Every once in a while on the blog, we’re going to highlight a particularly compelling piece from our BetterIR newsletter. This month, we look back at a piece from August, in which the part IR plays in corporate strategic decision-making was explored. In particular, we delved into the Investor Relations profession’s role in dividend initiation.
From August 2014’s BetterIR: Dividend Initiation Impact
Over the span of the last fifteen years, arguably the greatest advance made in aggregate by the IR profession has been an increased connection to corporate strategic decision-making. Once seen as simply a facilitator of disseminating outbound information, the best management teams now view IR as an important contributor to strategic decisions, not just a conduit for information flow. Few top management teams make a major change to corporate strategy without at least some level of consultation with IR to understand shareholder response to the decision.
The decision to initiate an ongoing dividend payment is perhaps the best example of a situation where IR’s “seat at the table” can produce significant value for the company. The best IROs maintain a finger on the pulse of major shareholders and their preferences for company strategy, and in particular keep a close eye on each investor’s stated views on company cash usage. An IRO that’s been in touch with the major constituents of his or her shareholder base can offer valuable insights as to how shareholders may respond to a major change – not just around dividends, but also including buyback plans, balance sheet restructuring exercises, or major operational investments.