Archive for July, 2010

Hotties of investor relations

July 23, 2010

OK, this is not my usual earnest, well-reasoned post. Just so you’re forewarned: Here’s a bit of summer fluff. And this may be in bad taste, or even sexist.

Sex appeal isn’t an aspect of investor relations I ever considered, well, an aspect of investor relations. I’ve always thought of IR professionals as a cross between accountants and sales people – perhaps smooth talking but not all that sexy. I’ve met a few attractive IROs, but most of us are “interesting,” with nice personalities.

So imagine my shock – shock! – when I was scanning Dealbreaker, the gossipy tabloid-style Wall Street blog, and saw a headline that begins “Here Are Some Current IR Girls …” (I told you this could get sexist.)

What could I do? I had to click through, and it turns out New York Magazine has been all over this story – identifying the “hotties” of investor relations with a focus on the world of hedge funds. The young women, mostly shown in party pics, are in fact doing IR or business development or sales for asset management firms.

Now, for the other side of the story, it turns out New York also published a feature on male hotties of Wall Street – though the men pictured in expensive Tribeca apartments seem to include many whose titles indicate they actually manage assets, rather than just trying to catch the eye of people with bazillions to invest.

Well, there it is: Sex appeal and investor relations. Who would have guessed it?

(Please don’t cancel your subscription. This is as racy as IR Café will get.)

Hope you’re taking time out to have a little fun this summer!

© 2010 Johnson Strategic Communications Inc.

IR evolves along with the CEO

July 22, 2010

As the role of the CEO changes in 21st Century corporations, the mission of investor relations and corporate communications also evolves. These staff functions often support the chief executive in achieving success – or fall short along with the boss. We ought to take note of subtle and not-so-subtle shifts in the corner office.

Cliff Kalb, a longtime marketer and strategist for drug companies, cites a spate of recent changes at the top level of Big Pharma in a column called “Splitting Image” in the July 2010 Pharmaceutical Executive. His thoughts apply across industries.

First on Kalb’s list is the splitting of the titles of Chairman of the Board, President and CEO. Five of the world’s largest pharma companies have recently divided the jobs and given different people the responsibilities of chairman and CEO, he notes.

Some institutional shareholders have long viewed separating the chairman and CEO jobs as best practice in governance (here’s a RiskMetrics page showing various groups’ policies on chairman and CEO roles).

As leader of an outside board, the chairman sees it as his or her job to oversee broad issues of ethics, policy and operating principles – and safeguard the shareholders’ interests – Kalb says. “And in the c-suite, the chairman of the board is boss,” he says. The idea of checks and balances to the CEO’s power  is, in fact, the reason shareholder activists often push for splitting the titles.

Meanwhile, the chief executive is becoming ever more visible. Kalb observes:

The CEO function is also morphing. Traditional internal roles include setting the visions and mission, elucidating a clear strategy and assuring proper management, allocating resources and developing synergies and alignment across a broad portfolio of businesses.

Now, however, the CEO’s external roles are becoming more prominent. Quarterbacking a team of c-suite players in communications with the press, the investment community, government and other key stakeholders is becoming a bigger line on this job description. Unfortunately, the duty of crisis management has been dropped on this doorstep as well.

So there it is. The CEO must interface with the outside world – press, investors, government and other stakeholders – as the face of the company in good times or bad. We’ve seen a few CEOs in crisis lately on the evening news.

IR and Corp Comm staff (and consultants) should be right beside the CEO, serving as “eyes and ears” to alert the boss to what stakeholders are thinking and guiding him or her in “telling the story” based on experience in communication disciplines.

Summer may be a good time for each of us to pause and reconsider our mission – including how our jobs tie in with the changing demands on the boss.

© 2010 Johnson Strategic Communications Inc.

Mr. Market, meet Mr. Regulator

July 21, 2010

Today President Obama signed into law the far-reaching expansion of federal regulation of US banking and capital markets. The overhaul has been brewing in Washington since the financial crisis in 2008 – and the 848-page heft of the Dodd-Frank Wall Street Reform and Consumer Protection Act (PDF here) may have something to do with the two years spent crafting it. The law orders new rules governing banks and investments, creates new agencies, and grants regulatory powers here, there and everywhere.

Supporters say it will protect investors and consumers, prevent abusive and risky behaviors by the bad boys on Wall Street, and avert future financial meltdowns.

President Obama cited eternal benefits for the Act he signed: “The American people will never again be asked to foot the bill for Wall Street’s mistakes [emphasis added].” Never again, of course, is Washington-speak that promises the latest patch in the roof will keep out the rain at least until after the next election. OK, that’s cynical. But financial crises have recurred every few years – over centuries and centuries – despite many previous regulatory fixes. Never again? Well …

For investor relations professionals trying to figure out what this wave of regulation means to us and the financial markets where we work, a few resources:

The New York Times story “Financial Overhaul Signals Shift on Deregulation” (July 15) offers an understandable overview and historical perspective on passage of the overhaul. The Times calls the new law “a catalog of repairs and additions to the rusted infrastructure of a regulatory system that has failed to keep up with the expanding scope and complexity of modern finance.”

A Wall Street Journal piece “Congress Overhauls Your Portfolio” (July 17) takes a “micro” view, looking into how regulatory expansion may affect individual or institutional investors – and companies.

“Several provisions promise to give investors a louder voice in policy-making circles and corporate boardrooms,” the WSJ says. Among the coming attractions: a new Office of the Investor Advocate at SEC to assist retail investors; an Investor Advisory Committee, also at SEC, watching out for investors’ interests; a mandate for the SEC to allow major shareholders access to corporate proxies to nominate directors; and nonbinding “say on pay” votes for shareholders.

Lawyers are weighing in with interpretations, too. On the Harvard Law blog on corporate governance and financial regulation, a partner in the firm of Davis Polk Wardwell LLP says this isn’t just about banks or Wall Street giants:

This legislation will affect every financial institution that operates in this country, many that operate from outside this country and will also have a significant effect on commercial companies. As a result, both financial institutions and commercial companies must now begin to deal with the historic shift in U.S. banking, securities, derivatives, executive compensation, consumer protection and corporate governance that will grow out of the general framework established by the bill. …

By our count, the bill requires 243 rulemakings and 67 studies. … U.S. financial regulators will enter an intense period of rulemaking over the next 6 to 18 months, and market participants will need to make strategic decisions in an environment of regulatory uncertainty.

Davis Polk has made its memorandum available online as a PDF. This 123-page “brief,” as the lawyers like to say, offers a rundown of all of the Dodd-Frank Act’s provisions and their implications for market participants. By scanning the Table of Contents, which hyperlinks into the narrative, you can see where you fit in.

What you can’t see is where all the rulemaking and wrangling will lead. In a few years, all of us probably will be running into financing deals that can’t be done, or reports that must be filed, or language that must be used – thanks to the 2010 Act.

Who knows what unintended consequences – such as increased costs of capital or even the genesis of our next “bubble and bust” cycle – may lurk amid the unknowns of the new law? I’m sure there is good in the Act, but also plenty of uncertainty.

Feel free to share your comments – pro, con or otherwise – by clicking below. And good luck with financial reform as it applies to your business.

© 2010 Johnson Strategic Communications Inc.

Sell side: regionals on the rise

July 9, 2010

Institutional investors are relying a bit more for equity research on mid-sized firms, regional brokers and industry-sector specialists as the bulge-bracket investment banks continue to reel from the effects of the financial crisis, Greenwich Associates reports in its 2010 U.S. Equity Analysts Study. Investor relations people reaching out to analysts might consider the changing sell side mix in targeting sell side firms.

In its survey of 1,007 buy side professionals, Greenwich tabulated “research votes” based on the sources of equity research used, weighted by commission dollars paid out by the institutional investors. So this is more than a popularity contest – it’s a look at who the buy side is paying for equity research.

To be sure, large investment banks still speak with the loudest voice, winning 64.1% of the buy side “research votes” in early 2010. But that’s down from 73.1% in 2008. Regional and more specialized i-banks gained share, from 23.9% two years ago to 32.4%. Independent research firms also gained, from 2.7% to 3.4%, but they remain a drop in the overall research bucket.

Integrity Research Associates notes that the financial crisis has contributed to an exodus of analysts from Wall Street, as some research stars have left troubled big brokerage houses to join regional or boutique firms or set up their own shops.

Greenwich says the bulge-bracket firms saw a pronounced drop in their share of research dollars in 2008, when giants like Lehman Brothers and Bear Stearns disappeared. But the shift continues into 2010.

What shape Wall Street research will take in the future is an open question, but the big i-banks may regain share of voice (and commissions) as the financial crisis continues to ease. “I think the worst is over from the bulge-bracket perspective,” Greenwich MD Jay Bennett tells Pensions & Investments.

IROs tend to seek out analyst coverage where they can get it. Large cap companies or hot stocks almost fight an excess of sell side interest, while small cap IROs work hard to cultivate regional brokers, industry boutiques and independent researchers.

But watching the changing landscape of the sell side – and particularly the shifts in institutional investors’ use of that research – may help IROs allocate their time.

© 2010 Johnson Strategic Communications Inc.

Open mouth, insert … No, wait!

July 8, 2010

“Keeping Your Foot Away From Your Mouth”

This headline in yesterday’s Wall Street Journal piece (p.D1) highlights a common human frailty. Citing gaffes from business leaders, politicians and entertainers, the WSJ says words do matter – and verbal errors can cause lasting damage.

In investor relations, of course, foot-in-mouth syndrome is one of our worst fears. We go to great lengths to avoid selective disclosure, much less erroneous disclosure, of financial information or strategic plans not yet ready for broadcast.

This is why we brainstorm key messages on quarterly earnings or strategic transactions in advance (and put them in writing to use as a reference) … why we write and review drafts of news releases and comments for investor meetings … why we create Q&As for conference calls and corporate events … why we try to make CEOs, CFOs and other spokesmen rehearse speeches and Q&A times.

The gatekeeper role is mission-critical in IR. We exist partly to create a process for orderly disclosure – helping our companies think before they speak.

Of course, some CEOs just are who they are. Most veteran IR people can tell horror stories – on more than one occasion, I’ve rolled my eyes at something coming out of the boss’s mouth. “Did he really say that?” Once the blurting is done, it’s too late for anything but damage control – which often doesn’t work too well.

Maybe one of the key performance indicators in an IR person’s annual goals should read: “Get through the year without anyone in top management sticking their foot in their mouth (at least around our investors).”

Any success stories or tips?

© 2010 Johnson Strategic Communications Inc.

The American way

July 2, 2010

Going into Fourth of July weekend, a friend who has helped raise capital for privately owned businesses – and a couple of public companies – offered his theory about why capital isn’t flowing into enterprises that could reignite our economy.

There’s “plenty of money” sitting in private equity funds and other investors’ stashes, this serial CXO and strategic thinker suggests. But people with the wherewithal to fund growth companies, mostly, aren’t taking the plunge right now.

The reason is the way investors feel about Washington, he opines. Not the place, but the US government’s massive extension of its legislative and regulatory reach. Government is seeking to govern so much more: new rules to prevent the next bubble or flash crash or oil spill, new agencies, health care mandates, too-big-to-fail bailouts, tougher penalties, stronger stimulus … public-sector stimulus.

And higher taxes to pay for it all. Bush-era tax rates will yield to higher rates. Revenue enhancement is in vogue. We’re even looking at the value-added tax.

But the worst part? “It’s the uncertainty” – not knowing what the rules of the game will be in one, two or three years. Washington is pressing its ongoing expansion of control in all areas of business – at a time when the economy is fragile.

So investing in a long-term way today means taking on risks of yet-unwritten mandates and so-far-incalculable costs from tomorrow’s “hope and change.”

Before long, this discussion begins to sound uniquely American: complaints from independent-minded business people against an overly ambitious government.

Which brings me around to one of my annual rituals: re-reading the Declaration of Independence around the Fourth of July. The words soar to rhetorical heights:

We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable rights, that among these are life, liberty and the pursuit of happiness. That to secure these rights, governments are instituted among men, deriving their just powers from the consent of the governed.

It’s a reminder of why we’re here – in America. And, apropos of my lunchtime conversation about the uncertainties of government on steroids, this time my eye catches on another line, one of the founders’ grievances against King George III:

He has erected a multitude of new offices, and sent hither swarms of officers to harass our people, and eat out their substance.

No doubt some CEOs, CFOs and even investors feel a bit like that. We’re wondering how much this reform or that Act will eat out “our substance,” how ramped-up regulation will hinder access to credit and raise costs of capital, or what new taxes will come unbidden out of the Beltway.

Not suggesting a revolution – only that we need to give thought to capital formation, to investing and a climate that enhances confidence in the American system. We need investors to resume funding the small and mid-sized firms that, after all, must hire those unemployed workers and create real, sustainable growth.

The American way isn’t negotiated by politicians or codified in 2,000-page bills. It’s not put out for public comment in the Federal Register. Instead, it is thrashed out in the competitive, pressurized, sometimes Wild West openness of the market. The market-driven approach is what, once, put US business on top of the world.

Let’s keep in mind that the American way – still – is about freedom.

Have a great Fourth of July!

© 2010 Johnson Strategic Communications Inc.

Let’s think about year-end

July 1, 2010

Arrival of the second half, naturally I think, sets investors and investor relations people to thinking about year-end. We’re halfway through 2010, so we begin to ask, “What will the outcome of this year be, in earnings and other accomplishments? … or in disappointments?”

As an IR person in the US, I’ve always seen Fourth of July weekend as a kind of pivot for the year. Whether it’s the start of third quarter or the holiday picnics and fireworks that punctuate this time for you, here are some questions to contemplate:

  • What kind of year will 2010 be in your memory, and that of your shareholders, 2 or 3 years from now? Do your communications now reflect that tone?
  • More immediately, when you report second-quarter earnings in the next few weeks, how will you answer questions about full-year 2010 prospects?
  • What do the first-half trends tell you about likely sales, costs and earnings in the next 6 months?
  • Does your outlook include a second-half turnaround, and what evidence can you offer of its probability?
  • What accomplishments has management promised for 2010 that need to get accomplished in the second half? Or do you need to soften those projections?
  • Do the CEO and CFO plan any mid-course corrections? If so, when is the appropriate time to begin to disclose those to investors?
  • What tone and messages will your audience get in the 2010 annual report? Time to get started is coming – whether your “annual” is a robust piece full of image, strategy and performance, a plain 10-K, or something in between.

Sure, we have a few weeks to relax – except for reporting Q2 results and all the interaction around earnings time – before the real rush to year-end begins. But the onset of second half is a good trigger for starting the thought process.

© 2010 Johnson Strategic Communications Inc.


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