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At this risk of getting Jeff Matthews mad at me (no, I'm not making this up... dude loves him some Warren Buffett like no one else... I hope he doesn't mind if I blog about the "Oracle of Omaha" this one time), I had to pass this along from Directorship - The 8 Buffett Rules for a Great Annual Report Letter. Regardless of your CEO's communications style or the format of your report, these are great reminders for any public company or private institution.
My favorite? Glad you asked... I like a number of them... but if I could only employ one rule it would be "Rule 6" as it directly ties to management credibility, which some would argue is the most important intangible assets a company can have.
There is a power in the letter, boys and girls. Warren knows it. You should too.
Seems like forever that industry pundits have been waiting to publish the obit for the sell-side analyst.
"They're glorified event planners," they laugh.
"All the smart ones now work for hedge funds," they say dismissively.
"Sell side analysts? No one listens to sell-side analysts anymore," they taunt.
According to The New York Times' Gretchen Morgenson, "they" might be wrong... seems like the sell-side still has a willing audience. Unfortunately, it would appear as though this willing audience is looking for nonpublic information... and the sell side is answering the call.
"... documents obtained by The New York Times indicate that the hedge fund practice of trawling for analysts’ shifting views is systematic and growing on Wall Street. Questionnaires completed by analysts that can telegraph their thinking are being used by hedge funds run by ; Marshall Wace, a large British hedge fund company; and Two Sigma Investments, a United States hedge fund concern. The funds say they ask only for public information, but in at least four cases, documents from Global Investors, now a unit of BlackRock, state the goal is to receive nonpublic information. Two documents state that the surveys allow for front-running analyst recommendations."
Take a look at the article and tell me what you think... I, for one, am surprised at how unsurprised I am by this.
Last week, I was asked by a reporter what, if any, role Mark Zuckerberg would play in Facebook's first-ever earnings conference call. That question sparked a really interesting (for me) conversation on prepping for an earnings call, which ultimately turned into a really great article on Facebook's earnings "war room."
The conversation got me thinking about prepping for conference calls in general... maybe it's me but it seems like folks are spending less time upfront getting ready for earnings calls than they used to. I don't see companies conducting due diligence on the content/tone/questions asked during peer conference calls as they once did. I don't see as many management teams practicing calls a day or so in advance like they used to. I don't hear companies debating what should be in the prepared remarks and what should held for the Q&A session.
I just don't get it. I had a CEO tell me that the prep I put him through for a call was many times harder than the call itself and, therefore, he had enormous confidence getting on the call. According to him, regardless of the actual results, he never worried about what he'd get asked during the call because I had already asked him all the really tough and obnoxious questions. That's the confidence and conviction you want your CEO to convey to investors. Remember, it's not what you say but how you say it.
Earlier this year, I wrote about the most common earnings conference call mistakes. I think I made a mistake when I wrote that post. The biggest, most common mistake with regards to earnings conference calls is not prepping thoroughly before the actual event.
According to The Wall Street Journal, there have been 106 supplemental proxy filings this year regarding executive-pay plans (an increase of 83% from a year ago). Blair Jones, managing principal at Semler Brossy said in the Journal story, the supplemental filing "... is a second attempt to say ‘perhaps we weren’t as clear as we could have been in explaining our compensation strategy.’” ("Supplemental Proxy Filings Surge" - June 26, 2012).
While that's a scary number, what's even more scary is that in only four of those situations did the proxy advisory firms overturn their initial recommendation.
What do these scary numbers tell us? That supplemental proxy filings aren't worth the virtual paper upon which they are printed? I wouldn't go that far - in many cases, the supplemental proxy filing is absolutely necessary to address assertions made (or conclusions drawn) in by the proxy advisory firms.
Nope... the takeaway for me is simple: it's too risky to wait until the proxy is mailed to start the discussion on executive-pay plans with the compliance officers at your institutional investors. This conversation needs to take place long before the proxy is mailed so that you have enough time to properly delineate the rationale behind the pay plan, as well as to give your investors the chance to provide feedback and, if appropriate, input to your compensation committee. If nothing else, by creating a direct line of communications early can dramatically reduce the need for investors to send management a message through its proxy ballot.
Just my two cents, of course. Anyone have other pocket change on this issue?
A few weeks ago, I said that if you wait for your investors to bring up sustainability, you will have all-but-missed a major opportunity to differentiate your company as an investment option.
Yes... I saw you roll your eyes. And, yes, I heard you snort. I also heard you mumble, "dude's an idiot."
It's okay... I've got a wife and kids so I'm used to this reaction.
Plus, I know I'm right (for a change).
For example, just recently the mighty KKR announced that its "green portfolio program" continues to expand globally. Pretty telling when an investor of KKR's ilk asserts its clout/muscle/influence/je ne sais pas in this way, don't you think? Don't roll your eyes - tell me why you disagree because, from where I sit, the expectations for sustainability reporting are building fast.
No, no... this isn't another ROBBIE awards ceremony... we're talking shareholder votes this time.
If you only read one obituary from this most recent proxy season in the States, make it this study of US mutual funds by Tapestry Networks (in concert with IRRC Institute).
Among the many highlights was this gem: mutual funds are increasingly relying upon proxy advisory firms to serve as data aggregators. "Across the board, participants in our research said they value proxy firms’ ability to collect, organize, and present vast amounts of data, and they believe smaller asset managers are more reliant on those services."
All the more reason companies need to treat proxy matters as a year-round campaign and make sure their investors understand their governance structures, protocols and practices. Similarly, doing so will allow companies to clearly understand their investors' governance concerns and sensitivities long before they send out the proxy ballot.
Be interested to know what jumps out at you when reading this report.
"It's not what you say but how you say it."
If that's not an old adage, then it should be because it's truer than Spandau Ballet.
Don't believe me? Hmmmm... perhaps it's the way I said it? Perhaps it will ring more true to you if you listen to NPR science correspondent Shankar Vedantam discuss the subject.
Not necessarily groundbreaking but interesting, right? How have you seen this phenomenon play out at your company or companies you follow?
Since anytime is the right time to hand out a ROBBIE award, I thought I'd hand out a few on the heels of the 2012 NIRI National Conference:
BEST GENERAL SESSION SPEAKER: Glen Hiemstra by a landslide. Sadly, NIRI stuck Glen at the end of Wednesday's general session when the vast majority of attendees had already left for the airport. What a shame too, as Glen's insight into future trends and the possible communications implications was both thoughtful and thought provoking... here's hoping NIRI finds a way to leverage Glen more going forward as his unique view of the world around is invaluable to any (communications) professional.
BEST BREAK-OUT SESSION PANELIST: David Weild. David's purview on the new realities of the capital markets and how they impact the role of communications (among other things) was as refreshing as it was frightening. Like Glen, David's is another voice that this profession desperately needs to hear on a regular basis.
BEST SPEAKER NOT ENOUGH PEOPLE GOT TO HEAR: Baruch Lev. The author of the must-reach book "Winning Investors Over" held court during a lunch for the senior roundtable contingent. Pure edutainment from beginning to end. Why he wasn't slotted as a keynote speaker during a lunch for all attendees or as a general session speaker is beyond me.
BEST EXHIBITOR: Capital Alpha. Perhaps the only exhibitor that was not hawking a new "app" for IR, Capital Alpha's insight into political and regulatory risks/trends was truly a welcomed surprise.
BEST (CONDESCENDING) LINE BY A CONFERENCE ATTENDEE: "I've found IR to be easy," says a six-month veteran of IR who comes out of treasury. Said with a straight face and a smug smile... let us all pray for his company...
BEST GIVEAWAY THAT WASN'T A GIVEAWAY: The "I (Heart) IR" shirts that PR Newswire staffers had on were terrific and, frankly, would have been a lot easier to pack for the trip home than the coffee mugs. (btw - I wear a large, Bradley, in case you're wondering.)
BEST CONFERENCE CHAIR: While it looked like a runaway for Felise early given her easy charm and genuine sincerity at every hallway interlude, Andy did have some good lines and ad-libs during the general sessions that shouldn't be overlooked. Therefore, I'm calling it a tie.
BEST DISAPPEARING ACT: Web disclosure. While there were plenty of leftovers being served in the exhibition hall, you would have been hard pressed to find any crumbs of the once-lauded-cure-all known as web disclosure. Here's hoping all the IR apps solutions being touted this year don't suffer a similar fate and disappear from the collective conversation faster than you can say jumanji.
Wow... that's already eight awards, which is a new record for ROBBIEs handed out in a single ceremony... is eight enough? Any you wanted to nominate or honorable mentions?
Remember a while back when we were talking about how employee-investors are the key to unlocking shareholder value? (I didn't think you did... that's why I'm bring you this sequel.)
PR Week was kind enough to ask us to create a three-part series on this subject for their blog... the first post makes the argument in support of expanding your IR program to include your internal owners; the second post focuses on steps you can take to reach your employee-investors; and the third post provides some examples of companies that are already courting this investor population (yes, there are companies that actually do this).
Would love to hear your thoughts on this... specifically, what downside do you see to including employees in your IR program?
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In the spirit of an earlier discussion we had on the importance of content, I thought it would be worthwhile to take a step back and revisit the basic tenets of writing. And what better way to kick off this exercise than to take a peek at this internal memo written by David Oglivy in the 1980s. Among my favorite bits of advice he offers include:
"Write the way you talk. Naturally."
"Use short words, short sentences and short paragraphs."
"Never use jargon words like reconceptualize, demassification, attitudinally, judgmentally. They are hallmarks of a pretentious ass."
After reading the list several times, I couldn't help but feel that writing is becoming a lost art - in IR specifically and communications in general. As to the former, I'm sure there are plenty of reasons for this... certainly, the undeniable shift in IR towards "IR as a compliance function" has had a lot to do with it. And the fact that so many are coming into the IR ranks that do not have communications backgrounds is also playing a factor. It's sad, though, as our common goal should be to educate, not just supplying grist for the mill.
Am I romanticizing the past? Maybe... but I don't think so. Do you see it differently? What would you add to this list? Anything on the list you'd like to "reconceptualize"?