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A couple of weeks ago, Citigroup former Chairman Richard Parsons played the "Cool Hand Luke" card to explain why shareholders voted down the company's executive compensation plan.
My question is - is this the tipping point that restores some equilibrium to the investor relations pendulum that has been so heavily tilted towards the compliance aspect of the discipline over the past few years?
In other words, is it time to give IR back to the IRO that is as fluent - if not more fluent - in communications as s/he is in financials?
This is not meant as a slight on the corporate secretary... or the general counsel... or the outside SEC attorneys... or the compensation advisors to the Board... or the Treasurer that also wears the IRO hat... or... well, you get the picture. The point I am trying to make that investor relations is both a compliance and a marketing function. Companies that lose sight of that do so at their own peril (as Citi learned the hard way) and, in many cases, leave significant value on the table.
There was an interesting post recently on the TAI blog about the top five shareholder concerns in 2012. The post was inspired by an interview with the iconic Nell Minow in Corporate Secretary magazine.
According to Nell, the top five concerns includes such things as executive compensation ("At most companies, investors don’t seem to care - shareholders approved 98% of the executive pay packages in last year’s say-on-pay votes," countered TAI) and quality of board/individual directors ("... in 2011, 45 directors received less than 50% of the votes cast, out of thousands standing for election," noted TAI). The author of the post also offered that Nell's list should have been:
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share price appreciation
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corporate cash balances
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share price appreciation
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share price appreciation
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share price appreciation
A tad extreme but point well taken. I agree that shareholders - like voters - tend to be swayed by their wallets at election time. That said, I can't believe that the list of five really boils down to just those one and a half things. From where I sit, shareholders are paying close attention to Board composition and quality but I would suggest that the focus here is really more on the director selection/succession criteria process than the individuals themselves. I also believe that there is more of a growing interest in sustainability than TAI is acknowledging. That said, my sense is that most investors are more interested in it as another intangible asset like new product innovation, R&D, etc. rather than looking for which company is doing the best in a particular CSR initiative.
What do you think of these lists? Does the answer lie somewhere in between or do you have a completely different list in mind?
Thank goodness for Johnson & Johnson.
First of all, they have great baby powder... far and away the best of breed as far as I am concerned. I still use it. Likewise, I'd say their baby oil and baby shampoo are of similar stature (and, let's be honest, there's no better smelling shampoo than the no-more-tears elixir in the classic golden bottle). Also - and perhaps more relevant for this forum - they have made it cool to talk about reaching the individual investor again - a topic that's long been dear to me.
Doug Chia, the company's corporate secretary, recently participated in a NYSE webinar about the upcoming proxy season and talked about how the company rebuilt its proxy statement this year in order to better serve the company's individual investors.
Have you seen the latest proxy statement from J&J? If you haven't you should take a look - it's really well done. Among other things, I think the additions of the "at a glance" content (see pages 5 or 36, for example) enhances the transparency of document by infusing it with some much needed/long-awaited "plain" English. Similarly, I think the expanded director bios starting on page 18 are a must for all companies - whether or not you have a retail base to serve. At the risk of repeating myself, I cannot stress enough how critical it is that companies clearly delineate the specific expertise each individual brings to the board and how that experience correlates the company's growth strategy, particularly in today's unsettled markets. When it comes to corporate governance, investors are dubious, proxy advisory firms are suspicious and activists are ready to pounce. The risk associated with letting them draw their own conclusions is too great.
Be curious how you are approaching this year's proxy statement. Has J&J's approach made you rethink your approach with the retail community?
To say there are a lot of deals stuck in the IPO queue might already qualify as one of the great understatements of 2012, right up there with "Republicans seem to disagree on who should be the GOP nominee" and "The European financial market seems a bit strained of late."
To say I have a recommendation for either the GOP or Europe might qualify as one of the great overstatements of all time, I do have a strong recommendation for those companies currently waiting to go public: use this time wisely!
Time after time I have seen management teams view "going public" as the completion of a process rather than the beginning of one (¿Cómo se dice "rude awakening"?). Believe me... companies that begin preparing for this new reality long before the S-1 is being drafted have a much easier time transitioning and performing after the deal has gone effective.
To that end, here are seven simple strategies for future public companies to consider in advance of the offering. For those of you who have already walked this (green) mile or are walking it right now, what would you add to the list?
Memo to: Those who prepare managements for earnings conference calls
From: Me
Re: Avoiding the most common (and biggest) earnings conference call mistake
All - effective immediately, earnings conference calls will require a strong closing statement to be used by your CEO following the conclusion of the "Questions and Answers" segment. Allowing this discussion to abruptly end with the senior leader of your organization muttering, "Ummm... okay... thanks for dialing in this morning. We'll talk to you in three months when we next announce earnings" is no longer acceptable for the following reasons:
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After roughly an hour on the phone - and too many questions on topics off in the weeds - management teams need to bring the conversation back to those essential takeaways from the quarterly performance (e.g., pleased with our ability to drive higher operating margins despite flat sales; encouraged by the progress we're making in integrating our latest acquisition; focused on more fully leveraging our market position as economy rebounds... you feeling me on this?). Letting the call end with a brief discussion on expected tax rates is not only a major faux pax but a wasted opportunity to reassert your value proposition for investors.
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It's also a lie... at least I hope it's a lie... please tell me you are talking to your investors in between earnings calls.
Please let me know if you'd like me to convene the group to discuss further - perhaps over a working lunch. In the meantime, I thank you for your prompt attention to this surprisingly wide-spread problem.
Did you see this piece by James McRitchie on the feud brewing over virtual annual meetings? Amazing... it never would have occurred to me that we would utilize technology in investor relations as a tool to separate us from our owners, rather than use it to engage as wide a group as possible.
Listen, I don't have a dog in this fight (so to speak) - I am neither a Broadridge shill nor am I a leader of P-TOT (People Tired of Technology). I'm just saying... if you're job is to garner support for Board-endorsed proxy proposals or your job title ends in the word "Relations", then I would strongly suggest you look to use technology to break down walls, not build them.
Do you see this differently?
Was anyone else surprised by this article (subscription required) in The Wall Street Journal a while ago about sell-side analysts getting invited to the Berkshire annual meeting? My guess is no as there hasn't been much talk about it since it ran in the paper.
Well, it surprised me but good (as Mrs. B would say). No, not because I didn't realize there were still sell-side analysts... I guess I never really thought that some companies didn't invite analysts to their annual meetings. I've been to a lot of annual meetings over the years and I don't remember one that didn't have at least one sell-side analyst in attendance. For that matter, I can't remember planning one that was designed to exclude the sell-side community.
Is there a reason you wouldn't invite your analysts to your annual meeting? Seriously, don't the benefits that apply to investors also apply to them? Who else aren't you inviting to your annual meeting?
It seems like just yesterday we were all bracing for the end of the world.
It was on the tip of seemingly everyone's tongue... articles were written, advisories were issued, blog posts were posted, candles were lit... it was this IR generation's "Y2K" and - at the time - it seemed scarier than a Willow Smith song.
Looking back today, all the tumult seems kinda cute if not plain ole silly. WHATEVER HAPPENED TO... THE FIFTH ANALYST CALL?
Remember that radical idea of talking to investors about the various components of the proxy material? It was THE hot topic this time a year ago and both sides of the argument seemed pretty hot under the collar about it. Then - quicker than you can say "web disclosure" (note to Mike O'Brien: this is not a reference to any previous, current or future product of yours) - the conversation was over.
Don't tell me we're already hanging up on this idea. I always liked the idea if, for no other reason, it seemed like a good wake-up call for companies as to how to focus their IR efforts.
Anyone planning on having a fifth analyst call with investors this year? Any takeaways from the fifth analyst call concept that you are applying another way to the proxy solicitation process?
Brothers and sisters... we have gathered here today to talk about the power of the letter!
When handled properly, this power can galvanize people, shape perceptions and manage expectations. This power knows no geographic boundaries. This power knows no technological limitations.
This power comes from inclusion, not exclusion... from looking ahead, not looking down... from aspiration, not recollection... the power of the letter comes from building, not from justifying.
Do you have this power?
If you have to think about it for more than a few seconds then you probably don't. And that's a shame because the power of the letter is within your grasp... shoot, for many of you, it's within your control.
Click here to learn how you can capture the power of the letter. Remember, more investors will read this piece than will meet with the CEO in a given year. Therefore, it is critical that this section of the annual report be crafted carefully to maximize its potential impact.
A few weeks ago, I was up on my soapbox ranting about IR tools and how they were only as strong as the IR content they delivered. I'm sure to some I came across as a technophobe who prefers typewriters to computers, VCRs to DVRs and vinyl records to MP3s (okay, this last one is actually true but we'll save the topic for another day).
I fear I came across a bit "Suh-esque" and, in so doing, misrepresented myself with regards to IR and technology. For that, I apologize. I am not a technophobe. Shoot, I'm not even a technology hater. I absolutely embrace the opportunities technology offers IR - some of which, frankly, are long overdue.
For example, take a look at this piece on Coca-Cola and Best Buy.
I. Love. It.
This is such a smart application of technology in the IR space. Among other things, it ensures that IROs and the senior management team will hear all the voices that wish to be heard and not just those that speak the loudest (typically through SEC filings) and claim to speak for all investors. For those of you who have been in a contentious proxy contest, you know full well how important that perspective and input can be. Putting such a mechanism in place can also further demonstrate their commitment to listening each and every shareholder.
What's not to like about this?!!? No. Seriously. What's not to like?
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