New Perspectives

Forward-looking finance executives can benefit from a past in investor relations.
Tim BurkeJuly 7, 2008

Kevin Entricken has enjoyed an eventful finance career. In the early 2000s, he oversaw M&A deals as vice president of finance at a division of Anglo-Dutch publisher, Reed Elsevier. More recently, he handled a restructuring as CFO of Dutch media group Wolters Kluwer’s law and business arm. Then, last summer, he gave up his job.

What kind of role is tempting enough to lure a successful CFO away from finance? In Entricken’s case, one in investor relations (IR). When Wolters Kluwer offered him a job as vice president of IR, he jumped at the chance to gain “a more outward-looking perspective” on the €3.4 billion company, its strategy and its investors. After a year in the post, he has no regrets. “I would recommend to anybody in a financial field a stint in investor relations,” he says.

Entricken believes his finance background gave him insight into the company and its markets that allowed him “a headstart on the learning curve” in IR. He’s not the first executive to benefit from exposure to both departments. Some CFOs started their career in IR before heading into finance. Others have complemented their finance skills by spending time in or overseeing IR departments.

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In fact, Entricken doesn’t rule out returning to the finance fold. If he does come back, he could be better placed than before to handle a CFO post, say experts. In June, consultancy Greenwich Associates asked around 700 equity analysts across the US about IR. Some 80% said that the finance chief’s credibility is “essential” to a company’s IR strategy, compared with about 75% when Greenwich carried out the same study a year ago. As economic conditions force analysts to focus even more on a company’s financials, CFOs with IR experience will find that this is their time to shine.

Make Me Better

Finance executives who have made the transition to IR often see it as a natural move. Six years ago, Isabel Goiri took over as head of investor relations at BBVA, a banking group headquartered in Spain with profits of €5.4 billion. She saw it not as a quantum leap for her career, but an extension of her previous work as an equity analyst and portfolio manager. “To be cutting edge in IR today, you need to be financially savvy,” Goiri says. Her knowledge of portfolio managers’ likes, dislikes and preferred metrics helped her “make the function more strategic,” she adds, as she consulted with BBVA’s CFO on the company’s plans, M&A opportunities and how the market would view various decisions the board was taking.

Now Goiri is back in finance, right at the top. In January she became CFO of Compass, a US bank BBVA bought in 2007 for €6.7 billion, after its previous CFO was promoted to the chief executive post. Her task over the coming months will be to help oversee the integration of Compass with three other BBVA-owned banks in the US. And just as she used her finance skills in IR, now she’s relying on her time in IR to boost her CFO knowhow. “Has being head of IR helped me to be a better CFO? I’d say a very clear yes,” she says.

For Goiri, the chief benefit is a wider view of the company’s business: in IR every decision has to be made according to how it affects the “big picture” in the market, she says, and that’s a useful perspective when embarking on a different job.

Talk the Talk

Being able to see the big picture is not a skill that all CFOs are equipped with. Michael Mitchell, manager of the UK’s Investor Relations Society, says CFOs who take the role with no prior experience of debt and equity markets — maybe moving from a sheltered divisional finance director post — can be “quite naïve,” failing to understand “how you deal with analysts and how you talk to investors.”

Those with IR experience normally have greater knowledge of such areas. “IR gives you a global view of the business, a market view on your company,” says Goiri. “It brings to you the reality of your competition, the demands of the market and the pressure of the market that you never forget when you’re reporting each quarter. That probably makes you more focused and hopefully more rounded as a CFO.”

Other finance chiefs with an IR past agree. Henri Poupart-Lafarge spent a year handling IR at Alstom after joining the French energy and transport group in the late 1990s. Now CFO, he says the experience was “extremely beneficial” in keeping investors onside during a massive turnaround and several corporate scandals.

In the Pipeline

Some CFOs may wonder whether their successor is currently working in the IR department. At certain companies it’s a very probable — even desirable — place to nurture future finance chiefs. Take Allergan, a $3.9 billion (€2.4 billion) US pharmaceutical company cited by analysts in Greenwich Associates’ survey as having the best IR programme in the country. Not only is the IR team staffed by finance professionals, but one role regularly brings in what CFO Jeffrey Edwards calls a “younger, up-and-coming finance professional” to be trained in IR before being moved to a finance role.

According to Edwards, young guns with IR experience return to finance better prepared for the demands of the finance department than when they left it. “They understand the company better, they understand the workings of Wall Street and the investment community,” he says. “They gain an appreciation that is much broader [as to] why companies are more successful and why they’re less successful.” Predictably, Edwards has IR experience himself — he used to be Allergan’s senior vice president for tax, treasury and IR. Does he recommend it? “The short answer is, absolutely.”

Back at Wolters Kluwer, Entricken is now the first port of call for investors with questions about results or strategy. It’s a frontline task, but lacks the hands-on excitement of his dealmaking past in finance, he concedes. “That’s the biggest adjustment that anybody in IR would need to prepare for,” he explains. “When you’re in an operational finance role you really do have a grip on the nuts and bolts of the business. When you’re in an investor relations role, you need to take that broader view of the company.”

Entricken could eventually become another CFO with an IR past. “I’d certainly welcome a role in [finance] again in the future because I do enjoy that part of the business as well,” he says. “I think that the time I’m spending in investor relations will make me that much more effective if I were to ever go back.”

Tim Burke is senior staff writer at CFO Europe.