Posts Tagged ‘Recession’

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Benchmarking the best: II on IR

April 29, 2009

When the going gets tough, the best companies get going – to communicate more than ever with shareholders and analysts – according to Institutional Investor‘s ranking of “America’s Best Investor Relations.”

The article in the magazine’s April 2009 issue is worth reading, but IR folks who want to benchmark against the “best” should go online and explore II‘s interactive rankings page. It’s a clunky interface, but you can find your industry among the 54 sectors covered.

The magazine polled more than 650 portfolio managers and buy side analysts, along with 400 sell side analysts, to compile its review of winning IR. Some examples of championship efforts cited by II:

  • With volatile currency exchange rates hitting many companies’ earnings, MasterCard and McDonald’s won kudos for providing extra data on the impacts, such as income and expense sensitivity to the dollar-euro rate.
  • In a scary time for airlines, Continental “soared above its competitors by being open and giving detailed information not provided by others in the sector” – e.g., monthly projections of revenue growth and jet fuel costs. The IRO also says investors appreciate predictability – like being able to count on seeing Continental’s traffic report on the first business day of each month.
  • When Coca-Cola Co. and its largest bottler had a run-in over pricing, KO launched a two-stage outreach – contacting top shareholders and influencers to answer rumors and concerns, then following up with a broad communication effort on how the two companies work together.
  • With the recession pinching casinos, slot machine maker WMS Industries emphasizes “being much more visible” by meeting personally with investors and analysts. WMS’ IRO says he’s on the road twice as much now as at the start of 2008.

Bottom line, professional investors are working harder than ever to eke out returns. To cultivate long-term relationships, IR people and the companies we serve must go the extra mile to help investors analyze and understand this challenging time.

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Posted in The value of IR | 2 Comments »

Monday, Monday …

March 30, 2009

I guess we learned a couple of things in Monday’s market:

  • Rallies don’t go on forever, especially amid negative business fundamentals (say, two of the Big Three teetering on the brink).
  • Attention CEOs: President Obama is an activist shareholder, and if you take the government’s money you should know who’s in charge.
  • Economic and industrial policy is unhinged from philosophical principles (this happened in the last administration), and global policy actions seem likely to continue in ad hoc reactive mode.

Those of us laboring in the investor relations trenches can continue to expect, shall we say, a fluid market environment. Stability and comfort aren’t in the macro picture  for the foreseeable future.

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Posted in Bear market IR, Regulatory reform & SEC issues | Leave a Comment »

Is AIG or Grassley more offensive?

March 17, 2009

One of the nastier comments to come out of the financial crisis is in the news today: Sen. Charles Grassley, ranking Republican member of the Senate Finance Committee, brings up suicide as an option for executives in failed financial firms.

From the AP story on Grassley (in an Iowa radio interview) joining the outcry over AIG executives receiving bonuses:

“I suggest, you know, obviously, maybe they ought to be removed,” Grassley said. “But I would suggest the first thing that would make me feel a little bit better toward them if they’d follow the Japanese example and come before the American people and take that deep bow and say, I’m sorry, and then either do one of two things: resign or go commit suicide.

“And in the case of the Japanese, they usually commit suicide before they make any apology.”

As I said – nasty. Suicide is not something to treat lightly. I learned long ago, in some past economic down-cycle, that executives of failing businesses are truly in danger. Their companies’ collapse and personal financial losses can seem like the whole world falling apart. This remark lacks compassion and real-world perspective. It’s offensive toward American and Japanese executives.

Of course, we don’t expect much of our politicians – and Grassley is as entrenched as a politician can get, after 50 years in elective office. When the economy is in the dumps, those who fancy themselves populists always villainize the business people whose misjudgments or greed contributed to the economic crisis. But can’t politicians be civil, or at least humane?

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Posted in Quotable quotes | 1 Comment »

Steady as she goes

March 16, 2009

In turbulent times it’s not changing strategies – but staying the course – that builds a strong corporate reputation, according to this year’s “World’s Most Admired Companies,” in the March 16 Fortune.

What quality wins respect for firms like Apple, Berkshire Hathaway, Toyota, Google, Johnson & Johnson, Procter & Gamble, FedEx, Southwest Airlines, GE and Microsoft – this year’s Top 10?

The consulting firm Hay Group, which helps Fortune survey 4,000-plus analysts, executives and directors to pick the most admired large companies in 64 industries, points to consistency in strategy:

Most important is a strong, stable strategy, which confers important benefits in unstable times. Companies that change strategies must usually change organizational structures as well, and making that change in a recession is a heavy burden just when corporations can bear it least. It forces employees to focus inward rather than outward and becomes a giant sink of time and energy.

Of course, fixing a broken business model isn’t optional if your old one is doomed. But we must recognize that changing direction is disruptive – and reputation is one of the casualties - Fortune says.

Hay Group found that, in general, less admired companies change structures far more often than the Most Admired, the main reason being a strategy switch. An extreme example is the Detroit automakers, which are turning themselves inside out as they seek strategies for survival at a moment when they should be focused on serving buyers.

The moral of the story: While “change” is popular, even more important is the ability to design and execute a strategy that endures.

As investor relations practitioners, we should emphasize the stability and durability of our companies’ strategies – and explain how those strategies will get us through the tough times.

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Posted in Messages & writing, Reputational capital | Leave a Comment »

Tough times? IR can shine

March 10, 2009

cole-3-10-09-kcThe Kansas City chapter of NIRI heard today from Derek Cole, an experienced investor relations pro and NIRI national board member who is Vice President-IR & Corporate Communications for ARCA biopharma Inc. in Denver. A sampling of Cole’s advice on “Winning IR in a Tough Economy”:

  • “Get out there” – despite the tough economy and market. The recession causes some CEOs to withdraw because they don’t feel comfortable with a negative macro picture and the difficulty of predicting where it’s headed, Cole says. Companies need to explain what they don’t know, as well as what they do, he says. And investors won’t expect a CEO or IRO to have crystal-ball answers that no one has. They’re looking for sound management and strategy amid this environment.

A bunker mentality creates a dual “opportunity”  for the IRO: First, you can be an advocate with the CEO and CFO to get out and meet with investors – build credibility and distinguish your company. And, second, as an IR person you can get out more yourself – if the CEO or CFO will send you, it’s a great time to develop your relationships with investors and analysts without taking their time. Stepping up at a difficult moment enhances your stature.

  • Be a strong advocate for good disclosure, including taking your hits when things go wrong. Cole told of a heated internal debate, in a former job, when a key clinical trial failed for a biotech company: Do we announce the trial failed, or come up with positives to gloss it over?

Telling it straight, Cole said, is how companies develop long-term credibility with investors and other constituencies. “If you’re correct in what you’re doing, you really should be willing to push your management team very hard to do the correct thing,” he said.

  • Be sure you’re targeting IR efforts to the appropriate investors. In the life cycle of companies, and through economic cycles, your mix of investors will change. You may know and love the manager of a giant mutual fund, but if you’re a microcap you won’t be appropriate for that manager’s portfolio – so meetings and communication could be wasted.

Cole says a database of institutions yielded 2,500 investors who have owned names in his company’s industry in the past 12 months. He and the CFO know the top 75 or so very well. But those aren’t necessarily the ones they should target right now – smaller funds by make a better fit – he says. The IRO brings expertise to decisions on where to focus efforts for maximum benefit.

  • From a career standpoint, a tough market can be a time to shine. Most IROs are probably getting more face time with CEOs, CFOs and boards right now – in a crummy market – than during easier times, Cole notes. It’s a time to be the center of information for those constituencies.

Create an “Ask and Read Hour,” Cole suggests. Set aside time to increase your expertise in critical areas. He suggests reading more about your industry, your market, how-to ideas for IR, your boss’s concerns (read magazines that the CFO or CEO draw upon). Also, ask questions that help you learn: What do your analysts or investors want that they don’t currently get? Where do industry experts see down the road? What is the CEO’s strategy?

  • Investor relations is about explaining your company – and this doesn’t change in a tough economy or bear market. Cole says the macro environment may change your content, but not the mission of IR. You need to keep explaining your business, what your company does, how you see the economic situation and its impact on your business.
  • Really, says Cole, it’s not about “Winning IR in a Tough Economy.” It’s just about “Winning IR.” And he’s right.

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Posted in Bear market IR, Career development | 1 Comment »

Quote, unquote – Wishing for ‘flat’

February 3, 2009

“Flat is the new up.”

- W. Russell Welsh, president,
Polsinelli Shalton Flanigan Suelthaus law firm
quoted in The Kansas City Star, Feb. 3, 2009, p. D15

Although Kansas City lawyer Russ Welsh is discussing the state of the legal biz amid the recession, he captures the mood that many industries – and the financial markets – are feeling in this economic winter.

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Posted in Financial crisis & recession, Quotable quotes | Leave a Comment »

Communicate your relative strengths

January 29, 2009

A couple of Boston Consulting Group gurus urge companies to “Seize the Advantage in a Downturn” in the February 2009 issue of Harvard Business Review – and investor relations is part of their story.

After listing actions management can take to maximize cash and working capital, reduce costs, and drive revenue, authors David Rhodes and Daniel Stelter cite valuation as a competitive tool:

Your company’s share price, like that of most firms, will take a beating during a downturn. [Been there, done that - my comment.] While you may not be able to prevent it from dropping in absolute terms, you want it to remain strong compared with others in your industry.

Enhancing relative valuation, a familiar benchmark for IR people, calls for communicating your strengths vs. the peer group. Of course, messages to investors must follow concrete actions by management:

In a downturn, our data shows that markets typically reward a strong balance sheet with low debt levels and secured access to capital. Instead of being punished by activist investors and becoming a takeover target for hedge funds, a company sitting on a pile of cash is viewed positively by investors as a stable investment with lower perceived risk.

Stability that may seem sleepy and boring in good times is suddenly popular – but you need to talk about it, the BCG guys say:

For that to happen, you need to create a compelling investor communications strategy that highlights such drivers of relative valuation. This will also be important as you try to capitalize on the competitive opportunities that a recession offers, such as seeking attractive mergers and acquisitions.

The consultants also say raising dividends has proven more effective than share buybacks in driving valuation. But they note the potential conflict between richer dividends and maintaining a healthy cash hoard.

(Call or email me if Johnson Strategic can help you put together a compelling IR strategy or craft messages for these turbulent times.)

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Posted in Bear market IR, Messages & writing | Leave a Comment »

Lacking visibility in the corner office

January 21, 2009

What worries Chief Financial Officers most about their companies? Inability to forecast results is the No. 1 concern internally, according to the CFO Magazine/Duke University Global Business Outlook survey. Results are reported in the January 2009 issue of CFO (online here).

That lack of visibility, of course, makes life hard for investor relations: IR can offer less forward-looking information in the current malaise.

Externally, weak consumer demand and the credit crunch are causing CFOs to lose the most sleep. A majority of 1,275 finance officers polled aren’t even expecting recovery to start at least until the fourth quarter. Some 39% can’t see a recovery beginning until 2010 or later.

Albeit without much faith in their own forecasts, CFOs are predicting an average 8% drop in earnings in 2009.

In response, the finance execs expect to reduce work forces 5% on average this year. They plan to cut capital expenditures more than 10%, marketing and advertising 7%, and IT spending 4%. Specific plans along those lines might provide forward-looking tidbits that management is willing to share – even as the overall earnings outlook seems more elusive.

Characterizing the uncertainties – the lack of visibility – may be more valuable to investors than giving guidance that turns out to be wrong.

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Posted in Financial crisis & recession | Leave a Comment »

The Obama era begins

January 20, 2009

In President Barack Obama we have a new chief executive, a fresh cheerleader, a change agent, a commander-in-chief with different strategies and (as Bloomberg points out) a “banker-in-chief” for  an economy that has become much more interventionist.

Inauguration Day 2009 was, as previous ones have been, all pageantry and historical symbolism. But once again America achieved a peaceful transition of power to a new leader, with a different take on what the nation needs. I voted for the other guy – but wish our President well.

Observers note that Obama’s inaugural address seemed to lack that single memorable line (the only thing we have to fear is fear itself … ask not what your country can do for you; ask what you can do for your country). You can read the text here, or hear talking heads discuss the speech here. Writing a speech for a million and a half people – and billions worldwide – must be horribly difficult. Inspiration is hard to manufacture. Investor presentations are way easy by comparison.

Obama seems to have eschewed poetry and passion to speak fairly bluntly about the gravity of our economic and geopolitical woes. I do think his ending is evocative – both sobering and encouraging:

So let us mark this day with remembrance, of who we are and how far we have traveled. In the year of America’s birth, in the coldest of months, a small band of patriots huddled by dying campfires on the shores of an icy river. The capital was abandoned. The enemy was advancing. The snow was stained with blood. At a moment when the outcome of our revolution was most in doubt, the father of our nation ordered these words be read to the people:

“Let it be told to the future world…that in the depth of winter, when nothing but hope and virtue could survive…that the city and the country, alarmed at one common danger, came forth to meet [it].”

America, in the face of our common dangers, in this winter of our hardship, let us remember these timeless words. With hope and virtue, let us brave once more the icy currents, and endure what storms may come. Let it be said by our children’s children that when we were tested we refused to let this journey end, that we did not turn back nor did we falter; and with eyes fixed on the horizon and God’s grace upon us, we carried forth that great gift of freedom and delivered it safely to future generations.

After the parades and the balls, the President’s work begins. Everyone hopes he succeeds, because we all need the benefits of that success.

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Posted in My two cents' worth | Leave a Comment »

Communicate – don’t hunker

January 16, 2009

Sage words from Fortune magazine in “How to Manage Your Business in a Recession” (January 19 issue):

The instinct of most executives is to hunker down in uncertain times, keeping quiet until they believe they have some answers. That’s the opposite of what’s needed. In a recession all of a company’s constituencies are nervous: Employees are worried that they’ll be fired, suppliers that they won’t be paid, customers that quality will decline or prices rise, investors that the stock will tank, communities that operations will close down. Your silence just makes them worry more.

Good managers respond by communicating even more than usual. They find that they needn’t have all the answers, but they do need to say what they’re thinking and be honest about conditions.

It may be preaching to the choir to say “get out and communicate” to investor relations folks, but it’s good advice for reticent CEOs and CFOs. To see the other nine tips for tough times, view the story.

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Posted in Financial crisis & recession, The value of IR | 1 Comment »

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