Investors want to know that the management team, led by the chief executive, knows what it is doing. That requires commitment to IR, not just bravado.

No investor wants to back a riderless horse. So, for the chief executive of any listed company, an active involvement in IR isn’t optional; it comes as part of the job.

It is helpful if the CEO is a good presenter, although good IR requires more than that.

Someone who can command an audience from a podium but doesn’t have a firm grasp of their business, isn’t prepared to engage in a dialogue or tries to gloss over difficult issues will not develop the trust and respect of their investors.

Similarly, charisma is helpful but not sufficient. A sell-side analyst comments: “Charisma helps a strong CEO but can also mask weaknesses.”

Craig Yeaman, an investment manager at Glasgow Investment Managers, believes that the key attributes for a CEO in terms of communicating with investors are “an in-depth knowledge of the company and the industry, and the vision to see beyond the next 12 months”. He also believes financial literacy is important.

An appreciation of the importance of body language is useful and a CEO should at least understand some basics: for example, what the negative connotations that will be read into him crossing his arms or covering his mouth when asked a difficult question.

Other attributes that shouldn’t be underestimated are energy and patience. It can be hard to maintain enthusiasm through a day of intensive back-to-back meetings, particularly when 90 per cent of the questions will have been asked in every meeting.

Some IROs suspect that certain institutions specifically ask for end-of-day meetings in the hope of catching the CEO out when he is tired and his guard may be slipping.

Learning the ropes
For many CEOs, IR is a new activity when they first step into the role. The mistake is for them to believe that meeting an investor is “just another business meeting”.

From being in a position where he may be questioned only rarely, the new CEO will find himself having to explain his decisions. He may face an hour of questions from someone with limited experience.

His questioner may know very little about the company. There may be several people asking the questions.

The CEO may feel criticised. He may even have his salary package questioned. And he is expected to deal with this without getting defensive or taking it personally.

Morgan Bone, at director at corporate communications agency Fishburn Hedges, says that CEOs who have stepped up from a CFO role start with an advantage in that they are already aware of the key City audiences and have probably met many of the individuals.

They have also seen their predecessor in that role and can learn from what he did well and not so well.

Around 15 per cent of FTSE 100 CEOs were previously CFO and several others have had the role in a different company.

However, one FTSE 100 CEO who has made the step-up says that it brings another difficulty; “trying to avoid answering all the finance questions”.

A balanced view
Talking to investors is about achieving a balance between promotion and giving an accurate picture. In almost all circumstances, the role of the CEO is to promote the company but investors don’t want to be “sold to”.

The best advice is to simply explain the facts, highlight the opportunities and let investors draw their own conclusions.

Winning the confidence of investors is undoubtedly easier when the chief executive has a track record of delivery. It is particularly difficult for an entrepreneurial CEO who has just taken a company public.

As company founders, they will often be used to making decisions based on gut instinct so it can be a culture shock to find that they have to explain and justify their strategy to investors.

One of the challenges of investor communication is to talk about the company, its goals and the challenges it faces in an even-handed way.

Confidence can come across as over-optimism but, equally, a CEO should not be too downbeat or investors will lose confidence in management and/or the business model. Realism is the best option.

There is also a balance to be struck between giving full and helpful answers to investors’ questions and monopolising the meeting or, at the extreme, being over-helpful and inadvertently disclosing some inside information.

The best communicators are those CEOs who show a strong commitment to communicating with investors, demonstrate extremely good knowledge of their companies and the wider industry, identify trends and have a clear vision, and have a track record of delivering on their promises.

Getting help
At the very least the CEO has to understand the rules around what can and can’t be said in investor meetings – and the consequences of getting it wrong.

He needs to understand who the main City audiences are and it is helpful if he understands how the different types of investors make their decisions.

Ideally he should be given the opportunity to “rehearse” the sort of environment and questions that he will face in investor meetings.

Help is available: many organisations – including CTN Communications, Bubworks, Finance Talking and Makinson Cowell – provide training and coaching in these areas.

However, while CEOs will probably be prepared to go through media training (often because of the fear of making a fool of himself) and may accept some coaching in presentation skills, they may find it hard to understand the need for training to meet investors.

This is where the corporate brokers can be helpful; either by directly coaching the CEO or convincing him that more structured training would be useful.

Widening access
No matter how committed the CEO is to meeting investors, it isn’t physically possible for him to meet more than a fraction of the institutions around the world.

Technology can be a very time- and cost-effective way of supplementing face-to-face activity.

Cantos specialises in video interviews with CEOs and CFOs, often based around results announcements or other corporate events.

Rosie Catherwood, business development director at the consultancy, says: “It is as close as some investors, particularly retail investors and smaller institutions, can get to actually meeting the CEO.”

She stresses the importance of questions having resonance with the audience and the interview not being scripted or looking rehearsed.

The use of documentary-style videos is also becoming more popular. These can give the CEO an opportunity to comment in some detail on specific parts of the business.

Catherwood says that it is “an opportunity for him to show the strategy in action”. Other technologies such as webcasts, podcasts and vodcasts are also useful as a means of giving investors a clearer impression of who the CEO is and why he can be trusted to deliver value for shareholders.

CEO commitment
Retail investors may only see the CEO distantly at the company’s AGM but large institutional shareholders and those with overweight positions will expect to see him/her at least once a year.

In addition, many institutions will not invest in a company until they have met its CEO. According to Sanjeev Shah, manager of Fidelity’s Special Situations Fund: “Meeting company management is central to the investment process.” 

The CEO of one FTSE 100 company says that his role is to meet investors to “try to give them confidence that the team, led by the CEO, knows what it is doing”.

One sell-side analyst emphasises the importance of going back to the major investment centres in the UK, Europe and the US year after year to build up the relationships and the following.

He says: “I don’t believe there are any short cuts.” The time commitment can therefore be considerable.

It is estimated that FTSE 100 CEOs spend at least 15 days a year on IR; some spend much more, for example speaking at investor conferences and sales-desk meetings.

Most CEOs leave the relationship with the sell-side to their CFO, although they may meet occasionally with their corporate brokers’ house analysts.

While only 20-25 per cent of IR teams report directly to the CEO, he needs to be involved in agreeing the IR programme and the IRO must have direct and regular access to him.

Active involvement in IR is an essential part of any CEO’s role. Those who work hard at it, who understand what investors need and who build relationships will find their reputation grows. This is likely to open up opportunities.

On the other hand, CEOs who display little regard for investors and who fail to build relationships can find themselves very vulnerable, particularly in the event that their company fails to deliver.

CEO meetings: what investors want

• To leave with a better idea of why they should invest or continue to invest in a stock.
• Learn more about areas of the business that they may not fully understand.
• Get a feel for the CEO’s conviction about the business, enthusiasm for running it and ability to deliver results.
• Get first-hand evidence that the CEO is able to answer questions on any and all parts of the business, has a clear vision and understands where the issues and opportunities lie.
• Have an open and honest dialogue.
• See whether the CEO is prepared to face up to problems or mistakes that may have been made.
• Ask any question and raise any concern without the CEO getting defensive or attempting to gloss over issues.
• Find out whether the CEO’s messages are consistent with other corporate communication. Investors keep notes (Anthony Bolton of Fidelity talks of his collection of notes from company meetings going back 25 years) and will refer back to notes of previous meetings to see if the message has changed.
• Substance, not spin.