Recently in In-The-Know IRO Category

Nearly three-quarters of all investor relations officers set specific goals and objectives to measure their IR programs, according to a just released NIRI survey.  I'm actually quite surprised that the number isn't closer to 100%.  In the absence of goal setting, how do you determine priorities and make decisions about what to tackle on a daily/weekly/monthly basis?  How do you adequately assess which activities add value for your company and which don't?  How is your personal effectiveness evaluated? 

Of those who do report formally measuring their programs, 80% use both quantitative and qualitative measures.  The top five measurement criteria noted were 1) relationships with the financial community; 2) feedback from the financial community; 3) individual meetings with top shareholders; 4) qualitative assessment by the C-suite; and 5) composition of the shareholder base.  I might also consider looking at changes in sell-side sponsorship, additions to earnings conference call participation and introductions to new potential shareholders as a tactical method of determining how an IR program is progressing.  Unsurprisingly, and for good reason, most of those surveyed do not believe a change in their company's share price is a valid measurement tool. 

Clearly there are many ways to track and measure IR effectiveness, and much is dependent on company performance, size and maturity.  Although investor relations is a delicate balance between art and science, it seems that not setting goals and objectives for your program is a big disservice to yourself and everyone involved in building sustainable value for shareholders.

-- Laurie Berman, lberman@pondel.com

Most of us want to work for a boss that is kind and fair.  Paradoxically, however, when looking for a leader we also equate kindness with weakness, and selfish aggressive behavior with strength, according to a recent study conducted by researchers at the Kellogg School of Management, Stanford Graduate School of Business and Carnegie Mellon University's Tepper School of Business. 

The study said that being selfish makes "you seem more dominant and being dominant makes you seem more attractive as a leader."  And, "people who are generous or altruistic can appear weak or gullible."

This is an explanation, at least in part, of why we get corruption.  People who are more likely to be moral, kind and pro-social are least likely to be elected to leadership roles, and the likelihood of corruption and malfeasance increases because we have the wrong people in positions of leadership.

Indeed, these findings on how we perceive dominance and weakness (when it comes to leadership) are likely what is behind the frustration and anger of the "Occupy Wall Street" protesters.  The news of outrageous salaries and bonuses for CEOs and the government using taxpayer money to bailout big banks is all too familiar, while many average citizens cannot find work or have to work more for less pay. 

Joe Dear, chief investment officer of California Public Employees' Retirement System, said recently that people are waking up to the fact that the game appears to be rigged. A helpful first step for fairing up the game may be to begin viewing kindness, fairness and altruism as strengths in business leaders, and selfish behavior as reason to look for a new CEO.

-- Robert Jaffe, rjaffe@pondel.com

PondelWilkinson recently organized an investor day at the Riviera Country Club in Los Angeles -- image via Wikipedia

Fall is upon us and the scent of a fine buffet meal is in the air.  Amid the cacophony of seasonal investor conferences and roadshows, another IR programming stalwart is vying for investors' time - the Investor Day. 

According to a recent National Investor Relations Institute study, more than two-thirds of members surveyed host some sort of periodic analyst or investor day.  While the data somewhat favor the larger companies (who typically have more analyst coverage), these events are becoming increasingly popular among companies of all sizes. Two of my colleagues recently ran an investor day at the well-heeled Riviera Club in Los Angeles; two others are still recuperating from an over-subscribed investor event in New York that included the NASDAQ closing bell ceremony; and several of us are in the throes of supporting a third analyst and investor day that will include on-camera clapping for the morning bell at the New York Stock Exchange, as well as a media relations component. 

And while the extensive planning and coordination might warrant a strait jacket, once completed, the effort and investment is almost always worthwhile.

The reasons for holding investor days are varied, but typically fall into the following categories:

·         To showcase the depth and breadth of the management team and provide additional insights into company-driving businesses;

·         To unveil a new product, product line, or company initiative;

·         To reveal company financial targets and the roadmap toward achieving them; or

·         To introduce a newly acquired company or business and its executive team.

While company and even investor budgets are still tight, the purse strings seem to be loosening.  But to ensure actual attendance matches up with a "confirmed" list, companies should think hard about creating a compelling event that is not easily bumped from the calendar. 

In addition to details outlined in the NIRI survey, consider the following when planning for your next Investor Day:

·         Issue a Save-the-Date notice well in advance;

·         If you are hosting the event at your company headquarters, try to tie it in with a local social event  or facilities tour that might help to bolster attendance (many attendees at the event going on right now will play the famed golf course afterward);

·         Construct a theme that creates some personality for the event and helps to unify the message for all of the presenters;

·         If the timing works in your favor, perhaps issue a splashy news release on the day of the event outlining your key message points (don't forget to think about your media campaign and consider offering news as an exclusive to appear on the day of your event);

·         Consider inviting a guest speaker(s) such as a customer or industry guru (or show a video of the same) to put your story in greater context; and,

·         Make the best use of management's time together and schedule a company planning session with the assembled division heads the day after your event.

Of course, I would be remiss in not casually mentioning the merits of utilizing a seasoned IR advisory team - even on a project basis - to help maximize the investment made for this important annual event.  With the scars to prove it, a team such as ours has almost seen it all - we know what works, what's compelling, and, of course, which hotels serve the best buffets.

-- Rob Whetstone, rwhetstone@pondel.com 

Image via Wikipedia

Social media have been a part of our lives long before the advent of the Internet.  When our ancestors used ochre, hematite, charcoal and other materials to paint their triumphs and tragedies on cave walls and ceilings, they were engaging in social media.

When ancient Egyptians carved elaborate scenes on vases, amulets and pots, they were engaging in social media.

And when Pauline Phillips established her "Dear Abby" advice column in 1956, she was engaging in social media.

Media have always been social.  The difference today is that the Internet speeds up the dissemination of information, which is often repurposed and then dubbed "social" when it's tweeted or published on a blog, YouTube or Facebook.   The challenge for professional communicators is harnessing the speed and power of the Internet to communicate effectively.

In the investor relations world, many professionals do not believe that today's social media outlets establish effective lines of communication.  The proof:  84 percent of IROs do not use social media to communicate with their constituents, according to a Thomson Reuters survey due out this week.

I understand that IR folks, including myself, are more cautious about embracing social media because so many of the facts and figures we work with require adherence to strict disclosure procedures.   But that shouldn't stop us from tapping into social media for other purposes, including the reinforcement of messaging and establishing dialogue with customers, shareholders and even employees.

As communications professionals, it serves in our best interest to understand how social media can be utilized to communicate more effectively with different audiences.  For example, London-based Derwent Capital runs a hedge fund that relies on Twitter for investment direction. StockTwits, which my colleague, Matt Sheldon, wrote about nearly six months ago, continues to garner more credibility in investor circles.

The bottom line is that human civilization has come a long way since relying on granite, clay and, yes, newsprint, to facilitate the flow of information.  Don't you think it's about time that IROs do the same?

-- Evan Pondel, epondel@pondel.com

Hey friends of PondelWilkinson, let's keep this one to ourselves: Voice analysis may become the next tool, and a good one, for predicting stock prices. Two professors from Duke think they have proved it.

They learned that if you listen very carefully to subtle emotional cues in a CEO's or CFO's voice on a conference call, you may be able to forecast, not an EPS estimate, but a company's future stock performance.

Using a digital voice emotion software program made by privately held Israeli company Nemesysco Ltd., Profs William Mayew and Mohan Venkatachalam (yes, I checked the spelling twice) analyzed voice inflections from 1,647 typical quarterly conference calls hosted by 671 public companies. 

The study monitored subtle and not so subtle vocal cues that showed either positive or negative emotional states.  They then checked the companies' performances to learn whether earnings, stock prices or analysts' recommendations corresponded with the cues over the next six months.

Voila!  When the execs were excited, the stocks responded favorably and earnings were on the rise. But the more negative the intonations, the lower the stock prices went. According to the study, which was published in the Journal of Finance, performance was most pronounced in either direction when there were questions posed on calls, making it easier for the software program to detect the cues.

Where can you buy the software package and how much does it cost? Sorry, you'll have to research that for yourself.  If it's not too expensive, please let me know.

I guess we just have to hope that the executives on those conference calls really are feeling what they are saying, lest we must heed the words of American poet William Carlos Williams, who wrote: "It's not what you say that matters, but the manner in which you say it."

-- Roger Pondel, rpondel@pondel.com

Image via Wikipedia

With myriad information and opinions hitting the papers and Internet every day about the ins and outs of "Say on Pay," it seems helpful to summarize the most pressing issues and commentary (and a short summary this will not be).

The SEC adopted formal Say on Pay rules about a month ago, as required under the Dodd-Frank Wall Street Reform and Consumer Protection Act.  Companies must conduct an initial vote on Say on Pay at their first regular meeting of shareholders occurring on or after January 21, 2011 (even if a company's proxy statement was filed prior to January 21).  Companies whose public investors hold less than $75 million of its outstanding shares are not required to hold such a vote until 2013. It's important to note that the votes are advisory and not binding onto themselves.

In its most basic form, Say on Pay requires U.S. public companies to provide shareholders with the right to cast three types of advisory votes:

• Say on Pay: To approve the compensation of named executive officers;
• Frequency (a current hot button among public companies and their investors): To determine the frequency with which shareholders should be entitled to cast votes on the company's executive compensation;
• Golden Parachute:  To approve certain payments made in connection with an acquisition, merger or other specified corporate transaction.

As of the end of last year, 73 companies with shareholder meetings on or after January 21, 2011 had filed either preliminary or definitive proxy statements.  Do these proxies provide trend information about how Say on Pay will play out?

Latham & Watkins says that 56% of the filed proxy statements have recommended a vote to approve compensation every three years; 23% have recommended annual votes; 11% have recommend a vote every two years; and the remaining 10% have not made a recommendation related to frequency.  A Towers Watson survey of 135 U.S. public companies conducted in mid-December showed that 51% expected to hold annual say-on-pay votes; 39% preferred the vote be held every three years; and 10% anticipated holding a vote every two years. 

Law firm Qashu & Schoenthaler LLP reviewed the voting results of 88 companies that had disclosed the results of their Say on Pay frequency votes as of February 22.  While 55% of the directors at these companies recommended a vote every three years and 27% recommended a vote every year, only 29% of shareholders at these companies voiced their preference for vote every three years while 65% preferred every year.  Sheppard Mullin also provides an excellent view into recent voting trends and practices.

My best guess is that investors will continue to press for annual votes, as they seek to gain more influence over how their companies should be run.  Institutional Shareholder Services (ISS) supports this view and has a good FAQ on its compensation policies here.  A recent MarketWatch article noted that the shareholders of Monsanto, Air Products and Chemicals, Jacobs Engineering and Woodward Inc. demonstrated a strong preference for future Say on Pay votes to be held each year, instead of management's preference to hold the vote once every three years.

Towers Watson contends that there is "no single right answer to the question of how frequently these votes should be conducted that will work for every company.  Each company seems to be assessing its own circumstances and needs, taking into account its specific shareholder composition and the degree of potential shareholder concern about the company's executive pay programs."

Towers Watson found that nearly half of those companies surveyed are making "some adjustments to their executive pay-setting process in preparing for the upcoming proxy season."  Those making these changes plan to devote more attention to explaining their programs, performing additional analyses on the link between executive pay and company performance, and/or considering changes to programs such as severance, change-in-control benefits and perks that have high visibility.

Advice from Latham & Watkins says that in preparation for these upcoming votes, companies may want poll their significant shareholders about desired frequency of Say on Pay votes.  In fact, a recent Harvard Law School Forum on Corporate Governance and Financial Regulation informed   that a group of institutional investors led by Walden Asset Management and representing more than $2.0 trillion in assets under management, has asked some companies to host an annual conference call specifically for institutional investors to focus on corporate governance discussions in the proxy statement. Whoa.

When deciding what is best for your company and its shareholders, consider the results of past votes on equity plans and director elections to determine the level of shareholder satisfaction on past executive compensation matters.  It's also a good idea to understand the voting guidelines of proxy advisors, such as ISS and Glass, Lewis, as well as your largest institutional shareholders. 

Open and ongoing dialog is key to maintaining a best-in-class investor relations program, and whether it be Say on Pay or other issues facing your company, communicating honestly is the best recipe for success.  Let us know how your company is thinking about Say on Pay.

-- Laurie Berman, lberman@pondel.com

Image by AJ Guel Photography via Flickr

As a huge fan of the game of football, I got to thinking recently about how similar things are in my daily life as an investor relations professional to Eli Manning's life as the star quarterback for the New York Giants (shameless plug for my hometown team - Go Giants!).

In football and in investor relations strategy is key.  Eli Manning spends hours strategizing about the best way to win the next big game.  I spend hours strategizing about the best way for my clients to win positive attention from the investment community.

In football and in investor relations knowing the competition is paramount.  Eli scrutinizes his competition by watching clips, reading scouting reports and analyzing other teams' histories to gain the upper hand.  I scrutinize clients' peers by reading voraciously, examining financial statements and listening to chatter to make sure I understand industry dynamics, know the analysts who cover the space and recognize what propels investors to buy.

In football and in investor relations communications is vital.  On the field, Eli must talk to his players to relay plays, position his players correctly and make sure they are all on the same page.  Likewise, I must communicate with clients, investors and analysts to ensure we are all on the same page.

In football and in investor relations, you must play by the rules of the game.  There are hundreds of rules that govern the game of football.  Coaches, players and referees must follow them and embrace them.  There are also hundreds of rules that govern the practice of investor relations from the exchanges to the SEC to employing IR best practices. 

In football and in investor relations, the eye is on the long-term prize.  For Eli, that prize is a Super Bowl ring.  For me, it's helping clients grow and sustain shareholder value.

While watching me in action is surely less exciting than watching Eli fire the ball down the field, we may just be kindred spirits.

-- Laurie Berman, lberman@pondel.com

Last week, I attended a networking event hosted by Bank of America Merrill Lynch at the Paley Center for Media in Beverly Hills. The event included an exclusive screening of "I AM," a documentary that recounts the story of filmmaker Tom Shadyac after a cycling accident left him with post-concussion syndrome. Though he recovered, he emerged a changed man.  Known for directing films such as, "Ace Venture: Pet Detective" and "The Nutty Professor," Shadyac embarked on a journey to discover how he, as an individual, can improve his life, and what we, the audience, can do to make our lives better.

The film explored why today's culture is so engulfed and obsessed with competition and separation, instead of community and cooperation. The film features interviews with well-known cultural figures such as Archbishop Desmond Tutu and the late historian Howard Zinn, as well as lesser-known scientists, poets and evolutionary biologists.

After watching "I AM," it got me thinking about how Shadyac's film can not only be applied to each of us on a personal level, but to the business realm as well.

The film is particularly relevant to our line of work because it reminds us how important it is to understand the communities we serve, particularly investor constituencies.   The more public companies and investors understand and communicate with each other, the more likely it will enhance long-term shareholder value.  And that's something we can all appreciate in this environment.

-- Meg Wilson, mwilson@pondel.com