I just started reading former world chess champion Garry Kasparov’s book How Life Imitates Chess. I can already recommend it.

“If you play without long-term goals your decisions will become purely reactive and you’ll be playing your opponent’s game, not your own. As you jump from one new thing to the next you will be pulled off course, caught up in what’s right in front of you instead of what you need to achieve.”

Reading this got me thinking about investor relations… I guess I’m an IR nerd rather than a chess nerd. When I ask companies about their IR strategy, they are often at a loss for answers. Mark Hynes claims that IR is coming of age. I’m not so sure. Given the fact that it is not unusual for CEOs to spend 20 percent or more of their time dealing with investors (CFOs spend even more), there is a surprising lack of strategic direction in the IR field. Goals are often vague or misguided, and the role of the IRO poorly defined.

This is NIRI’s definition of Investor Relations:

“Investor relations is a strategic management responsibility that integrates finance, communication, marketing and securities law compliance to enable the most effective two-way communication between a company, the financial community, and other constituencies, which ultimately contributes to a company's securities achieving fair valuation. (Adopted by the NIRI Board of Directors, March 2003.)”

Given that you accept this definition (which I do), it definitely sounds like the head of IR should report directly to the CEO. Well, only one of my IR director clients does (in fact, this was a prerequisite for taking the job).

I know of one large Swedish company where IR is not even involved in the production of the annual report. The PR department leads the project.

I believe that the notion that “the market is always right” is partly to blame. The Efficient Markets Theory was dumped long ago. The starting point of an effective IR strategy is a perspective on your company’s valuation. You need to take greater control of your company’s valuation (this is also how I interpret NIRI’s definition of IR…).

Given that your goal is a fair valuation, how do you achieve it? Is the share undervalued or overvalued now? Why and approximately by how much? What activities are most likely to move the share in the right direction?

There is a lot of talk about social media strategy in IR at the moment. Before even starting to think about this, you need an IR strategy.