Senior Client Partner, Global Corporate Affairs and Investor Relations
Investor Relations: The New Masters of the (CFO) Universe
IR executives haven’t traditionally been major players in determining corporate strategy.
Increasingly, companies are being scrutinized by the very stakeholders IR executives work with.
Give IR executives a seat at the leadership table, and put them in line for CFO or other C-suite roles.
Deb Wasser's calendar is a screen of colorful rectangles, each denoting meetings with colleagues in departments that include product, marketing, operations, legal, finance, communications, human resources, and more. Also scheduled: appointments with US, European and Asian investors whose attentions have mushroomed since the market cap of the company she works for rose from $3 billion in 2018 to a peak of $37 billion in 2021.
Her job? She’s vice president for investor relations and ESG engagement at Etsy.
In recent years, no executives have experienced the expanded responsibilities and clout of investor relations chiefs. “It’s evolved into a role that’s at the center of everything that happens within a publicly traded organization,” says Peter McDermott, senior client partner for global corporate affairs and investor relations. “It’s the person who the CFO, the board, and every important stakeholder turns to in order to get answers.”
And by providing those answers, experts say, the investor relations role has become something new: a stepping stone to the CFO corner office. Indeed, it’s a major evolution for a job that was, not all that long ago, predominantly a deep-but-narrow communications position. Of course, many jobs add strategic dimension over time. (We’re looking at you, chief medical officers and chief human resources officers.) Think about CTOs, who 30 years ago were in charge of making sure that the voicemail system worked and now are at the core of all organizational strategy. But investor relations’ rise is unique in that it is fueled by a growing source of power—investors, whose influence on companies has mushroomed. “Shareholders have many mechanisms for getting companies to do what they want them to do,” says Wasser. “Institutional investor money is more powerful now than it was previously.” A publicly traded company lives and dies by investor choices, and now the conduit to those investors is among the most important persons in the organization.
In discussions about modern investor relations, the word that comes up repeatedly is influence. When top investor relations officers speak, investors and C-suite teams listen. We spoke to three top IR executives about their newfound sway. Besides Deb Wasser at Etsy, they include Gabrielle Rabinovitch, senior vice president for corporate finance and investor relations at PayPal, and Carroll Lane, the former vice president for investor relations at United Technologies who has now risen to president at Pratt & Whitney Commercial Engines.
In days of yore, the investor relations department was skilled, utilitarian, and narrow. It worked like this: the C-suite would make decisions, and investor relations professionals communicated those decisions to investors. Top investor relations officers served as keenly informed communications coordinators for the CFO’s office, drawing on public relations and planning skills. They otherwise kept themselves occupied by coordinating the external release of quarterly earnings, annual reports, and shareholder letters.
When the internet arrived, not much changed. Most companies still created messaging for audiences differentiated within silos.
Then came social media. Everything changed. On Twitter or Facebook, any word uttered by an IR executive could appear before the eyes of not just investors but employees and customers and other humans with internet connections. Those words began to matter enormously, requiring a tight playbook and a coordinated narrative across departments—and considerable financial savvy about the forces at play to allow real-time, meaningful discussions with shareholders. “That allows investors to have very comprehensive conversations about the financial drivers of the business,” says Rabinovitch of PayPal. “If an IR person is functioning effectively, there should be very little need for most investors to actually speak with the CFO.”
At the same time, speed became paramount, particularly as the pandemic triple-sped the clock of corporate activity. “The rate at which information is communicated and digested and acted upon by investors is still increasing,” says Lane of Pratt & Whitney. “That means that the corporate management team needs to be able to orient itself, decide, and act at an increasingly accelerating pace.” Translation: there is no longer time to play a game of internal telephone with investor relations, whether it’s asking for investor perspectives on an issue or communicating decisions and context.
Meanwhile, the role swiftly expanded. Investor relations professionals began keeping close tabs on everything from competitive intelligence to ESG, and at many companies the IR department is now the go-to team for investor inquiries about ESG. (Wasser at Etsy recently added “ESG Engagement” to her title as a symbol to stakeholders how embedded the company's Impact work is to their business and investment narrative.) What word describes an executive with direct, daily access to the most influential people in and around a company, whose words are fodder for A-list analysts, shareholders, and media outlets? Valuable. Investor relations chiefs took a seat at the leadership table.
Not surprisingly, the role today serves as a strategic resource for the rest of the finance team. Officially, the job includes investor engagement via narrative development that articulates both the company’s financial and operational stories. It also involves managing how those stories are portrayed to Wall Street. But an executive capable of effectively talking supply chain or labor or finance with an investor is also valuable in strategizing, so IR executives are increasingly relied upon in corporate decision-making—and relied on as well to see around corners to help position the company for the future.
The result: investor relations professionals increasingly find themselves in prestigious careers. “The IR track is now a more compelling path toward the CFO role than it’s ever been,” says Jeff Constable, co-leader of the global Financial Officers practice and managing partner for the New York office of Korn Ferry. Constable says that when he’s running searches for CFO roles, backgrounds in investor relations are “paramount.” Companies want candidates who not just understand finance but can smoothly communicate the company’s value to investors and Wall Street. PayPal, for example, runs a 12-to-18 month development role rotation in investor relations for high-performing finance people.
When he’s not filling IR roles, Korn Ferry’s McDermott is regularly asked by CFOs to find talent within the IR candidate pool for future VP of Finance and CFO roles. “More and more of our searches for investor relations are hiring for today but thinking about the CFO succession plan in a couple of years,” he says. He points out that investor relations responsibilities are also increasingly paired in dual roles with duties in treasury, corporate development, or financial planning and analysis—as building blocks to future C-suite roles.
Not surprisingly, these paths to the C-suite have resulted in investor relations attracting more talented, multidimensional applicants. Lane of Pratt & Whitney, who was vice president of investor relations at United Technologies for over three years until 2020, is an example of this. He came to IR by way of eight years in the Marines, Williams College, and executive roles in aerospace and corporate strategy. “I didn’t come up through IR or even finance. I was really more of a generalist,” he says. He particularly benefited, he says, from daily exposure to what shareholders are valuing, as well as to how corporate management teams make decisions. “It’s a tremendous benefit for anyone aspiring to senior leadership and a fantastic education that you can take with you into roles of increasing influence within the corporation,” he says.
This high-caliber pipeline is the jet fuel to the last half-decade’s upward trajectory of the profession. “If you put better people in the seat, they’ll contribute more and give great strategic advice,” says Wasser. “It’s a self-fulfilling prophecy.”