Posts Tagged ‘Media relations’

‘Key to success … is preparation’

June 2, 2014

AlaixJuan Ramón Alaix, CEO of the animal health giant Zoetis Inc. (formerly Pfizer Animal Health, spun off as a NYSE-listed company last year), offers wise counsel on communicating effectively with investors.

In a “How I Did It” CEO interview in the June 2014 issue of Harvard Business Review, Mr. Alaix comments:

A lot of people, when they reach a certain age, are reluctant to accept training. That’s not true for me—I’m very open to it. I’d had communication training over my career, but the preparation for our IPO was much more intensive. Before I did my first TV interview, for instance, I probably spent more than eight hours doing mock interviews. I believe that the key to success in communication is preparation. By the time I gave the first road-show pitch to investors, I’d rehearsed it at least 40 times.

Wonderful words from a CEO! As IR professionals, most of us have had the opposite experience: an exec who is too busy to practice and thinks it’s OK to wing it because, after all, who knows the story better?

Ask the people who listen to investor presentations: The CEO, CFO or IRO who is practiced and prepared will always have a greater impact than the one who fumbles with his thoughts – or just reads the script.

It’s good to hear Mr. Alaix endorse the most basic rule of speech making: rehearse, rehearse, rehearse! I’m sure Zoetis is well-served in its communications – and other areas – by this kind of diligence.

© 2014 Johnson Strategic Communications Inc.


PR does matter

July 8, 2009

Media-and-manI know, I know. “It’s all about the numbers.” Investor relations people (and some CEOs and CFOs), steeped in accounting fundamentals and valuation formulas, are skeptical of public relations. We scoff at press interviews, photo ops … the “spin” stuff PR people do. Of course, no respectable fund manager or analyst would admit to being swayed by a press release, or getting an idea from a newspaper. “It’s all about the numbers,” they say.

Trouble is, influencing the market is not all about the numbers. It’s all about the numbers – plus getting the right people to pay attention.

Two recent studies from respected business schools analyze extensive data on the relationship between press coverage and the market for individual stocks – and conclude that broader dissemination of news has benefits in the capital markets.

The more comprehensive study, a doctoral paper by Eugene Soltes at University of Chicago’s Booth School of Business, looks at all US nonfinancial companies traded on NYSE, NASDAQ or AMEX, excluding the 100 largest by market cap. Soltes and his computer programs count and analyze all articles on these firms, 9.3 million bits of news in total, from the Factiva database for 2001 through January 2007. Then he crosses that information with annual trading data on the stocks, looking for long-term effects rather than a daily “pop” in market activity. Soltes concludes:

The press provides an important and highly visible system of communication between firms and investors. … Specifically, greater dissemination of firm news is found to lower bid-ask spreads, increase trading volume, and lower idiosyncratic volatility. …

By increasing the visibility of firms, greater dissemination may also reduce a firm’s cost of capital.

In this paper, “dissemination” has to do with putting news out and getting it covered in the business press. Soltes says the average firm sent out 21 press releases a year, one every 12 trading days, covering deals, earnings and other news. (His tables give a median of 14 releases a year, just over one a month, a figure I like better as the midpoint in a range of small to large companies). For each release, business publications wrote an average of 1.5 articles – obviously, many releases get no coverage, while some get a lot. Soltes did not investigate why some releases get more coverage – being newsworthy probably is the key, although making connections with reporters also helps.

Soltes’ point is that more is better – more frequent issuance of news and broader coverage of it. Consider the impact of news dissemination on bid-ask spreads:

Based on an average sized trade, a 20% increase in press coverage reduces the average cost of a trade by $1.07. With the average firm having nearly 25,000 trades a month, this translates into a significant reduction in trading costs.

Soltes also finds more dissemination of news increases monthly trading volumes and decreases the volatility of individual stocks. Most companies – and institutional investors – value reduced trading costs, increased liquidity and lower volatility.

The other recent study, by Brian Bushee and three accounting colleagues at the University of Pennsylvania’s Wharton School, focuses on quarterly earnings news. This one looks at the three-day window around earnings (earnings release date, plus or minus one trading day) and yields more detail on immediate trading effects.

The Wharton study looks at quarterly announcements by 1,182 medium-sized NASDAQ firms from 1993 to 2004, excluding large cap companies based on an assumption that differences in coverage are more marked among lesser-known names. The authors analyze 608,296 articles on those quarterly results:

Our results indicate that, ceteris paribus, press coverage has a significant effect on firms’ information environments around earnings announcements. We find that greater press coverage during the earnings announcement window is associated with reductions in bid-ask spreads and improvements in depth.

The impact of media attention extends to retail and institutional investors:

We find that greater press coverage is associated with a larger increase in the number of both small and large trades. … For small trades, these results are consistent with the press providing information to a broader set of investors and triggering more trades. For large trades, these results are consistent with press coverage reducing spreads and increasing depth enough to reduce adverse selection costs and encourage more block traders to execute trades.

Both papers take a mechanistic view of corporate processes for disseminating news and how the media respond. These are data mining studies by accounting scholars – focusing on numbers of releases and press stories, word counts and similar measures of dissemination.

No attention is given to the qualitative nature of the news – positive, negative or nuanced. The authors also do not explore why reporters decide to write more, less or not at all. (The Soltes study does analyze “busy news days,” when a flood of business or nonbusiness news overwhelms XYX Company’s little press release, and confirms that issuing news on busy days has little benefit – although companies obviously can’t control when Michael Jackson dies or GM goes bankrupt.)

Neither of these studies venture outside of traditional “news” databases to analyze the impact of using social media, blogs and so on, to disseminate news. My guess is future studies will prove that the impact on markets comes from getting the word out, by any means, as long as you are reaching the investing audience.

Bottom line: Issuing news has a measurable benefit for public companies in the capital markets – increasing volume, reducing trading costs and reducing volatility. More frequent news is better. Getting more reporters or news outlets to write about the company amplifies the benefit. That’s what the quantitative evidence says.

So when PR people speak of “creating visibility,” it does matter in the market.

From old media to social media

July 7, 2009

Entrepreneurs trying to raise capital – and get businesses up and running – are turning more and more to social media stars vs. traditional media to get the word out, The New York Times reports in “Spinning the Web: P.R. in Silicon Valley.”

The hottest PR people in Silicon Valley, says The Times, care less now about reporters at tech pubs or financial magazines than the influential voices online:

This is the new world of promoting start-ups in Silicon Valley, where the lines between journalists and everyone else are blurring and the number of followers a pundit has on Twitter is sometimes viewed as more important than old metrics like the circulation of a newspaper.

Gone are the days when snaring attention for start-ups in the Valley meant mentions in print and on television, or even spotlights on technology Web sites and blogs. Now P.R. gurus court influential voices on the social Web to endorse new companies, Web sites or gadgets — a transformation that analysts and practitioners say is likely to permanently change the role of P.R. in the business world, and particularly in Silicon Valley.

This, of course, is tech PR – the air has always been rarified around Silicon Valley startups, their founders and service providers. But the Times story has much to say about how information spreads in the rapidly changing world of social media.

One thing remains the same. Communicating begins with building relationships, so that when you have something to say, you’re talking to people who know you. I like the quote from Brooke Hammerling, one of those Silicon Valley publicists. Noting that Twitter is today’s fashionable way to get the news out, she says some newer platform may take its place: “It will morph, but it’s still all about relationships.”

(If you’re an investor relations person who doesn’t think IROs should even care about public relations, come back tomorrow for some compelling evidence.)

Swatting a gadfly with a cannon

April 14, 2009

Keeping a sense of perspective can protect you  from embarrassment, and this holds true in the chaotic world of social media. Goldman Sachs seems to have lost track of what’s important by sending its lawyers after a blogger who is criticizing the company – a “corporate gadfly.”

A gadfly, you know, is a little person with no power but a big mouth (or pen). He complains of some perceived wrong, and pretty much no one listens, unless … well, you can be the judge of the complaints in this case.

This story starts with Mike Morgan, a Florida investment adviser and real estate broker, setting up a blog in March called The name tells you where he’s coming from. Many of America’s corporate giants have spawned critics in the blogosphere – it’s a place outside the control of corporate giants.

But who would have read the 666 guy’s blog? I don’t see anything too interesting. He has posted about 30 times in the three and a half weeks it’s been up, offering conspiracy speculation and links to other blogs and news stories. I can’t find a disclosure of his personal or business agenda, why he’s going after Goldman Sachs.

Then Goldman – actually, its Wall Street law firm – threw down the gauntlet by sending him a cease-and-desist letter claiming he’s violating their trademark by using the company name in his URL. I’m no lawyer and don’t know the legal merits of their position. But this comes across like trying to shut up a critic.

That salvo encouraged Morgan to go into full attack mode. Besides encouraging blog readers to alert the media to his story, he’s filed a pre-emptive suit claiming the GoldmanSachs666 blog is posting news and commentary, not infringing their service mark. Some financial bloggers and the UK’s Telegraph are covering the case. Morgan is recruiting volunteers online, planning a media conference call and so on. He’s campaigning to become a cause celebre.

I don’t know the behind-the-scenes story of Goldman’s contacts with the 666 guy. In general, companies should do one of two things about a corporate protester, online or on the street outside the office:

  • Look for a way to engage and mollify the critic. Go the extra mile in person or by phone to see if there’s a grievance that can be solved, meet with him, offer respectful and factual answers or see where he’s coming from. Or if he seems intractable …
  • Ignore the gadfly, while preparing message points to rapidly respond to the criticism. If the negative chatter spreads to other venues or threatens the company’s business or reputation, provide your message points quickly but one-on-one. Don’t issue a press release or file a lawsuit (both of which just turn up the volume). Answer reporters’ inquiries in a noncombative way. And perhaps comment directly on other blog or Twitter posts as they arise, especially if they overlap into your own social media constituency.

But taking aim with the legal cannons seems to be the surest way to make a big noise and get the wrong kind of attention. It’s like calling the police to arrest someone carrying a picket sign outside the office – guaranteed to make the evening news. Goldman Sachs, with all else that is on its plate these days, has more important things to do.

Mad Money = sad money, Barron’s says

February 9, 2009


Enjoy the manic entertainment experience of CNBC’s Mad Money – but don’t count on getting rich based on host Jim Cramer’s advice – Barron’s recommends in this weekend’s edition. In “Cramer’s Star Outshines His Stock Picks,” the weekly says the TV stock jock’s Buy/Sell calls are “wildly inconsistent” but, overall, perform substantially worse than a passive investment in the market.

Cramer would no doubt disagree, but Barron’s at least bases its conclusion on some serious number-crunching of his stock picks:

Cramer’s recommendations underperform the market by most measures. From May to December of last year, for example, the market lost about 30%. Heeding Cramer’s Buys and Sells would have added another five percentage points to that loss, according to our latest tally.

To his credit, Cramer’s Sells “made money” by outperforming the market on the downside by as much as five percentage points (depending on the holding period and benchmark). His Buys, however, lost up to 10 percentage points more than the market.

Barron’s also says stocks Cramer highlights as Buys tend to have gone up in the days before the call, and the reverse with Sells. The paper speculates on whether that points to advance leaks of broadcast plans – a serious allegation – or merely Cramer’s preference for calling stock moves based on the momentum of “what is working.”

Investor relations folks seem to regard Cramer as comedy, or aggravation, or both – but not a serious source of investment advice. If Cramer was serious, he wouldn’t yell so much or use funny sound effects. Even mentions on his show are a short-term event. But the Barron’s piece offers a more reasoned analysis of Mad Money and its picks than I’ve seen so far.

We buried the news, I’m afraid

December 9, 2008

A client issued a news release recently. Without going into detail, let’s just say it was the work of a loose-knit committee with more finance experts and lawyers than communications folks (me). That’s the way with all financial announcements.

The release was dense with technical matters only an expert could understand. Then again, those experts were our target audience.

What brought me up short was one bit of press coverage. The day of the release, a wire service published a well-reported story, putting the news into perspective, citing actions by others in the industry, and so on. The next day, the wire service wrote a second story. This one focused almost entirely on a scrap of information that also was in the release: the client’s plans to launch its major product by year end.

The second story made me realize: We buried the news – the launch date was down in the eighth paragraph of the release. 1, 2, 3, 4, 5, 6, 7 … 8!

If you say anything in the eighth paragraph, most people get the unspoken message that this is not the most important part. In this case the first reporter mentioned the launch plan – in the 15th paragraph. Only a committed reader gets that far into a story. The second-day story came along and highlighted the launch – I was glad it did.

Some companies want to bury the news, of course. This is the not-so-honest technique of putting a fact to which shareholders should pay the most attention down on the second or third page of the release, rather than in the first or second paragraph. If a reporter catches you burying the news, you may catch grief in the story – not to mention the reactions of investors, who may never come calling again.

In this situation, we didn’t intend to disguise anything – it was simply not the main event the company set out to announce. Given another chance, I’d probably say let’s do two releases, focus each more narrowly and make each piece of news clear. A lesson learned.

Aim. Ready. Fire!

November 25, 2008

TargetI’m no expert on hunting, much less combat. And it’s been a long time since I took an NRA gun safety course as a kid. But in the art of financial communication, I do have an opinion on how we ought to take our shots: The order should be “Aim. Ready. Fire!”

By this, I mean that investor relations professionals should counterbalance the occasional tendencies in the executive suite or PR department to – really quick now – “Fire!” The call may come as, “Let’s get out a press release” … and then we’ll think about it. In more level-headed places, the first step may be to get something ready – develop a press release, write a Q&A, organize a conference call. Execute a tactic.

I’m all for preparation and action. But our first step really should be “Aim.” The IR professional in the room should ask, what’s our goal? Who are we trying to reach? Can we get more specific on objectives? How will this advance our business or support the company’s value? Can we get more specific on these target audiences? Are we aiming the right message to people who will respond to it? What will maximize our impact?

At the start of each tactic, that is, we should think through a little strategy.

© Copyright 2008 Johnson Strategic Communications Inc.

Defending yourself in a YouTube world

September 3, 2008

Some good insights on reputation management in the era of Web 2.0 appeared recently in IR Magazine’s blog: In “Stay Awake Online” (August 15), IR correspondent Tim Human notes that investors are increasingly scouring the Web to learn about companies – and can be swayed by attack posts on blogs, nasty YouTube videos and the like. He adds:

But companies can fight back against negative publicity online, with the right know-how. The 2009 Search Marketing Benchmark Guide by MarketingSherpa explains how a major bank reacted to a highly ranked site attacking its reputation.

The bank contacted other sites linked to the negative one and got them to de-link, lowering its importance to search engines like Google. In addition, the bank added lots of search-optimized content to its own site – like blogs, videos and press releases – to fill up more of the top spaces in search listings. As a result, the offending site was knocked from the top page of results.

The media – your summer thriller?

August 5, 2008

Here’s a summer reading idea, since we have a few weeks left, maybe with some pool or beach time: Manage the Media (Don’t Let the Media Manage You) by journalist William Holstein. It’s a quick, easy read in the Harvard Business School Press “Memo to the CEO” series: 100 pages, with many anecdotes and a real-life point of view.

Even if your job in investor relations excludes dealing with the media, this little tome offers valuable insights, so think outside the silo. Sooner or later today’s headlines on executive pay, shareholder activism, CEO missteps and other topics may come home to roost – and as an IRO you will have input into how your company communicates in a crisis. A little forethought now may help avert a nightmare later.

Attacks on corporate reputation pose some of the worst risks to shareholder value, and the author notes that CEOs and boards are starting to realize the need to manage those risks:

In response to the rapid emergence of coalitions of critics, shareholders and investors, and in recognition of the increasing prevalence of Internet-based communications, there appears to be growing consensus … that the broad role of communications must be more deeply integrated into how CEOs chart their business strategy. Communications can no longer be a sideshow.

Media relations also caught the attention of NIRI in the July issue of Investor Relations Update – worth a peak if you haven’t read the article.

Not that a CEO, VP of public relations or IRO can really “manage” the media. Giving up that illusion is the first step toward successfully working with the media. What Holstein presents is a practical set of suggestions for how companies can manage themselves to communicate more effectively.

Words matter – to IROs as well as politicians

July 8, 2008

For any who doubt that our mission in investor relations overlaps with news-media coverage of companies, an article in the June issue of the Journal of Finance reports a study that parsed 350,000 news stories (100 million-plus words) on firms in the S&P 500 from 1980 to 2004.

What is intriguing in “More Than Words: Quantifying Language” is the attempt by two finance profs and a tech expert to translate language into numbers and capture their impact on stock prices. The findings offer some insights for IR as well as PR professionals:

  • Words do matter. Drawing on Dow Jones and Wall Street Journal coverage, the study found that negative words, especially, are predictive of lower earnings and shareholder returns in the future – and stock prices adjust, partially at least, with only a slight delay from publication.
  • Quantitatively, “the numbers” (that is, publicly disclosed results that many finance folks believe are all-important) account for only part of the change in stock price after an event. Analysts’ reactions also figure in. And the words have their own impact, statistically speaking.
  • Words can be classified as negative or positive. The authors use a linquistic database called the Harvard-IV-4 dictionary to analyze those 100 million words. Thinking in those terms, the point is decidedly not that a company should try to “spin” bad news into positive. But surely the IR team, in communicating results, should consider whether the words it uses appropriately convey the company’s intended tone.
  • The words in Dow Jones and WSJ stories, of course, are written by reporters – although stories often pick up words from press releases or statements. To me, the point is that news reporters are intensely relevant to the process (which some CEOs and CFOs don’t understand).
  • News coverage of companies spikes dramatically around quarterly earnings announcements – one day before, the day of earnings, and one day after. Seems obvious, but this strongly suggests the importance of seizing the quarterly “news peg” to reinforce key messages.
The authors explain the incremental impact of words on stock prices: “Linguistic communication is a potentially important source of information about firms’ fundamental values. Because very few stock market investors directly observe firms’ production activities, they get most of their information secondhand.”
Of course, traders do watch news stories – seeking to capitalize on the market’s short-term underreaction. The authors note: “Even if economists have neglected the possibility of quantifying language to measure firms’ fundamentals, stock market investors have not.” And neither should we.