Investment relations public relations should they consolidate? Sounds like it may be ideal, but is it practical?

Because of the scope of the Securities and Exchange Commission's (SEC) disclosure rule, U.S. Regulation FD, covers all corporate communication, it's about time companies started consolidating IR and PR, according to National Investor Relations Institute President Lou Thompson.

"Companies have to begin putting the communication functions under one umbrella. They are moving in that direction, but it's not happening fast enough. It has to be made a top priority this year," Thompson said.

Other IR officers say that although consolidation is a goal, it's not always possible. PR departments are product-related and have a different mission, VerticalNet Inc. director of IR Muriel Lange said.

"We work with PR to consolidate certain functions to save on expenses. But PR and IR are different departments. The IR department works on complying with the SEC and makes sure that shareholder groups are getting all the information at the same time. The PR department promotes the company," Lange said.

Although IROs may have concerns about unintentional disclosure by spokes-people they have no control over, that doesn't mean PR and IR have to be combined--so long as the lines of communication are kept open, Lange said.

"When the company has a lot of people in it, and there are a lot of people coming at you from different directions, the best thing to do is to control the message before someone calls you," he said.

While it makes sense to have IR report to the CFO, or at least have it attached to the finance department, PR is primarily a marketing concern, Glaxo Wellcome Americas PLC VP of IR Frank Murdolo added.

KISSING COUSINS 

"At Glaxo, IR and PR work hand-in-hand on everything--conference calls, analyst meetings and so on. But they are still separate functions and separate audiences. Not all companies do it that way, but I think it works better for us," Murdolo said.

Although coordination of communication is essential, consolidation may not be feasible for all organizations, Tiffany & Co. vice president of IR Mark Aaron agreed. "The IR department is speaking on behalf of the company, and both departments review materials that are going out. We have a coordinated flow of information, but Tiffany is not planning to consolidate the departments," Aaron said.

Other companies have managed to bridge the gap by combining all communication under one manager, an approach Avon Products Inc. has taken, vice president of IR Carol Murray-Negron said.

"All of our communication departments have different spokespeople, but they report to the senior vice president of communication. That includes PR, IR, internal communication and all web-based communication," she said.

This is particularly advantageous for a company that has different arms, different management and different priorities and agendas, because otherwise it's hard to make sure the message is always consistent, Negron said.

CENTRALIZATION LESSENS SURPRISES

"We have 500,000 representatives in the U.S. selling our products. The last thing we want is for something to appear in the news that they haven't heard of," Negron said. The good news for IROs is that, thanks in part to Regulation ED (Reg FD), the financial media seem to be making the switch to the IR department for corporate information, which makes it easier for IROs to monitor information disseminated to journalists, Thompson said.

According to the findings of a recent NIRI (National Investor Relations Institute) survey, 72 percent of IROs say that they are now the financial media's primary contact in their company, Thompson said.

BRAVE NEW ROLE

"That's a good step, and it gives IROs a lot of opportunities. In the past a lot of the financial questions were handled by media relations people, who were simply intermediaries funneling the queries between IR and the reporters in an inefficient process," Thompson said.

IROs will have to change their communication focus when dealing with the media from now on. For IROs, there's going to be much greater emphasis on crafting the strategic message for the company, the one thing you can talk about in one-on-ones, he said.

"The financial media will become a key provider of information about companies to the investment community--they get access to conference calls and they are exempt from Reg FD. Basically they can communicate with whoever they want to in the company," Thompson said.

SMALL CAP SHUTDOWN

Unfortunately, analysts are in some ways muzzled by the rule, which, for small-cap companies struggling to make it onto the media's radar screen, wili make it even harder to recover from the beating the market has taken, Thompson predicted.

"It may well he that worries about the valuation of technology stocks have been pretty much wrung out at this point. But if the market continues to go south we may see more 'bad news' disclosures," he said.

Even if the recession doesn't last, there won't be the kind of growth there once was when the market picks up again. Small-cap companies especially need IR help to deal with communicating under Reg FD, because analysts may perceive more risk in covering tiny companies no one has heard of, Thompson said.

Grace Delpit is associate editor for Investor Relations Business, New York City.

EDITOR'S NOTE: With the advent of the U.S. Securities and Exchange Commission's new rule, Regulation Fair Disclosure, companies' separate communication functions became inseparably tied. Now, corporate communication professionals are increasingly finding that their reporting structures merge with their investor relations cousins'. Some may even be thinking about making the leap into investor relations (IR)--after all, investment relations officers (IROs) make twice as much money on average.