[GUEST POST] Moving AR into IR…..

Duncan Chapple / Kea - For the IIAR blogInvestor relations just took over Analyst Relations at Tata Consultancy Services, an IT Services giant. Is IR about to eat AR for lunch? TCS has decided on the reorganisation after a year that included significant leadership changes in the firm’s analyst relations team.
In most tech organizations, AR sits within corporate marketing. This has been a natural home for AR though, as we know, not always appreciated but seen as a necessary function that is needed as part of a wider marketing organization. Most sensible senior executives know how important the analysts are in the overall ecosystem.


Holmes Report has announced it as part of a substantial reorganisation of TCS’ marketing communications. The investor relations leadership will manage both AR and IR functions. The teams remain separate, with AR being part of the CMO’s organization and IR remaining part of the CFO’s organization. The head of investor relations will thus report to the CFO for IR and to the CMO for AR.
AR and IR have differences and similarities. Analyst relations uses candor to build rapport with crucial influencers. Investor relations is regulated to provide fair disclosure to the whole market. There is certainly a substantial overlap: candor (while staying in the confines of fair disclosure) works just as well with investors and equity analysts. However, Fair Disclosure rules are about making all material information available equally so that no investors suffer from information asymmetry.


Our take

Many companies tell themselves a comforting lie: as long as AR does not disclose financial metrics that are not already in the public domain, then Fair Disclosure rules do not apply to AR since the information given to industry analysts has no impact on investment outcomes. If that were the case, services like Gartner Invest and the Analyst Value Survey would not be purchased by investment professionals.
In reality, the information asymmetry that industry analysts thrive on, is both qualitative (relative capabilities, customer references, case studies, strategy) and quantitative (off-the-record guidance on market shares, customer numbers, deal values and pricing). As clients of analyst firms, AR spokespeople and managers disclose revenue breakdowns, pricing data and many other operating metrics that are not a part of the company’s public disclosures. Because they are under the non-disclosure terms of contracts, they are less likely to violate the rules against selective disclosure. However, not every US court would accept the prior existence of an NDA as a defense against charges of selective disclosure: almost every organisation has an NDA with every other. When the AR team plays the game of ‘hotter’ and ‘colder’ with analysts wondering if their market estimates are too low or too high, few judges will feel that this is not selective disclosure of financial performance. That is not even the biggest danger of selective disclosure.
The only experience many AR people have of investor relations is dealing with executives who want to brief both investor analysts and industry analysts at the same Analyst Day.  Generally, these two groups have completely different areas of interest. Communications professionals have often found there’s little information that they can both share with both communities and also really meet the information needs of these different analysts.

Bottom Line

This is not necessarily a bad move as long as the two constituents are addressed by people with different skill sets who understand how they work. The AR team also needs to be aligned with the other functions in corporate marketing so they understand what the overall strategy is for the company and the key messages that are coming out of corporate marketing. The proof in the pudding will be how the analysts react to this and whether they see any change in the overall relationship.
By Duncan Chapple (@duncanchapple, LinkedIn, blog), Managing Partner at KeaThanks to Robert De Souza (@robert_desouza, LinkedIn) for his contribution.

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6 thoughts on “[GUEST POST] Moving AR into IR…..”

  1. Pingback: Investor relations head takes over AR at Tata – Kea SageCircle

  2. Interesting article Duncan and raises many interesting conversations. I would like to offer a specific counterpoint. When AR rests under Corporate Marketing, it often competes for attention with scores of other sub functions & we have seen in many organizations that it does not always get the priority it deserves when it competes against larger budget and direct to business priorities. The point of our new approach is to have one of our most dynamic leaders (who has served with great distinction in terms of stakeholder relations in an affiliated function) take charge of the function and give it more leadership attention, plus make our engagements with Industry Analysts even more strategic. Time will tell whether any strategy works, but having known Kedar, our IR & and now AR head, for over 15 years I would caution anyone in betting against him. He is a strong fundamentalist who builds winning long term strategies. [Disclaimer: I work with TCS and serve in its marketing department. So while that gives me an interest in this issue, it also places me at an insider’s perch to give a meaningful perspective on this matter.]

  3. Thanks for your comment Abhinav. Of course, Rob and I are neither criticising TCS nor betting against its success: the company is a long-time leader in AR and it knows what it is doing. The TCS leadership clearly has great confidence in the new arrangement. I stress that more on the article on my blog. We’re simply making the point that most other firms should not copy this move.

    Perhaps I have misunderstood what has happened? I thought that AR was still under Corporate Marketing, and reported to the CMO.

  4. In my personal experience this can work well provided IR and senior management understand the ‘relationship’ side of AR, the disclosures needed, accept the AR pro expertise and the latter given autonomy over their practice. Duncan is right in that IROs are trained to not disclose/share anything beyond the bare minimum. This by design means that IR is incompatible with AR because AR requires a large amount of ‘immaterial’ data disclosure. There arises the need for IR to trust that AR know what constitutes ‘material’ disclosure. The structure worked very well for me for the past 7 years. Equally, sitting within corporate communications worked well. Each structure has its own merits and downsides but I suspect that when AR is moved into IR, it is because senior management is concerned about uncontrolled disclosures around the organisation (analysts, journalists and consultants are notorious for finding their own ‘unofficial sources’). If this is the case then it is the job of the AR pro to educate IR and senior management and work together to ensure that disclosures are appropriate, proportionate and legal. I certainly learnt a lot in IR and it enabled me to expend my role further. Others might find it restrictive. It is what you make of it. If anyone finds themselves in this situation, I am happy to have a chat.

  5. Pingback: Investor relations head takes over AR at Tata - Influencer Relations ¦ Duncan Chapple

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