Comment: Changing global investment arena is demanding a new course of action, writes Matthew Gower 

Irish plcs have taken enormous steps, in a short space of time, in terms of improving the overall quality and professionalism of their investor relations (IR) efforts.

While the large banks were previously the leaders, significantly it is now the mid-caps which have acknowledged the correlation between an effective and continuing dialogue with the investment community and a healthy share price.

More Irish firms are opting for a structured approach to IR and becoming more proactive with local and global financial markets, often through the appointment of dedicated IR officers. Most importantly, the old personable and direct relationship between senior Irish management and the investment community has not been lost in the process.

Firms can find comfort in the fact that Irish IR practice is held in high regard, not just by the domestic investment community, but by investors based in the UK and across Europe. More than half of the 62 European sell-side analysts, buy-side analysts and fund managers covering Irish equities who were canvassed for IR magazine's Ireland Research Report 2004 said local IR had improved considerably over the past year.

Meanwhile, 52 per cent said that IR in Ireland compared favourably with standards in other countries in the euro zone. "From my point of view, Irish companies seem much more willing to communicate with foreign investors than other small- and mid-caps companies. For instance, they are prepared to travel to Italy," said one respondent.

Unsurprisingly, the advances made in terms of compliance with Irish and UK corporate governance codes since 2003 are among the key factors driving local IR forward. One respondent to our survey went as far as to say that the culture of secrecy that once pervaded Irish companies' senior managements has virtually disappeared.

According to a Goodbody Stockbrokers report included in its Irish Equity Yearbook 2004, the top 30 Irish Stock Exchange companies have made significant headway in key governance issues. The study found that two-thirds already separate the role of chairman and chief executive while, without exception, all have remuneration and audit committees with a majority of non-executive members.

However, the same report also raised important concerns regarding overall boardroom sizes, the absence of nominations committees in six of the companies, as well as the questionable independence of many of the appointed non-executives - a problem that goes back to the limited pool of senior non-executives that are available locally, but this needs to be addressed nonetheless.

Another issue that needs to be looked at carefully is that of online financial and non-financial communications. The closely knit Irish financial community has had comparatively little need for extensive online disclosure and, even today, few Ireland-based analysts and institutions rely heavily on the Web as a primary information resource.

However, online communication does have an impact on global investor interest. A survey commissioned by IR magazine of more than 600 European investment professionals in 2003 found that corporate websites are highly regarded as important sources of information - more important than press releases, information from news wires and other media, and even direct contact with an IR officer.

But what is the wider picture surrounding local IR? Quite simply, Irish companies seeking out capital opportunities overseas are facing a tougher time. Global analyst coverage has significantly declined, making it tougher, particularly for the mid-caps, to get onto their radar screens. What's more, overseas coverage of Irish equities is often sector-based, meaning Irish companies are not compared against other Irish firms but against their global peers and, for a country with a market the size of Ireland's, this puts enormous pressure on all but the handful of local large-caps.

Indeed, according to a survey by business communication consultants Financial Dynamics, UK analyst coverage of the top 20 Irish stocks is already very low compared to the almost-total coverage given to Germany's DAX 30 and Italy's MIB 30 companies.

More worryingly, the same survey raised some doubts by UK analysts as to the ultimate relevance of Irish international communications strategies - the implication being that local companies are considered local players, and that global institutions buying into local stock are actually hedging bets on Ireland's future economic performance.

Lastly, we have the imminent arrival of 12 new members into the EU from central and eastern Europe. Never mind the issue of European subsidies - many pan-European funds are going to be allowed, for the first time, to invest in fast-growing companies emerging out of Poland and Hungary, many of which have already become extremely IR savvy.

So while Ireland's IR achievements have been notable, the changing global investment arena is demanding a new course of action. Irish companies, particularly mid-caps, that are hoping to attract overseas investor interest in the future, are going to have to market themselves far more aggressively to the key market players and continue vamping up their global IR efforts in the months to come.

Matthew Gower is international editor of IR magazine