs try to explain, defend and advance the management's point of view.

Summarizing my research results for the Institute for Public Relations I concluded that this second era of the history of investor relations was characterized by financial expertise heavily dominating investor relations: accountants and financial analysts often with no expertise in strategic communications were hired to perform an investor relations function.

However, I suggested that today we are already in the third period - synergy era. Now investor relations is not focused on advocacy, but rather on understanding: the goal of the investor relations function is the improved understanding of the company and its business model among investors and analysts. This investor relations does not try to achieve a "high" value of stock but tries to achieve a "fair" value of stock.

Here is the summary of my review of the investor relations history.