From the previous Inside Investor Relations article: "How should an IRO work with the C-suite management?" we went through IRO's role within the organization. In this volume, we would like to introduce how to form an effective IR team with examples of Taiwan semiconductor firms. For most Taiwan small- and mid-cap companies, the spokesperson, besides his/her daily responsibility, is also a part-time IRO. When IR activities increase along with company's improving fundamental, it is necessary to assemble an IR team to communicate effectively with the capital market.
The head of IR - usually led by senior management in the company
The first step of building an effective IR team is to assign a dedicated and professional senior management who understands the industry, business operations and capital market to be in charge of the IR department. The head of IR should be capable of leading the IR team to maintain a loyal shareholder base, build long-term credibility with the investment community and enhance long-term shareholder value. In addition, it takes both IR and finance expertise to ensure receptive capital markets for financing at lower cost of capital. Furthermore, due to growing popularity of responsible investing, it is also the head of IR's responsibility to reinforce the company's efforts in executing its ESG plans and communicate the progress and results to the market (QIC ESG Series (1) – Should companies invest in ESG?). In general, spokesperson is not only the official representative for corporate communication, he/she is also the one that conveys the corporate value to the capita market. Therefore, assigning a professional IR head is essential for building an effective IR team.
The IR team members - responsible for day-to-day IR tasks
The second step is to search for suitable team members and implement IR program across departments. In order to find someone who has adequate industrial and financial knowledge, the company may look for someone internally or recruit externally for an experienced professional. IR team members need to be communicative and is capable of coordinate communications among departments within the company. We believe a successful IR team consists the following components:
(1) The IR databank: Besides categorizing and keeping record of every investor meeting, the IR team need to identify and actively communicate with target investors to fortify the shareholder structure (Investor targeting).
(2) IR SOP: By means of preparing result conferences with support from different divisions, IR team continuously keep themselves updated with the knowledge and trend in the industry, corporate strategy, business operation, R&D, financial as well as ESG, and then prepare for the investors' Q&A accordingly.
(3) Two-way communication: In addition to deliver corporate information to investors, IR team monitors and brings market intelligence into the company in a timely fashion, including industrial news, peers' activities, sell-side research and third-party ESG reports, etc.
(4) Communication tools enhancement: Constantly fine tuning company's official website, investor presentation, factsheet and on-line conference agenda are crucial for investors and will improve transparency, especially when physical investor meetings are restricted during COVID-19 (How a company should be prepared to communicate with investors during COVID-19).
Best practices for assembling effective IR team – Examples from Taiwan leading semiconductor companies
Let's have a look at the IR team members of leading Taiwan semiconductor listed companies, including TSMC, UMC, ASE and MediaTek. We noticed there's one thing in common: A senior management leading the IR team withdedicated IR officers members. Most of the IR heads have both finance and industrial expertise while some of them have prior working experiences in foreign financial institutions.
Examples of IRO head background and experience.
Photo: QIC
The Bottom Line
Due to limited resources, Taiwan small- and mid-cap companies tend to consider CFO, Chief Sales Officer (CSO) or special assistant of chairperson to be the sole member of IR team. Although assembling an IR team takes resources, we encourage corporates to set up a cross-functional and independent IR department to articulate corporate messages to all stakeholders. In conclusion, an effective IR team is the cornerstone of a corporate's transparency, but also an integral part for any listed company that wishes to improve its long-term shareholder value.
(Editor note: To give our readers a more in-depth and comprehensive knowledge about investor relations from the investor's perspective, DIGITIMES has invited QIC as a contributing partner to share their insights. The article is the second part of the QIC Inside Investor Relations Series, which was originally published on QIC website.)
Photo: QIC
