IR as a roadmap

November 4, 2009 by Dick Johnson

Roadmap NJ-NYYou gotta love Global Positioning Systems – finding almost anything, guiding you through the streets, offering data to get you to your destination. And you don’t have to fold them back up, like the roadmaps people used in the old days.

I thought about roadmaps – and their GPS counterparts – as I was working on a strategy for communicating a company’s value to investors.

We need to provide roadmaps to our investors, to enable them to envision our destination and see the path the company is taking. A few broad examples:

  • Investors need to see the path back to financial health for most companies coming through the recession. How will the P&L improve, through cost cuts or recovery in revenues? What steps are we taking, and when will we get there? Where do we need to take the balance sheet? (See earlier post on recovery IR.)
  • Investors in biopharma and other R&D-based companies need to understand the path for commercializing new drugs or high-tech products. What’s the process? Where are the challenges? How will we navigate them? What’s the timeline, and will investors see the mileposts along the way?
  • Investors in companies affected by government policy changes – health care reform, cap and trade, tax increases on dividends, you name it – need to visualize the different routes their investments may take depending on what Washington does in specific areas.

We, of course, are the map makers (or people who load data into the GPS devices).

Investor relations professionals should think more about roadmaps. A good map would tell investors where we are, what the destination is, and how we plan to get from here to there. We can’t assume investors – especially those new to a company – know the road. To create understanding, we must craft the clearest possible explanations of how our companies are moving forward to reach our goals.

The analogy to roadmaps suggests one more thing: We should also try hard to give visual expression to key investor messages. Seeing how a company intends to create value adds persuasive power to the verbal explanation of the strategy.

Do you have any examples of useful “roadmaps” in the financial or strategic realm?

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Posted in Messages & writing | 1 Comment »

Mission accomplished?

October 29, 2009 by Dick Johnson

I’m getting a mental picture: The confident commander-in-chief strides across the flight deck of the USS Economy and addresses the aircraft carrier’s crew as a MISSION ACCOMPLISHED banner flies overhead. “The recession is over!”

Well, maybe we should hold off on photo ops.

The good news on third-quarter GDP rising, breaking the recessionary streak, doesn’t mean we’re finished with tough times. The other good news may be that the Obama Administration does not seem ready to declare victory just yet.

Although a recovery may be taking hold, investors remain plenty nervous. The “U” and “W” and “L” scenarios are still too plausible to declare it’s over.

Not that we should get mired in doom and gloom – but, in telling our story to investors, we ought to keep our feet on solid ground.

For sure, companies and investor relations people should be explaining our strategies for the recovery phase, providing perspective and industry insights. An earlier post offers some ideas on IR for the coming recovery. In this transitional time, we should present a view of the business based on data, not wishful thinking.

Feel free to share your thoughts … Where are we in the economic cycle? And how can IROs best tell the story while the macro picture remains uncertain?

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Posted in Financial crisis & recession | 1 Comment »

Execution trumps strategy

October 27, 2009 by Dick Johnson

Companies often find themselves explaining strategies to investors, and investor relations people should be experts on how our corporations are creating value, building competitive advantage and so on. But strategy isn’t the whole story.

Some words of wisdom on strategy – and execution – come from Paul Polman, chief executive officer of Unilever, in the McKinsey Quarterly (text here, video here):

I’ve always said execution is strategy in our business. This is consumer goods. I cannot speak for other industries, but for us, execution is strategy. It’s absolutely important. In fact, the strategies that we have as companies might differ a little bit, but that’s 5 percent or 10 percent of the work. And then the other 90 percent is execution.

I’ve seldom met a consumer—and I go to a lot of home visits or go around with shoppers—and I’ve seldom met a consumer who buys our wonderful Knorr products or Lipton or Omo or Skippy because they like our strategy. And so, our business is a very simple one of getting the right products at the right place at the right quality at the right price—all the time.

And in our industry, share movements are often happening because of lack of execution on the other side. So, this is a very, very important part of us. Now, organizations normally don’t tend to gravitate towards execution, because strategy is the sexy part of all of this.

An interesting thought, in its implications for messages to investors.

One question is, How do we communicate execution as a key message? Surely not just by waiting for the earnings numbers to prove management is executing well – although that’s the ultimate test. IR people need to scour our companies’ everyday and exceptional happenings for achievements that demonstrate skill and discipline in execution. And we need to be telling those stories, as well as our strategies.

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Posted in Messages & writing, Quotable quotes | 2 Comments »

Visualize the data

October 23, 2009 by Dick Johnson

If you enjoy seeing your data in graphic form – not just drab tables or bland bullet points – you’ve got to check out a website called FlowingData. Nathan Yau, a PhD candidate in statistics at UCLA, publishes the site – a wealth of interesting pictures.

Investor relations people and our audiences are, of course, data geeks. IR is about the numbers – but more than that, our story is about the change in numbers, the trend that creates value for shareholders. Flat lists of numbers hardly do justice, sometimes, to the powerful drivers of performance for our businesses.

FlowingData mapWe should always be on the hunt for clearer, easier to grasp, more persuasive ways to communicate data on the markets for our products and services, not to mention the financial trends that influence our stock prices. To the extent that investors “get it,” they invest.

It’s worth spending some spare time exploring new graphic approaches. A good place to start is FlowingData’s “projects” page, a sampler of Nathan’s experiments in visualization (he also offers an archive of older projects). Some pearls I’ve found:

  • Living maps - WalMart or Target’s amazing growth story starts with a single store and expands to fill up the continent, as the years tick by. Instead of showing a static map of locations on a slide in a Powerpoint, or a simple map on your website, go dynamic with a map that comes alive.
  • Bubbles - Discs on a graph, by their size and positioning, communicate a lot. Have a look at this post on US market shares of beer – you see at a glance who the winners are and by how much (unless you’re an upscale beer snob, ignore his comments on Bud, Miller and Coors). To go hyperactive with bubbles – and leave numbers behind - check out Nathan’s moving graph of people’s hopes and dreams as expressed on social media site 43things.com.
  • Choosing a chart – Ever wonder which kind of chart to use? Nathan links to a decision-making flow chart in a PDF file from the Extreme Presentation blog.
  • How not to do it – FlowingData offers six amusing tips here on how to make an ordinary graphic really, really ugly.
  • Blogs on presenting data – A page full of links offers a jumping off point for exploring dozens of viewpoints and how-to sources on visualizing data.

FlowingData doesn’t focus on financial information, though it has some economic content. For example, the humble bar graph isn’t explored much. A staple of data presentation for investors, many bar charts could speak more persuasively if they had movement to show growth over time – or even just better labels and scaling.

My point is simply that IR people need to be thinking and learning about graphics. Visual tools are critical to communicating effectively with investors – and we should be sharpening our craft, even as we keep up with the numbers side of IR. At the intersection between numbers and art, we should be lifelong students.

A few other sources to stimulate your visual thinking: The Wall Street Journal Numbers Guy blog, anything by data graphic guru Edward Tufte, By the Numbers blog in The New York Times, and the Extreme Presentation website.

Do you have a favorite source of ideas for graphics in IR? Share a comment.

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Loose lips sink … IR

October 19, 2009 by Dick Johnson

loose-lips-sink-shipsThe latest Wall Street scandal, an insider trading case against billionaire Raj Rajaratnam and his hedge fund firm Galleon Group, holds implicit warnings for investor relations professionals: Beware the aggressive trader seeking an informational “edge” to trade on, and never ever get in bed with a tipster.

Today’s Wall Street Journal (“Colleagues Finger Billionaire”) reports that, according to an SEC complaint, an employee at an investor relations firm that counts Google among its clients allegedly fed inside information on Google’s earnings to a Galleon tipster, then tried to collect a six-figure quarterly fee to keep providing tips:

In the case of Google, the SEC civil complaint said that a person the agency identified as Tipper A received information in 2007 about an impending earnings shortfall from an unnamed employee of Market Street Partners, a San Francisco investor-relations firm. The SEC complaint said that Tipper A provided the information to Mr. Rajaratnam and that Galleon executed trades designed to profit on a decline in Google stock, netting $9 million.

The SEC complaint said the informant at Market Street demanded $100,000 to $150,000 a quarter to keep supplying Tipper A with information, but Tipper A refused and the informant stopped providing tips.

Google declined to comment. Market Street said it hadn’t been contacted by any authority, adding that it fully supports the prosecution of insider trading and will provide any necessary aid in the investigation.

Wow. If you crave more detail, read the SEC complaint.

To me, the bottom line is careers ruined … credibility lost … and crime doesn’t pay. The source of the tip, the traders, any middlemen in between – all are tarnished. And IR takes a hit, right along with an allegedly crooked gang of traders.

Confidentiality and trust are the foundation of investor relations. They are the basis of a relationship between a company and its in-house IRO or outside IR consultant. There is no more basic rule of ethics in IR: Do not discuss material nonpublic information with anyone who is not an authorized insider in the disclosure process.

We’ll have to watch for more information on this case. The SEC allegation that a Market Street Partners employee sought six-figure payments for inside information goes way beyond an inadvertent slip of the tongue, although neither Market Street nor its employee has been charged in the insider trading case.

(Update: Reuters reports on Oct. 22 that Google has suspended the services of Market Street. A lawyer for the IR firm says it is cooperating with authorities and considering whether to pursue legal action against a former employee.)

Deliberate tipping for profit is an obvious criminal act. Accidental tipping probably is a greater danger for most investor relations professionals. The threat of sloppy handling of information leading to insider trading should be discussed more often – as a repeated warning – within companies and in the IR community.

It’s critical to maintain the bright line that separates public information from nonpublic – to talk about what’s public and keep lips sealed when it is nonpublic.

Loose lips do sink – among other things – investor relations.

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Posted in Ethics in IR | 2 Comments »

This space not for sale

October 9, 2009 by Dick Johnson

NoSaleSignThe Federal Trade Commission this week jumped into a controversy that has been swirling in social media circles: “Pay for play” – the practice of companies or PR agencies paying bloggers, Twitterers and other online “influentials” to endorse or mention their products or services.

This FTC action focuses on people selling products – not pitching stocks. But the intervention in the online marketing world has important implications for online promoters of investments, as well. More on the investor relations side in a moment.

What the FTC did was announce new guidelines requiring disclosure if companies pay online chatterers, or give them free products, for endorsements. (FTC announcement here, old media take on it here.) So faking a word-of-mouth or “viral” phenomenon gets a bit harder. FTC explains:

The revised Guides also add new examples to illustrate the long standing principle that “material connections” (sometimes payments or free products) between advertisers and endorsers – connections that consumers would not expect – must be disclosed. These examples address what constitutes an endorsement when the message is conveyed by bloggers or other “word-of-mouth” marketers. The revised Guides specify that while decisions will be reached on a case-by-case basis, the post of a blogger who receives cash or in-kind payment to review a product is considered an endorsement. Thus, bloggers who make an endorsement must disclose the material connections they share with the seller of the product or service. … And a paid endorsement – like any other advertisement – is deceptive if it makes false or misleading claims.

For the record, this space is not for sale, regardless of FTC guidance. I have, in fact, received a couple of offers from IR service providers – but getting a paycheck isn’t the reason I’ve chosen to take part in the conversation through IR Café.

My ethic comes from years of working in the Old Journalism of daily newspapers. When I was a young reporter, one of the newsroom characters was a City Hall reporter known for, among other things, refusing to take a donut at the weekly City Council meeting because he never wanted to place his objectivity in doubt. A journalist who accepted freebies from someone he covered would be drawn and quartered, usually in a public flogging through a news story about his termination.

So I got the message: Journalism is about delivering information for the readers’ benefit; advertising is about being paid to deliver messages for advertisers’ benefit. Publishing ads is all well and good. But if you want credibility, the lines should not be blurred – as they increasingly are, both online and in traditional media.

I value credibility more than a buck, which is why I headline a post “This space not for sale.” If our firm tries to sell you something, you’ll know it.

Now, I have mixed feelings about the FTC sticking its nose into what has been a wide-open space on the Internet. Does freedom of speech extend to someone tweeting “Wow U have to try this new digicam from CoolVideo.com, best ever and an awesome Christmas gift, too!!!!!”  I don’t know, that’s marketing … or maybe constitutional law … a question above my pay grade, as the President says.

When it comes to investor relations, I have a clear opinion: Pay for play is not a good idea. Investors are smart enough to see through a paid profile in a publication or website aimed at investors, and it can hurt rather than help the company’s credibility. And people shouldn’t be touting stocks online (or touting the short side) for pay, period. Companies and IR or PR firms should steer completely clear of that practice – regardless of regulation. It’s a matter of integrity and credibility.

Securities laws outlaw market manipulation and misleading information, of course. I’m no expert on the Securities and Exchange Commission, but as interactive media play a growing role in capital markets, it wouldn’t be surprising to see the SEC take direct action to require disclosure of payments to bloggers or other online chatterers – just as analyst reports must disclose the i-banks’ interests in companies covered. It might even help clean up the markets.

What’s your opinion on the integrity – and freedom – of online discussions?

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Not feeling ‘social’

October 5, 2009 by Dick Johnson

Forty-nine percent of companies do not have a specific approach or policy on employees’ use of social media on behalf of the companies, according to a survey reported in the October 2009 PR Week (link here, but requires subscription).

Jim Tsokanos, president of North America for MS&L, a PR firm that sponsored the survey with PR Week, comments:

When we live in the world of the empowered consumer and everyone has a point of view, and they share it at the speed of light, for companies to not have policies in place to guide how social media can be utilized by their employees, I thought was very interesting.

You can tell he’s in PR: Dangerous might be a better word for half the companies lacking policies on social media use. The risk is especially acute for public companies, who could face serious disclosure issues or ethical breaches in a tweet.

As I’ve suggested before in IR Café, public companies need to develop policies on who can use social media to discuss the business and guidelines for how. (Links to examples of social media policies at this post.)

Investor relations professionals ought to offer input on social media, at least to address the defensive compliance issue – and, getting radical here, also to include the financial community proactively among audiences served via social media.

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Oh, good (for now anyway)

October 2, 2009 by Dick Johnson

One regulatory reform proposal has slowed down a bit, at least for now: The Securities and Exchange Commission doesn’t plan to vote until early 2010 on a “proxy access” rule, which would help shareholder activists nominate slates for corporate boards, The Wall Street Journal reports today.

Delay of an SEC vote from autumn to January or February means companies wouldn’t have to contend with direct proxy access in the spring 2010 proxy season, the WSJ notes. That would offer a breather for corporate staffs – and maybe some embattled corporate boards – amid a wave of potential new regulation.

Proposed in May, the SEC proxy access rule (if passed) would give shareholders a “right” to have their board nominees listed in a company’s proxy materials -empowering dissidents who might otherwise be shut out. To qualify for submitting board candidates, shareholders would need to hold a minimum of 1% of the shares for larger firms; 3% for mid-sized companies; and 5% for small firms.

SEC Chairman Mary Schapiro favors the proposal, citing the financial crisis as evidence that boards need more accountability.

Business groups like the National Investor Relations Institute oppose the idea. President & CEO Jeff Morgan said in NIRI’s comment letter to the SEC:

Possible side effects of a federal proxy access rule include increased costs to public companies to ensure valid nominations are included on the proxy, an increased influence of activists with narrow economic interests that run counter to that of long-term shareholders, a continued reduction of individual investors’ proxy voting influence and the possibility for decreased board effectiveness.

Morgan favors company-initiated changes in the proxy process, tailored to the varied interests and circumstances of individual companies. (See Morgan’s comments on a range of regulatory issues in his President’s Blog at the NIRI website, or a quick summary in this IR Café post. Broc Romanek gives an overview of comment letters on proxy access in a post at TheCorporateCounsel.net.)

“Proxy access” hasn’t gone away – just slipped a notch in the Washington timetable.

My own opinion: Handing more power to hedge funds, social activists or union pension funds isn’t really a good “fix” for corporate blunders or misdeeds. Activists follow their own political or economic agendas – not necessarily in the best interest of shareholders. Companies that destroy shareholder value, in my opinion, are punished in the market. And their CEOs and boards often share in the downfall.

What’s your opinion? And have you or your top management spoken out?

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Watching Washington

September 29, 2009 by Dick Johnson

All eyes are on Washington this fall, as the country watches hope and change take hold through new laws and regulations. When NIRI President and CEO Jeff Morgan briefed a group of investor relations people and corporate lawyers in Kansas City on changes coming our way from DC, “scary” was a word that kept recurring.

Jeff Morgan 9-29-09“There are a lot of scary things happening in Washington, and some potentially good things happening in Washington,” Morgan said Tuesday evening at the NIRI Kansas City chapter meeting.

Motivated by the financial crisis, Morgan noted, politicians have turned from talk to action on regulatory issues that have been around for years. Rightly or wrongly, he added, politicians see only two causes for the financial crisis: corporate greed and lack of adequate regulation. So they are bent on fixing those problems.

Morgan said significant changes in the way corporations are governed are in the works in Congress and at the Securities and Exchange Commission (SEC):

  • “Say on pay” proxy votes and input from a federal “pay czar,” initially targeting financial companies that got bailouts, could be expanded by Congress to all public companies.
  • If say on pay spreads, institutional investors – many of whom lack the staff to examine every executive pay proposal – would outsource the research and perhaps the voting to RiskMetrics Group. RiskMetrics sells governance advice to companies, and chastises those who don’t measure up to its standards.
  • An SEC proxy access proposal to expand shareholders’ ability to nominate board members seems likely to take effect, and Congress could weigh in to expand the mandates. That would empower activist investors such as union pension funds to target companies for changes in governance.
  • An SEC change in Rule 452 to eliminate broker discretionary voting, starting January 2010, seems likely to disrupt voting of retail stockholders’ share.
  • Various proposals are kicking around Congress on board compensation committees, separating the CEO and chairman roles, requiring certification and training for directors, eliminating staggered boards and other issues.

What can companies do? Get senior management to reach out to Congress with the public-company viewpoint on proposals for federal intervention. Take pre-emptive action by implementing compensation and proxy access programs designed to enhance, rather than put a strangle hold on, good governance for companies.

Two good sources on legislative and regulatory changes are Jeff Morgan’s blog on NIRI.org and Broc Romanek’s blog at TheCorporateCounsel.net.

We’d better be watching Washington. Says Morgan: “Corporations are the lifeblood of America, and we’re doing things that are dangerous to those corporations.”

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Posted in Governance, proxy & pay, Regulatory reform & SEC issues | 1 Comment »

Don’t be ACORNed

September 28, 2009 by Dick Johnson

Regardless of your politics, it’s clear that what happened to the activist group ACORN this month is an extraordinary case study in Web 2.0 and the rapid loss of reputation. It’s a new media nightmare.

Before answering “What’s this got to do with IR?” here’s a recap of the action:

acornACORN is the Association of Community Organizations for Reform Now. An advocate for the poor, labor and liberal causes, ACORN organizes voter registration drives, demonstrations and efforts to influence government or pressure businesses. While controversial and oft-accused of improprieties, ACORN has won victories against big companies and been an ally of some top Democratic leaders.

Along came two politically motivated social media types, James O’Keefe and Hannah Giles. Like other 20-somethings, O’Keefe has been producing videos for the Web – in his case, needling liberals. Giles, a 20-year-old college sophomore, got in touch with O’Keefe with an idea to go after ACORN with a made-up event.

The two concocted a scenario to test the community organizers’ integrity. O’Keefe would play the role of a pimp and Giles a prostitute. The pair gathered a few props, went on the road with a hidden camera, and set out to entrap ACORN.

Visiting ACORN offices in DC, New York, Baltimore, San Diego and San Bernadino, O’Keefe and Giles told ACORN counselors they needed advice on getting a house for the prostitution biz, hiding income from the IRS, avoiding police detection, and smuggling underage girls into the country to use as prostitutes.

The poseurs got their shocker. Some of the ACORN officials went along, seemingly ignoring the illegality and morally outrageous nature of acts they were discussing. The videos show ACORN people casually giving advice for how best to carry out and conceal the purported illegal enterprise. “Pimp” and “prostitute” seemed to be treated like any other client.

BigGovernment.com, a new conservative website, linked up with O’Keefe and Giles and used their sensationalized attack videos to create momentum for its September launch on the Internet. It’s been a success: The ACORN videos went viral, with links from a host of blogs and tweets; they were huge on YouTube; the slam on ACORN struck a chord with conservative talk hosts; and the controversy crossed over into mainstream media. Within days, Congress members were denouncing ACORN and voting to defund it. Everyone’s investigating.

ACORN has been tripping over itself with denials and counter-attacks. It denounced “indefensible” actions of its people and fired some. Accused the video makers of distortions and filed a lawsuit. Invoked the respected names of its silk-stocking Advisory Council. Posted its own video. Launched an “investigation” of itself. ACORN has tried all the usual reputation-defense tactics. But the damage is done.

This isn’t a small-time hit. BigGovernment is the brainchild of Andrew Breitbart, a conservative Internet entrepreneur who has worked with Drudge Report, a top right-leaning site, and a similar aggregator, Breitbart.com. The sophisticated distribution and marketing of the “news” is worthy of film propagandist Michael Moore or liberal political activists MoveOn.org. These people play hardball.

Well, enough politics. What does the ACORN story have to do with corporations and IR? Investor relations professionals need to envision, for a moment, the potential for a new media nightmare for their corporate reputations.

Build your own scenario. Imagine a couple of 20-somethings bent on doing damage to your company, products or industry. You can’t predict what store, office or plant they may visit. Starting with sophisticated new media skills, they add well-funded distribution – and show no civility or restraint in their attack.

Will the “gotcha” go viral? How much will it damage the company’s reputation?

The anti-business analogy to ACORN’s current organizational torment argues powerfully that companies need to prepare for potential crises created through interactive media channels. Skirmishes already have taken place – but may intensify.

Companies ought to minimize risk by being sure our people are all trained in ethical conduct. If we consistently do what’s right, it’s much less embarrassing. Culture can prevent problems – or not.

IR and other functions must develop robust social media skills, so we’re prepared before a crisis strikes. And we should invest in early warning systems – assuring timely internal communication, as well as monitoring the social and regular Web.

Our crisis communication plans – including IR components – must be up to the challenges of the 21st Century.

Don’t be ACORNed.

© Copyright 2009 Johnson Strategic Communications Inc.

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Posted in IR 2.0 - Web & social media, Reputational capital | 3 Comments »

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