Corporate Eye

The Goldilocks Theory and Investor Relations

goldilocks-three-bearsThose that are involved in investor relations recognize that in order to do it right, you need to combine skills from the disciplines of finance, marketing, law and communications. Underpinning these disciplines are a deep understanding of the company you represent and knowledge of how the capital markets work. So there are a lot of factors at play. Combining these factors in a coherent message can be a tricky business, because if one chooses to emphasize one factor over another the entire message can suffer.

For example, if a press release is written where legal factors and accounting dominate, the result is a stilted document that reads like a regulatory filing, a lawyer’s brief or worse yet, an accountant’s statement. In other words, something that’s deathly dull and uses language to obfuscate rather than clarify. Similarly, if the marketing and communications disciplines dominate, what you wind up with is a document that is more hype than substance and is bound to turn off your audience of sophisticated investors. The key to getting the message right is to balance the various factors.

You start with the key message you wish to convey (communications). Then you consider your audience and how they may view and react to the information you are giving them (marketing). You bolster your message with a discussion of how the business operations either supported your message or will be impacted by the information you are conveying (finance). Finally, you run what you intend to say through the legal filters to make sure you are complying with the appropriate regulatory scheme (law).

One of the things I have learned from combing through business textbooks in preparing for my class on investor relations is that a catchy graphic helps to explain complex relationships. Couple that with the fact you almost can’t give a talk nowadays without PowerPoint slides and I simply had to create a graphic to illustrate this point. So here it is – my attempt at capturing the need to combine all four disciplines in your investor relations message.


Of course, it’s one thing to understand the theory, it’s another thing entirely when you are trying to incorporate comments to your press release by the CEO, CFO, the General Counsel, the outside auditors and the communications department.

This is where investor relations officers should think back to the Goldilocks story and say to themselves, “Not too much law, not too much marketing, but just right…”

It’s at times like that I recommend you pull out the graphic to remind yourself what it is you are trying to achieve.

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John Palizza

John recently retired as a Lecturer in Management at Rice University’s Jones Graduate School of Management, where he taught investor relations. Prior to that, John was in charge of investor relations for Sysco Corporation and Walgreen Co. He holds a MBA from the Kellogg Graduate School of Management at Northwestern University and a law degree from Loyola University of Chicago. You can learn more about John’s thinking about investor relations at his blog, Investor Relations Musings.