The Integral Role of Ethics in Investor Relations

A few months ago, I read something from a PR professional that revealed a certain amount of confusion over the matter of investor relations (IR) and ethics.

More to the point, it occurred to me that the confusion could simply be due to some communicators who rarely get involved in IR matters assuming that investor relations presents a higher number of ethical challenges than other communications disciplines.

Compounding this in the piece was the casual and repeated use of the term “ethical dilemma” when describing an ethical choice or decision.

In my experience, having worked in IR and in the full range of communications disciplines, I’d have to say IR does not involve a greater number of ethical challenges when compared to any other communications discipline. Also, I’d add that to describe an ethical decision as a “dilemma” may be a bit melodramatic.

In any form of communication, we always have the choice to do the right thing or not. We can tell the full story, a partial story, or an untrue story. Choosing to do the right thing shouldn’t be and usually isn’t much of a dilemma. Whether the discipline is IR, marketing communication or workforce communication, the same ethical standards apply.

The PRSA Code of Ethics does provide some help. If you ever find yourself in one of those rare situations in financial communications where the path before you is not so clear and you need some guidance, then you may want to start by revisiting the PRSA Code of Ethics. While it is valuable to study the entire Code, pay particular attention to the sections on “Disclosure of Information” and “Safeguarding Confidences.”

Disclosing information

“Core Principle — Open communication fosters informed decision-making in a democratic society.”

The Code does a nice job of concisely explaining intent, and then providing guidelines and examples to follow.

For our purposes, here, however, it’s important to note that the U.S. Securities Exchange Commission (SEC) monitors and regulates all activities in the public interest. Because of this, IR professionals need to be mindful of such rules as Regulation Fair Disclosure (Reg FD) and the Sarbanes-Oxley Act.

These regulations are in place to protect the investing public through the governance of public company information disclosures and reporting. This means you can’t always share information as freely or as selectively as you might in other situations.

While the SEC regulations serve a valuable purpose, they may restrict where, when and how you can communicate. For example, while the PRSA Code of Ethics requires us to “act promptly to correct erroneous communications for which the member is responsible,” if those communications are part of a financial communication program, we must make sure to work with company management, its officers and its legal counsel before taking it upon ourselves to determine exactly how “promptly” we can correct those communications.

Safeguarding confidences

“Core Principle – Client trust requires appropriate protection of confidential and private information.”

If you’ve ever signed a non-disclosure agreement and you read it carefully, you would know that we as professional communicators are not the owners of the information we receive from our employers and clients. The organization owns the information. We are its custodians.

When you look at it this way, the importance of protecting confidential and private information comes into focus. In short, the information is not ours to give away at our own discretion. This is particularly true in investor and financial communications. Large sums of capital and people’s lives can be both positively and negatively affected with any major disclosure. That’s why it is paramount to take very seriously the confidentiality of the information we receive in the course of our work.

Simplifying our ethical choices

We already know it’s not right to freely share private information when, in the normal course of business, someone entrusts us with it. We already know that when we work as professional communicators the product is information and that it has value. And we already know that ethical communication can lead to great things, and poor or unethical communications can lead to dire consequences.

These same dynamics are at play in IR and financial communications. What makes IR unique is that its very work is often tied more directly to a company’s valuation. In other words, IR activity usually has a direct impact on a company’s stock price, and that in turn affects the nest eggs of many individual investors, retirees and employees, not to mention the massive portfolios of corporate and institutional investors, retirement plans and other organizations.

Because IR plays an important role in this way, its potential and immediate impact on the bottom line may be more direct and significant than, say, digital communications. But, the ethical requirements and challenges that are involved are often no more or less important or common.

Tim O’Brien, APR, owns O’Brien Communications, an independent corporate communications practice in Pittsburgh, and hosts the “Shaping Opinion” podcast. Email: Twitter: @OBrienPR.


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Tim O'Brien, APR

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