Annemieke Roobeek: ‘The IRO Is Often Unconsciously Incompetent’

Annemieke Roobeek: ‘The IRO Is Often Unconsciously Incompetent’
What is the situation regarding investor relations (IR) in the Netherlands? Are they in safe hands with the Investor Relations Officer (IRO)? What about their mandate, and do they meet today's expectations? Jesse Thiel from IR platform Q4 Inc. goes in search of answers on Management Scope’s behalf. This time, Mr. Thiel speaks to ‘the supervisor’, in this instance, non-executive director and Nyenrode Professor of Strategy and Transformation Annemieke Roobeek. Ms. Roobeek is outspoken: ‘In my experience, IROs are incredibly conservative, disdainful and extremely risk-averse.’

Ms. Roobeek makes time for us at her office in Amsterdam. She certainly has an opinion about the role of the Investor Relations Officer (IRO) — an outspoken one, in fact. She does not have many good things to say about the IROs she has met during her working life. ‘Most of the IROs’ stories are sooooo boring,’ she stresses. ‘They are always focused on the tiny details. On annual reports and press releases. So little that is surprising.’ Ms. Roobeek believes this can and must change: ‘I am critical, but ultimately an IRO can have a highly important, pivotal role.’

How do you feel about the connection between companies in the Netherlands and their environments? And especially the investors?
‘There is definitely a disconnect between companies and their environments, and that is particularly evident in their annual reports. Those reports are becoming monotonous and over-optimistic. They are very risk-averse and look just like advertising brochures. As a result, annual reports are becoming less and less relevant, so I am definitely noticing a disconnect between companies and the evolving environment. On the other hand, I feel that the disconnect with investors is less pronounced. Investors have plenty of opportunities throughout the year to hear the stories behind the numbers at roadshows or in bilateral meetings.’

How do companies handle those conversations with investors? And, no less importantly, are companies talking to the right potential investors?
‘That is where a lot of improvement is to be made. A very important change in the investor market is the rise of impact investors. They are certainly not the dominant group yet, but they are becoming increasingly important. Impact investors want companies to explain how their purpose is experienced and they want to know a company’s social impact, particularly in terms of ESG or SDG criteria. That requires a lot more than an audit report or good figures in an annual report. It also aligns with today's trend, of course.
For example, here I have a press release about Eneco's annual figures. This press release places the company in a social context. They do not start with the numbers — they start with the war in Ukraine, the humanitarian crisis and the associated challenges in the energy market. I like that. It is relevant. First, speak from the heart and only after that talk about the figures. I think that is important in 2022. You can honestly think about whether the Investor Relations Officer is sufficiently committed to working on those issues. Is the IRO the director of the heart? I do not think so.’

How could that change?
‘The Investor Relations Officer should gain an understanding of the bigger picture and learn the story of the company in that social context. As a company, you need to show your commitment to the social challenges. How are your staff involved and how are clients involved? That is different from any numbers story. And the IRO has to make that story their own.’

So in your opinion, that makes the role of the IRO more important and more meaningful?
‘Yes, it should do so. The IRO needs to be more proactive, and that includes towards its own board. I think the IRO should be allowed to give strategic advice about investors. The IRO is allowed to say that if we go into business with these investors, we are going to alienate ourselves from our clients or potential clients. The IRO should actively go out and find investors and involve others. This is a time for togetherness, so the IRO will have to involve their own network within the organization. Talk to someone within the organization who is responsible for sustainability or innovation, and take that person with you to a meeting with investors. That will also be valuable for investors — Impact investors are certainly interested in working together constructively.’

So in your experience, the IRO is still taking the familiar path too frequently?
‘Yes, the IRO is still too set in their ways and that does not do the company any good. In my experience, IROs are actually incredibly conservative. Conservative, disdainful and extremely risk-averse. They play up to the CFO, they are not interested in the company’s innovative activities and they are not interested in the purpose. They are still stuck in their ivory tower. IROs consider themselves incredibly important because they are the first to show the annual report, and add the finishing touches to press releases. But if that is the IRO’s role, then I feel it is a totally meaningless one.’

What is required in order to get the IRO out of its ivory tower?
‘The blind spots need to be removed. I have the feeling that the IRO is wearing glasses with tiny holes in them, and that needs to change. The IRO should explore more and network more and that involves activating their internal networks. Their work should extend far beyond the figures in the annual report. Who is working on interesting developments within the company? What is in the pipeline? That is precisely what the market wants to know. The market wants to know what your plans are as a company. The market wants to know how you set about looking for talent and how you manage to retain it. That is an entirely different story from your average IRO who is only interested in the EBITDA.’

Daily operations show that there are also investors who only look at the bottom line — the financial results. As long as impact investors are not dominant, perhaps there is no need to change their ways?
‘That would be silly. If your company is only concerned with the bottom line, then you are not the most attractive and innovative employer. At that instant you are in fact just squeezing your own lemon — your company, your people. But investing is not just about money. On the contrary, it is about people, about modernization, innovation. It is about the bigger story, especially during this time of transformation on so many levels.’

And that means presenting dilemmas to your potential investors?
‘Not so much the dilemmas as the strategic decisions, which are extremely interesting to investors. An investor can also have an opinion on those matters. For example, what are you doing in terms of sustainability, digitization, and customer experience? If you notice as an IRO that an investor is not interested in those things, then you could ask yourself if you are working with the right financier. You could raise that with the Board of Directors or the Supervisory Board. As an IRO, I think you also have to be more selective when it comes to the investors you work with. You do not have to beg for an investor’s support and you do not have to make yourself smaller than you are. A company needs to find the right investor who is interested in your long-term story or your innovation. An IRO needs to explore that, to go out there to find the right investor and not just agree to work with the first investor that comes along.’

An IRO may also face practical problems such as many day-to-day tasks, a small Investor Relations Office within the company and only one or two FTEs.
‘I think the IRO may have felt a little too secure in their cozy little club for a bit too long. I want to challenge the IRO to venture into networking, collect collective knowledge from that network and look beyond the CFO’s circle. That circle is risk-averse and usually does not have the most innovative, creative people. There is often a clear disconnect between the IRO and the financial head of the organization on the one hand and the rest of the organization on the other hand. I think it is up to the IRO to take on an entirely new perspective, remove the blind spots and become more socially committed. If the IRO takes the lead on that, the CFO’s circle may well follow suit.’

As a non-executive director, what do you need from the IRO?
‘What a non-executive director really needs are competitive comparisons — studies of competing companies in the market or in a similar market. How do they do things? That kind of analysis should be one of the IRO’s key tasks, but that is almost never the case. Their scope is currently so small and they do not think outside of the box, only looking within their small circle. But as a non-executive director, you want to know the following: How are we doing compared with our competitors? What are they working on? How are other companies making an impact? That kind of analysis is very important to the Board of Directors and the Supervisory Board. Ultimately, the same applies to all stakeholders. It also gives you a clearer idea of how you stand out as a company, other than the bottom line.’

Can you try to see things from an investor's point of view as well? What do you think they need?
‘That is an interesting question. I think impact investors will be quite critical. They will say to the IRO, 'You are just spoon-feeding me the figures from the annual report and I have already seen them. I would like to speak to your Sustainability Director and I would like your CHRO to show me your company's exit interviews, please.' That would give interesting information about commitment, management style, challenges... or the lack of those things. I am sure the IRO would be at a loss for words.’

So, as far as you are concerned, the IRO should be “the director of ideas”?
‘Absolutely, and I think that could be a hugely enriching role. Currently, the role is too inward-looking and not exploratory enough. The IRO is often just unconsciously incompetent — they could do the job much more effectively.’

And companies are not sufficiently aware of the areas of improvement?
‘Companies are just very happy to have an IRO. The IRO has managed to acquire a unique role, and especially in that precarious period when the annual report needs to be published and press releases written. Currently, the IRO is actually the director of the annual report — and that should not be the case. The IRO should have a more concrete role.’

Do we perhaps need to give the IRO a bit more guidance? Could we give the IRO a kind of job description, for example? The Corporate Governance Code describes the tasks of the company secretary and the General Counsel, albeit concisely. Perhaps we should also include something about the Investor Relations Officer?
‘That sounds like a good idea. Do not get me wrong though — I am critical, but ultimately an IRO can have a highly important, pivotal role. The IRO could be a very valuable strategic communicator both within and outside of their own organization. They can bring in new capital so that the company can achieve the objectives in the strategy, have frank discussions with investors and report back on those discussions, and have a vision. But certain things are necessary for that: Collaboration, networking, exploring, comparing. Broadening their horizons. Changing their ways!’

This interview was published in Management Scope 04 2022.

This article was last changed on 13-04-2022