The purpose of investor relations

Your primary goal when working with investor relations is to reduce the cost of financing the corporation. Your secondary goal is to protect and develop its commercial leeway. These goals legitimise the resources you spend.

This may seem unremarkable, but it is not. The most common alternative – working towards a higher market valuation – can easily lead you astray, perhaps without you noticing it.

When the goal is a higher valuation, you will naturally prioritise assessments, activities, and communication that emphasise conditions which imply a higher value. You may be tempted to under-communicate information that can be perceived negatively. Even without making formal mistakes, the result is that investors do not get the best possible basis for their own valuations. Investors notice this. It impacts their trust in the corporation. When investors are unsure if they can trust the information they receive, they increase their required risk premium – and hence the cost of capital. The goal of a higher valuation, pursued directly, produces the opposite of what it intends.

When the goal is to reduce the cost of financing, the logic reverses. You must work to facilitate independent valuations and reduce the perceived risks associated with making these valuations. This orientation is also beneficial when working with debt capital, when attracting new investors, and when seeking capital from loyal owners if the corporation runs into difficulty.

A fair valuation is a closely related goal and can work well in practice. However, it may seem less relevant when dealing with banks and bondholders. You need a goal that covers all financing relationships and all the material and tools involved.

Visibility is not a goal

It is common for a corporation’s management to feel that the business receives less public attention than it deserves. Visibility can therefore creep in as a goal, even when instinct warns that something is amiss.

An effective way to handle this temptation is to remember the difference between pride and vanity. Pride is what you feel when you are applauded for a good performance. Vanity is doing something for applause.

Corporations receive less attention than management may feel they deserve, but they just as often end up working to get attention that is not deserved. That effort is costly, it occupies time and resources, it can damage relationships, and it can create a gap between reality and perceptions. Such gaps will, eventually, collapse.

Getting attention from investors on arenas developed for this purpose – results presentations, capital markets days, investor meetings – is an obvious operational objective. Getting public attention should not be a goal.

Trust is not a goal either

Similarly, the market participants’ trust in the corporation is critically important, but trust is not a goal. Trust is a necessary condition for reaching your goals, not a sufficient one.

This distinction matters because trust is better understood as a psychological concept than as a financial one. Think of trust as a person’s willingness to be vulnerable. In the context of investor relations, vulnerability is not only about accepting financial risk. It is about the emotional dimension of decision-making.

Trustworthiness, on the other hand, is a product of perceived competence, integrity, and benevolence. These are properties of the corporation that can be developed and maintained. Trust is a property of the investor that follows – or does not – from that work.

This understanding of trust and trustworthiness changes how we think about investor relations and how we practise it. It moves us from transmission to relationship: from crafting messages that manage perceptions to building the substantive foundations on which trust can form.

A note on governance

Investor relations operates within the principal-agent problem. Management acts on behalf of owners whose interests may not always be perfectly aligned with its own. Corporate governance exists to manage this tension. Good IR does not resolve the principal-agent problem – no communication practice can – but it reduces the information asymmetry on which the problem feeds. The goals described above are consistent with this function: facilitating independent valuations and reducing perceived risk serve the principal’s interests, not only the agent’s.

Commercial leeway

The business value of corporate communication is the development and protection of the corporation’s commercial leeway – its ability to implement changes and to handle unforeseen events. Protecting leeway also means avoiding being forced to implement undesirable changes, or to implement them at an unfavourable time or in an unfavourable way.

Investor relations impacts commercial leeway in several ways. The most obvious is through efficient pricing of the corporation’s financial instruments: efficient pricing keeps the cost of financing down, protects against hostile investors, and provides financial flexibility.

But leeway is also affected by whether the financial markets have the information, knowledge, and disposition towards the corporation and its management that is necessary to support management’s efforts to achieve its goals. Mergers, acquisitions, divestments, and restructuring all require a foundation of understanding that cannot be built in the moment. It must be in place before it is needed.

A relational discipline

Investor relations, understood this way, is a relational discipline. Its operating logic is the same logic that is now being institutionalised across corporate communications through frameworks such as CSRD, CSDDD, ERM and UNGP: begin with stakeholders, not messages; engage substantively, not communicatively; treat the organisation’s relationships as something to be understood and maintained, not managed through perception.

The regulatory environment has reinforced this direction. MAR has formalised disclosure obligations and tightened the management of inside information. MiFID II, by unbundling research from execution, has reduced sell-side analyst coverage and shifted the burden of informing the market back towards the corporation itself. The intermediary layer between the company and its investors has thinned. The relational work that IR was always supposed to do has become, in many cases, the only work that remains.

IR may, in fact, be the oldest application of what is becoming the new paradigm in corporate communications. The difference is that investor relations has practised this logic for decades – listening to institutional investors, anticipating their reactions, understanding the structural composition of the investor base – while the rest of corporate communications is only now catching up.

My thinking on corporate communications is laid out here: www.jorgenchristiansen.no/how