Best Practices for Handling Ethical Issues in Investor Relations

July 2024

Ethical dilemmas in business such as executive misconduct, questionable accounting practices, breaches in cybersecurity, or health and safety concerns are just a few examples under increasingly heightened scrutiny today. For Investor Relations Officers (IROs), navigating these challenges is a crucial part of the job.

After all, IROs play a strategic role within companies, acting as the bridge between internal operations, the management team, and the board. This position gives IROs a comprehensive view of potential ethical issues.

It also gives IROs significant power when it comes to navigating the high-stakes relationships among executives, boards, and investors. In addition, that power comes with the responsibility to do the right thing. Even if it is hard.

There are ways to manage these situations effectively and maintain credibility.

1. Act fearlessly and proactively

In some companies, without the right support system, exposing unethical behavior can feel risky: Unfortunately, some may feel that “doing the right thing” can cost you your job or damage your reputation. While it may be tempting to stay quiet, inaction can be more harmful to your career than sitting on the sidelines.

Taking a stand is not just about personal integrity; it’s a vital part of your role. Ensuring that leadership isn’t an echo chamber is your responsibility.

While most people in public companies strive to do the right thing, never forget you are not alone in your company. Recognizing that seeking the truth and evaluating risks is never wrong, at least in the long run, when you do the right thing.

2. Have your crisis plan ready to go in advance

In the event of an ethics violation, having a crisis communication plan is essential. Each crisis is unique, and there is no one-size-fits-all playbook, but you should have an official game plan in place before the going gets rough: You need to know who is going to be included (the board and executives, and of course PR) and be armed and ready to go.

3. Code of conduct serves as a guideline

If you’re uncertain about a situation, your company’s code of conduct should be your first stop. These codes have become more comprehensive. IROs, officers, and boards must uphold these standards — and the SEC requires that companies disclose the existence (or lack thereof) of their code of conduct. Many companies combine many legal requirements into their code of conduct, depending on where they are listed.

The code of conduct serves as a guideline, however, so there’s no way it will cover every possible scenario. If you’re in doubt, escalate the situation to higher authorities within your company. Your company’s general counsel or CFO is always a good resource, as is your reporting manager.

The most important thing to keep in mind? Failure to report something suspicious is often a violation of the code of ethics itself. You will never want to put yourself in a compromising situation.

4. Activate your internal network

Building relationships within your company — especially with PR, finance and legal departments, and the board — is essential. These connections provide a foundation of trust and support when ethical issues arise, so cultivate them as soon as you join a company’s ranks.

You never know when you’ll need a sounding board, particularly when ethics issues can have a subjective component. You need to be attuned to those subtleties.

If you need to remain anonymous, use your company’s ethics hotline to report concerns. Companies are legally obligated to investigate reports made through these channels. Reporting anonymously has no downsides and ensures you fulfill your duty to address potential ethical issues.

5. Make sure you are in the best working environment to voice your concerns

As an IRO, you have a seat at the table, and the moment you take that role, you’re trusted to advise board members and management. However, you may sometimes disagree with how they handle an ethical issue.

Accept that leadership may make decisions you don’t agree with. Adopting a zen mindset is crucial, even if it’s a struggle to get there.

If you consistently find yourself at odds with the company’s decisions, it might be time to consider whether the organization aligns with your career and personal values.

Any crisis can represent an opportunity to showcase your leadership and empathy, not to mention strengthen relationships with key stakeholders along the way. That’s always good for your reputation and career.

Ultimately, starting with the truth and being open and honest with shareholders is crucial. Transparency builds credibility and peace of mind, for both you and your company.