IR and the Health Care Debate

The battle over health care policy, regardless of its outcome, offers a number of important lessons for those who work in investor relations. Accept, for sake of argument, the following substitutions:
Investors = patients
CEOs = doctors
Boards of Directors = health insurers (or Medicare)
Government (federal and state) = government (federal and state)

The question in both health care and in investing is, “What course of action best balances the interests of each individual, and the majority? And, who gets to decide that?
Naturally, each group has a point of view:

• Patients (investors) think they should decide. After all, they can take their dollars (or benefits) and spend them where they want. Or keep them and do nothing at all.
• Doctors (CEOs) think they should decide. They make decisions on each case based on the facts at hand, as well as the big picture, which is what their expertise and experience tell them is the right course of action, given all the risks and benefits.
• Insurers (Directors) think they should decide. They set the boundaries on what the doctors and CEOs can do, balanced against what investors/patients need and can afford. They decide, in general terms, whether to make the money available.
• Governments think they should decide. They set and enforce the rules of the game, which are complex and change constantly. But market participants ignore them only at their peril.

So, who’s right?

If you have the vantage point of an IRO, you can’t help but conclude that the answer is none of them. And, that each must acknowledge the rights and privileges of the other three for the system to work effectively.

What should IROs do when these corporate interests clash? IROs should speak up:

• When CEOs ignore or avoid input from investors and directors on the grounds that they don’t know all the facts, and because lawyers and lobbyists exist to deal with the government.
• When Boards set policies or compensate CEOs in ways that investors are likely to disapprove, and may cause them to invest elsewhere.
• When governments make rules, or enforce existing ones, in ways that are not in the long-term best interest of the investing public.
• And when investors aren’t being told, don’t understand, or simply disagree with what the CEO or Board is doing, and why it’s in their interest.

By keeping those principles in mind, we might all be a little wealthier, and maybe even a little healthier, in the New Year.

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