Introduction:
On December 18, 2024, CFA Society Chicago welcomed Mike Steele, CFA, IRC and Jennifer Childe, CFA, CPA as part of the Distinguished Speaker Vault Series. Steele is Vice President of Finance and Investor Relations at Zebra Technologies. Childe is a Senior Vice President and Director of Investor Relations at Northern Trust. In this presentation, Steele and Childe shared their insights on what it takes to have a successful career in Investor Relations (IR). They began with brief overviews of their respective careers.
Earlier in his career, Steele held a broad range of financial responsibilities primarily at larger public companies. This includes credit analysis, financial analysis, commercial finance and financial planning. This experience served as a solid foundation for a career in IR. In fact, it was one of the main reasons he was hired for his first IR role at OfficeMax. During his tenure there, he gained deeper experience working with institutional investors. Additionally, the merger of OfficeMax and Office Depot was a great opportunity for further development. Currently, Steele is at Zebra Technologies, a company which seeks to digitize operations across the supply chain. Zebra’s devices, software and services allow for real-time information and better decision making.
Childe has experience in a variety of fields within finance such as consulting, commercial banking, and investment banking. She spent most of her career on the sell side at Bear Stearns and Credit Suisse. Later, when she sought a better fit in terms of hours and travel, IR was a natural transition. She worked in IR directly for corporations as well as at an IR consulting firm. In this capacity, she has experience working with companies of varying sizes, activist campaigns, and transformative M&A. She joined Northern Trust in 2022 and is currently a Senior Vice President and Director of Investor Relations, responsible for communicating company strategy to key stakeholders and other constituents.
Overview with Focus on Earnings Preparation:
Steele presented an overview of the IR role. In the past, the IR role was often considered an administrative function. Now, the role has been elevated. IR professionals are not only required to have financial expertise, but also understand all aspects of the organization. They are expected to be able to sit in for the CEO or CFO and answer questions ranging from balance sheet items to company culture. There is a lot of collaboration to ensure that the company has one voice and consistent messaging. Additionally, the IR professional must determine the most effective way to spend time and resources. This requires an analytical approach to the marketing calendar and target audiences. Of course, a great deal of the focus is on earnings.
Childe added further comment on the earnings process. The process starts with the financials and recognizing the story behind those numbers. From there, the press release and CEO quotes are
drafted. Every word matters and internal consensus is essential to ensure a consistent message. The goal is to provide useful information while also leaving room for a certain level of inquiry during the Q&A. Childe’s experience on the sell-side helps her anticipate analysts’ questions. She will identify potentially tough questions and prepare the CEO/CFO ahead of time to ensure that the responses are on point. She considers it a victory if they do not receive any questions that weren’t already anticipated.
Steele agreed that anticipating and preparing for follow-up questions is imperative. There are a lot of smart people on the receiving end of earnings calls and press releases. Steele is still amazed when a reputable large company fumbles their response to an obvious question on an earnings call. Steele further suggests that one hallmark of a successful earnings call is a relatively low volume of follow-ups from analysts. This indicates that the analysts have the right takeaways and can inform their models and forecasts.
Audience Questions:
To what degree has the CFA charter enhanced your career, and would you consider it a requirement for an IR career?
Steele shared that he uses virtually all the material in the CFA curriculum. Additionally, the CFA charter adds credibility with counterparts and investors. At the same time, he may not always look for the designation when hiring in IR roles. This is because the IR role has a different set of skills when contrasted to a more typical buy/sell side role. The goal of an IR role is to arrive at a unified company opinion rather than an individual conviction. Childe added that this role requires both analytical and communication skills. Individuals who thrive in IR roles use the left and right sides of their brain equally well.
Did you receive any formal training on the communications aspect of the IR role?
Steele believes that, for many IR professionals, communication skills come from a combination of natural interest and aptitude. Childe added that she built her skills primarily through experience without formal training.
Has artificial intelligence (AI) changed how you craft your messaging?
Childe commented that, while she has seen some amazing things from AI, she has also seen some glitchy results. Steele added that, with so much care put into every word in IR messaging, it is easy for AI to miss the mark. Given these observations, relying on AI to create public-facing information is not currently viable. There are some limited use cases. For example, AI might be used to leverage existing language to create supporting documents. It may also be used to digest outside information such as gathering and summarizing peer earnings reports.
Do you consider how those receiving information might use AI to screen or interpret the information?
Neither Childe nor Steele specifically tailor their written copy to AI algorithms. Instead, they consider audience sentiment more broadly. For example, they typically avoid negative words when positive and credible alternative phrasing is possible.
Are there any common metrics for IR success? How is someone in an IR role evaluated?
Because so much of stock performance is outside the control of IR, it is not the basis for measuring IR performance. Instead, metrics are based on other activities and outcomes. For example, one could measure the number of meetings with potential new investors and how many of those investors initiate new positions. Steele added that feedback is often instant and highly visible. For example, if your CEO/CFO was well prepared for an earnings call, you know you did a good job.
How do you see the IR role evolving and changing in the future?
Childe observed that there are challenges as the industry shifts from active to passive management. Additionally, the number of publicly traded companies continues to shrink.
Steele added that understanding market sentiment has also changed. In the past, most of the trading activity would be routed through a trader who specialized in each company. That specialist could be relied upon for meaningful insight on sentiment. Now, trading is fragmented. Even with modern IR tools, market sentiment can be difficult to discern.
Another evolving factor is Environmental, Social and Governance (ESG). Companies are increasingly expected to articulate their sustainable ESG plans.
How do you deal with investors who are dissatisfied and considering exiting their position?
Childe stated that every public company should have a plan in place for the event that an activist investor gets involved. Part of this is to be aware of any potential bear cases and conduct vulnerability analysis. With this understanding, one can proactively address concerns through direct communication and campaigns to mitigate any misconceptions.
How do you navigate bringing diverse stakeholders together and achieve buy-in?
Steele emphasized that it takes time and patience. A successful IR professional will ensure that their recommendations are as bulletproof as possible. At the same time, it is important to be open-minded and “pick your spots.” Childe explained that company culture is set by the CEO. For example, Northern Trust has a relatively conservative approach. This culture should be reflected in all messaging coming from the company and is key to building consensus.
Companies appear to have different approaches to the IR role in terms of career path. What is your experience and opinion?
Steele grouped IR career paths into three categories. Each category represents about a third of total existing career paths. “Lifers” build their career specializing in the IR role. Other IR professionals might wear multiple hats in addition to their IR responsibilities. Lastly, some gain experience in IR through rotational programs. Regardless of the approach, it is essential for each company to maintain steady and experienced leadership within the IR team. This is because inconsistencies and mistakes in the IR space can be costly.