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In 2012, embrace the uncertainty?

January 2, 2012 – 9:04 pm

Happy new year. A chatty column in the Financial Times, “Three cheers for new year trepidation,” touches on a central issue for investor relations in 2012: How should companies communicate with shareholders about what we can’t foresee?

Citing the obvious risks in trying to predict what will happen in a fragile global economy, FT management editor Andrew Hill notes that many companies are simply waiting, hoarding cash, holding off from embracing any particular scenario. But, he adds, mere expressions of caution don’t do much for their investors:

As executives’ reluctance to commit themselves grows, so the appetite of outsiders to know about their future plans increases. Investors are now far more interested in the “outlook” section of the company report than in the backward-looking summary of the historic results. But in their public statements, most chief executives hide behind a “lack of visibility”, adding to the general nervousness.

Hill says CEOs should “embrace uncertainty” in 2012 while at the same time communicating what they can see in the current situation:

Business leaders need to count on their ability to be the one-eyed man in the land of the blind – a proverb recently recast by Richard Rumelt in his book Good Strategy/Bad Strategy: “If you can peer into the fog of change and see 10 per cent more clearly than others see, then you may gain an edge.”

So we should acknowledge to investors our uncertainty but then discuss what we do know: data on changes in our customers’ behavior, qualitative trends in the business, our own strategies for surviving and thriving in what could be difficult times. This may be the biggest messaging challenge for investor relations in 2012.
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So how are you communicating in this environment of uncertainty?
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By Dick Johnson | Posted in Industry Blogs, Investor Relations | Tagged , , , , , | Comments Off

Do You Think You Could Make That More Boring?

December 1, 2011 – 2:55 pm

Who ever said that an investor presentation has to be boring? (I exclude from this question the lawyers, who as a default position, always feel that boring and incomprehensible is safer than exciting and interesting.)

I was at an investor conference last month and took the opportunity to sit in on several presentations. I think that most of the company presenters must have been listening to their lawyers. After about two presentations I began to tune out because most of what I heard was pretty bland and uninteresting. It was as if the presenters had all gone to the Sgt. Joe Friday school of public speaking. They were determined to give “just the facts” in the most humdrum fashion possible. (For those of you too young to remember, Sgt. Joe Friday was the principal character in the TV drama Dragnet who gave new meaning to the term poker-faced.)

Honestly, how can you expect an investor to get excited about a stock if the company CEO doesn’t show some enthusiasm when talking about the company? Yet that is exactly what I saw at the conference. This was especially true at the beginning of most presentations, when the speaker should be working the hardest to capture the interest of the audience, yet what I often heard was the recitation of bare bones facts about the company without a lot of context to help investors understand the company’s products and position within the industry.

The other major bone I have to pick about what I heard was that most companies thought their job was done when they had explained what their past activities had been. The implication of such a presentation is “Here’s what we’ve done in the past, now you can go ahead and make your own judgment about what we will do in the future without any help from us.” This is like saying that markets are static, conditions are not going to change and we are not working on any new products or markets. This, of course, is nonsense, as American companies and markets are predicated on growth and conditions change all the time. Further, financial theory 101 teaches that investors are buying your stock based upon the value of FUTURE cash flows, so why not give them some guidance about where you are going in the future? Hey, there’s a safe harbor statement about forward-looking statements in every presentation. Why not put it to good use?

All was not terrible, however. There were several successful and engaging speakers I saw at the conference. Generally, these successful speakers seemed to have two things in common. First, they got a little worked up about what their company was doing and what made their products and services unique. Secondly, they allowed some of their personality to come through. This is important because if you’ve ever read any of the surveys of investors and what they care about, quality of management is always high up the list. Yet if management is nothing more than a bland talking head, how can an investor be expected to make a qualitative judgment about them?

After all, who ever said, “I liked your presentation, but you could have been a bit more boring”?


By John Palizza | Posted in Industry Blogs, Investor Relations | Tagged , , , , | Comments Off

The European Commission’s Stealth Decision on Transparency:

November 8, 2011 – 11:03 pm
For publicly listed companies, transparency is not an option — it is an obligation. by Neil Hershberg, Senior Vice President, Global Media The European Commission said as much when it implemented its harmonized pan-European disclosure standards for the 27-member European Union in January 2007. The compliance guidelines were aptly titled:  the Transparency Obligations Directive ["TOD"]. Therefore, the European [...]
By Monika Maeckle | Posted in Industry Blogs, Investor Relations | Tagged , , , , , | Comments Off

Stand a Little Closer to the Podium… Coaching and Investor Relations

October 31, 2011 – 3:05 pm

A short while ago a friend sent me a copy of an article in the New Yorker about coaching. We’re not talking here about improving your golf swing. Rather, the author of the article suggests that people in business could stand to benefit from having someone who is an expert observe and offer constructive criticism on how they perform routine tasks. The article can be found here: http://www.newyorker.com/reporting/2011/10/03/111003fa_fact_gawande

I was intrigued by the article, not only because I spend considerable time coaching first year MBA students on how to give business presentations, but also on the concept’s potential for improving investor relations activities. By its nature, investor relations involves repetitious activities that revolve around everything from how you talk on the phone, to investor presentations and quarterly earnings reporting. These are the exact type of activities that can benefit from coaching. And yet, in all my years of business, I have rarely seen anything that approaches coaching done outside of a seminar environment.

Take for example, your typical investor relations presentation given by a CEO. I’ve sat through literally hundreds of these throughout my career and most were less than memorable. Just a few things that we talk about with our students touching upon delivery, content and visuals could be pointed out to many CEOs:

Delivery – was the speaker enthusiastic when speaking to the investors? After all, if the CEO isn’t enthusiastic about the company, how can you expect investors to get excited?

Content – is the speaker able to place the company into an understandable framework that helps investors understand the value his company brings to the marketplace? I have seen any number of presentations where software and tech companies get so wrapped up in the technological aspects of their products that they fail to bring it down to the level where an investor can see how they can make money on the technology.

Visuals – how many times have you seen a screen full of bullet points that the speaker feels compelled to read? Worse yet, how about a balance sheet in 8 point type?

Business leaders of today have to be communicators, yet many of them could stand some improvement in their delivery. This is where coaching should come in, but rarely does. My guess is that most investor relations officers are loath to criticize their superiors. Which is too bad, because we can all stand some improvement. I know I’ve been practicing public speaking for over thirty years and there are still things I need to improve.

So here’s today’s practical tip: if IROs don’t want to tread on thin ice by critiquing executives, videotape them and let them review themselves. It helps if you give them a list of common errors to watch and listen for, such as vocal fillers, repetitive phrases, body language and eye contact. Then tell them to watch/ listen to the presentation four times:

First, listen and don’t watch. This lets the speaker focus on vocal qualities such as pitch, tone, speed, ums and ahhs, and if he was using his voice to tell listeners what was important.

Second, watch with no sound. This will draw attention to body language, eye contact and the annoying things the speaker may be doing with their hands.

Third, listen and watch the presentation to see if it all comes together in a coherent whole.

Fourth (for the brave), watch the presentation at double speed. This will really bring to the fore any annoying or quirky things the speaker tends to do, such as looking up at the ceiling, or performing a little dance step as he speaks.

Who knows, after watching themselves a few times, CEOs might get a little bit humbler.


By John Palizza | Posted in Industry Blogs, Investor Relations | Tagged , , , , | Comments Off

XBRL Update: U.S. XBRL Initiative Begins to Move Beyond SEC Reporting

October 21, 2011 – 7:00 am
The recently-signed The Child and Family Services Innovation and Improvement Act, and other new and pending legislation, has positive implications for the adoption of XBRL as a data reporting standard.
By Monika Maeckle | Posted in Industry Blogs, Investor Relations | Tagged , , , , , | Comments Off

Shareholders & ‘the ADD society’

October 14, 2011 – 2:27 pm

Andrew Ross Sorkin, the New York Times M&A columnist, CNBC “Squawk Box” co-host and author of Too Big to Fail, says we’re kidding ourselves when we say we want corporate leaders to think long-term. The problem, he says, is all of us.

“We are the ultimate ADD society,” Sorkin said today in a speech to the Association for Corporate Growth Kansas City chapter. Patience is nowhere to be found, and that goes for the stock market and demands it places on managements, he said:

We keep saying we want more shareholder democracy because we want executives to think long-term. The problem is not that the people in power are short-termists, it’s that we are short-term thinkers.

As Exhibit A, Sorkin cited the statistic that the average shareholder holds onto a stock for only 2.8 months. Less than one quarter. Of course, high-frequency automated trading turns stocks over in milliseconds, and multiple times every day. But even individual investors can be fast-moving and fickle:

I would love to find a way to get our country back to being an investing society, not a trading society.

Sorkin acknowledged there’s no sign of that happening anytime soon. (Coverage of the rest of what Sorkin had to say is here or here.)

The investor relations person in search of a patient investor, in this environment, is something like a mythical but tragic hero. Solutions, anyone?

© 2011 Johnson Strategic Communications Inc.


By Dick Johnson | Posted in Industry Blogs, Investor Relations, Stock market | Tagged , , , | Comments Off

NASDAQ as SRO: An Oxymoron

October 10, 2011 – 2:06 pm
NASDAQ as a self regulatroy organization (SRO) is proving to be an oxymoron.
By Monika Maeckle | Posted in Industry Blogs, Investor Relations | Tagged , , , | Comments Off

Things could be worse

September 27, 2011 – 10:30 am

In the “things could be worse” category: Unless you work for Hewlett-Packard, Yahoo! or News Corporation, your company isn’t discussed in “The Worst Board in America,” a video by Thomson Reuters tech correspondent Peter Lauria.

“There’s basically a race to the bottom. They’re all dysfunctional in their own way,” Lauria says of the trio of companies that have been generating negative headlines. He reviews the CEO firings, shifting strategies and downward-moving stock graphs and then names “the worst board” – well, I won’t spoil it. You can watch the video.

No doubt H-P, Yahoo! and News Corp. might respond, “Who is Peter Lauria? What qualifies him to judge the merit of our boards of directors?” And they’d be right. He’s just a journalist who covers media, technology and telecom for Reuters.

On the other hand, he’s not alone in his assessment.

The positive side of this: If you’re doing investor relations for a company that does have a long-term, consistent strategy and high-quality board and management, you’ve got some very attractive selling points for long-term investors.

Focus your IR messages on the track record of your strategy and how it’s paying off, the quality and experience of management, and the expertise of your board. The long-term investors will be with you.


By Dick Johnson | Posted in Industry Blogs, Investor Relations | Tagged , , , , , | Comments Off

Can’t This Gang Shoot Straight?

September 23, 2011 – 1:50 pm

The Securities and Exchange Commission used to be one of the most respected federal agencies in Washington. Some would argue that this is a low barrier to overcome, but nevertheless, the SEC was for many years considered a well run agency that, by and large, did what it was supposed to, and helped to give the United States the best and most transparent capital markets in the world. Alas, things have changed and now it seems that the SEC is the agency that can’t seem to get it right.

The most recent stumbles have come over the fact that the SEC Chairwoman, Mary Shapiro, who was given a mandate by President Obama to strengthen enforcement, failed to disclose to her fellow commissioners a conflict of interest involving the agency’s former top lawyer, David Becker. According to the SEC Inspector General’s report, it seems that Mr. Becker stood to have a financial interest in the settlement of the Bernie Madoff fraud case, and although he disclosed the potential conflict, Ms. Shapiro stayed silent on it, even allowing her fellow commissioners to vote on how to divide up the Madoff assets without telling them how their top lawyer might potentially benefit from the decision.

Not only that, but the Inspector General’s report also brings to light the fact that the SEC decided not to have Mr. Becker testify before Congress for fear that his conflict of interest would come to light. And this is from the agency that is charged with “full and fair disclosure” for investors.

This is bad enough, but it come after a series of other blunders over recent years that make you wonder if the agency has lost its way. Most notably, this is the agency, charged with protecting investors, that actively ignored the pleas of Harry Markopolos to investigate the returns being generated by Bernie Madoff, which turned out to be the biggest ponzi scheme in history.

More recently, and somewhat more mundanely, proxy access, a pet SEC project that would allow shareholders the ability to nominate directors using a company’s own proxy materials, was struck down by the Federal Appeals Court for the District of Columbia. According to the appeals court, the SEC had “inconsistently and opportunistically framed the costs and benefits of the rule; failed adequately to quantify the certain costs or to explain why those costs could not be quantified; neglected to support its predictive judgments; contradicted itself; and failed to respond to substantial problems raised by commenters.” Further, the court said there is “good reason to believe that institutional investors with special interests” – such as unions and pension funds -- would use the proxy access rules to advance their own issues and chided the SEC for “ducking serious evaluation of the costs that could be imposed” by shareholders representing special interests. It certainly doesn’t sound as if the Court of Appeals thought the SEC was taking a fair and balanced approach towards rule making in this instance.

And finally, how about the $557 million lease the SEC entered into without competitive bidding, which the agency can’t afford and doesn’t need because the underlying assumptions for the space were incorrect. Never mind that Commissioner Shapiro approved the lease in a 10 minute unscheduled meeting and later said that “The agency made a terrible mistake here,” and “I view myself as being ultimately responsible.” In most corporations if you were responsible for a $557 million mistake, you’d be fired, or maybe the SEC would investigate you…

By John Palizza | Posted in Industry Blogs, Investor Relations | Tagged , , , | Comments Off

Five stages of grief

September 15, 2011 – 3:05 pm

I hate to go all morose and contrarian on another “up” day in the markets, but …

Jerome Booth, research director of London-based emerging markets specialist Ashmore Investment Management, makes an interesting point in a Sept. 14 Financial Times column. He posits that global markets are moving, slogging really, through the classic five stages of grief. When we lose a loved one, we follow a pattern described by psychiatrist Elisabeth Kübler-Ross as the five-step model of grief: denial … anger … bargaining … depression … and, finally, acceptance.

Booth applies this to global markets.

As investor relations people making our rounds with investors, we might probe what stage the patient is in, on any particular day, before launching into our story.

What has died, Booth writes, is our complacence in using debt to meet all needs:

Western Europe and the US now face years of painful deleveraging. The loss they feel is the death of the levered model enabling them to live beyond their means, plus a loss of prestige as their economic models have failed.

As an EM guy, Booth says we’ll have to adjust to kowtowing a bit to emerging markets. In the West right now, he writes, we’re in denial:

When faced with a truly awful prospect we explore and then cling to any theory or hope that reality may be different. Even where political leaders understand the immensity of their loss, the denial of their electorates constrains their action.

There are examples of anger – riots in Greece and other nations over economics. And of bargaining to delay unpleasant consequences or sweep them under the rug. Still ahead, perhaps, is the loss of hope a patient feels as depression. And we haven’t seen many signs yet that our leaders – or we the people – have moved on to acceptance of realities so we can deal with what needs to be done.

All this is very global and “macro,” but let’s think about how it applies to IR messages about the businesses we speak for:

  • Above all, are we helping our management teams to avoid living in denial?
  • In offering forward-looking views to investors, do we spell out assumptions on the economic factors that drive our particular businesses?
  • Do we explain how we plan to perform if the economy stays weak for a long time, vs. signing onto consensus hopes for recovery in H2, or H1 2012, or  … ?
  • When our stock is beaten-down, do we listen to see if the investor on the line is in the anger stage or depression – or maybe in a place to hear reality and look forward to ways out of the doldrums?
  • Do we deal with debt and balance sheet metrics, including strategies for managing the balance sheet, in a way that helps investors understand?

Just a handful of thought-starters. I’m not arguing where investors’ sentiment should be – just saying IR people need to pay attention to where it is.

Mainly, I appreciate Booth’s wry insight into the psychology of today’s happy-nervous-elated-terrified-optimistic-not so sure-ever mercurial stock market. I’d love to hear your reactions.

© 2011 Johnson Strategic Communications Inc.


By Dick Johnson | Posted in Industry Blogs, Investor Relations, Stock market | Tagged , , , | Comments Off
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