The week leading up to our long weekend in the U.S. gave investor relations people plenty of reasons to pause and consider what our profession is about:
Facebook faced issues with its IPO – including a brouhaha over the analysts for Morgan Stanley and three other underwriters lowering their estimates in the middle of FB’s road show. Some commentators call for SEC regulations to require investment banks running IPOs to disclose their analysts’ opinions broadly, not just to their favorite institutional investors. Something about a level playing field.
Reuters says Facebook told the analysts they’d better bring down their revenue and earnings forecasts, a wink-and-nod sort of investor relations not regarded as acceptable in recent years. Something about Regulation FD.
People care because the IPO lost its sizzle on the very first day, then dropped further. FB shares closed this week 16% below the IPO price. The Financial Times has a good narrative. Poor Wall Street. Poor Mark Zuckerberg. Poor speculators.
The hounds of the plaintiffs’ bar are in full chase, of course, barking loudly and threatening in all directions. The SEC and Congress are investigating. As a high-impact disclosure issue, this will be one to watch.
JPMorgan Chase continued to convulse over its trading loss of $2 billion, or is it $3 billion, or … whatever the amount, reputational damage exceeds the financial loss.
From an IR perspective, at least two aspects of JPM’s debacle are interesting:
- The disclosure (or lack of disclosure) of the risks JPMorgan and its “London whale” were taking – and the losses they incurred. IR people should take a close look and consider how we would treat similar setbacks in our companies.
- Corporate governance concerns came to a boil over doubts about the JPM board’s risk-policy committee and whether it had the right stuff to actually oversee risk for what is, basically, a huge global risk-taking machine.
Washington stalwarts, once again, are calling for new laws and regulations to codify the good sense that the old laws and regulations haven’t quite brought about. And we’ll be treated to the spectacle soon of Jamie Dimon going before Congressional panels to be used as a prop for politicians’ campaign videos. Oh, well.
General Motors filed an amendment to its proxy statement today noting that it “recently learned” of a related party transaction last year that it hadn’t disclosed.
GM says CFO Dan Ammann’s wife is a partner and COO of an advertising agency that got about $600,000 from a GM subsidiary in 2011 – and he didn’t know about it, so it wasn’t in the proxy. The deal was reported in AdWeek last fall, according to the Detroit Free Press, but apparently the $600K eluded the proxy writers. Oops.
Executive compensation remains a lightning-rod issue, especially in an election year. Plenty of misinformation is floating around, including this misleading headline from Associated Press: “Typical CEO made $9.6 million last year, AP study finds.”
You have to read way down into the story to find that AP’s sample included only S&P 500 companies, the largest cap companies in the U.S. market. Actually, AP had data from only 322 that had filed proxy statements through April 30. The other 7,000-plus publicly listed companies in the United States? Not part of the study.
None of my clients’ CEOs has $9.6 million in compensation. How about your boss or clients? But the AP headline paints with a very broad brush: “Typical CEOs …”
The AP headline might have said: “Large-cap CEOs made $9.6 million …” As it is, politicians trading on Joe Sixpack’s envy will just run with the anti-CEO broadside.
And companies will deal with the widespread assumption that CEOs and other execs are paid too much. Investor relations pros need to focus on providing the real numbers and explaining – in plain English, not legalese – why pay is what it is.
What do you think?