The SEC, rightfully so and perhaps long overdue, is flexing its enforcement muscle with regard to Reg FD and how companies disclose material non-public information.
We all know the drill by now and what public companies are supposed to do. Yet sometimes at private meetings with analysts and investors, management inadvertently says something it shouldn't, and violates Reg FD. If there's any unusual trading the next day, watch out.
While it is perfectly acceptable and even good practice for management to meet with analysts and investors from time to time, one way to mitigate the risk of Reg FD violation is to have an IR professional present at every meeting, or at least at the group meetings.
I know what you are thinking..."What a self-serving statement." Nevertheless, competent, experienced IR professionals know how to counsel management on what to say. More importantly, they can be right there, ready to intercede, when sensitive questions come up or to prepare a press release should the accidental comment be made that should really be disclosed widely.
Recently, the SEC began an investigation into Reg FD violation by generic drug maker Mylan, Inc., following a private meeting it held. I do not know if an IR professional was in the room, and even if there was, there would be no guarantee that harmful comments would not be made. However, at least in theory, if an IR pro was there, the risk of a disclosure violation would have been significantly reduced. And mitigating risk is really what it's all about. Just ask your D & O insurance broker.
Reg FD has been around since the year 2000, and up to now, there have been few cases involving its enforcement. Word on the Street and from
Roger Pondel, rpondel@pondel.com
PondelWilkinson is attending the National Investor Relations Institute's annual meeting in San Diego. Tune in to our Twitter feed to learn what's going on with new governance requirements, changing markets and ever-evolving media.
BP’s future seems pretty bleak at the moment. The stock hit another low this week as the company’s latest effort failed to stop the massive oil leak, which continues to spew millions of gallons of crude into the Gulf of Mexico, severely impacting the
Making matters worse, BP boycotts are underway coupled with an onslaught of lawsuits and fines that undoubtedly will cost the company tens of billions of dollars.
Can BP ever recover? Some on the street say no and that the political, economic and environmental fallout from the disaster will be too tough to overcome. Media pundits have even compared the crisis with the Arthur Anderson scandal of 2002, when the company surrendered its license because it was found guilty of criminal charges for its auditing of Enron.
No doubt BP will become a heavily studied case history among B-schools for years to come. It’s important, however, to understand the dynamic between the company’s crisis communications efforts and its stock price, which dropped more than 30% since the April 20 explosion of drilling rig Deepwater Horizon, killing 11 workers.
No question the fact that they still can’t plug the hole is a key reason for the stock drop. But by how much? Will the boycott hurt business? Sure it will. Will that affect profits? Of course. Could a boycott be prevented? Probably, but only if BP communicates more strongly and frequently about its repair efforts. There has been some apprehension, at least on BP’s part, to get out in front of the problem and be more open in public statements. This only invites public anger, which leads to a consumer backlash that can, in fact, result in a boycott.
BP will never get a handle on the crisis until the leak is stopped. Only then can it begin to attempt to rebuild its brand among investor and consumer audiences. In the interim, BP’s investor and public relations divisions need to work in unison, making sure key messages are tailored appropriately and communicated effectively (and regularly) to each of its core audiences. Understanding the needs of different target audiences creates a stronger overall messaging platform and allows for deeper dialogues between BP and its investors, as well as the media, which is paramount during a crisis.
-- George Medici, gmedici@pondel.com
Recently, I stumbled upon Tom Chambers’ “Five Things You Need to Know Before Dating a Journalist.” Chambers cuts right to the bone, capturing the mindset of many journalists using some, shall we say, colorful language. I know this because I was one before fleeing to the world of public and investor relations.
At this point in my career, I may not have to date them, but I certainly have to deal with them on a daily basis. I understand these creatures of media, and to help our clients understand them a little bit more, below are some of Chambers’ musings.
1. We can figure things out. Understand, we’re paid to dig deep, find the secrets and wade through *&%$#. We can pick up on subtleties, so what you think you are hiding from us won’t be hidden for long. … We spend all day separating fact from fiction, listening to PR cronies and dealing with slimy politicians. If you make us do the same with you, you’re just gonna piss us off.
2. At some point, you will be a topic. Either through a feature story or an opinion column, something you do or say will be a subject. Get over it. Consider it a compliment, even if we’re arguing against you in print…
3. Yes, we think we’re smarter than you. In fact, we know it. Does that smack of ego? Absolutely — but that confidence is what makes your heart go pitter-patter. … Guaranteed, when you say “towards,” we will automatically say “toward” — “towards” is not a word. We’re not trying to call you dumb (even though you don’t understand the English language), it’s habit. The same will happen when you say “anxious” when you mean “eager” and when you answer “good” when someone asks how you are doing.
4. You’re not less important than the job — the job is just more important than anything else. One doesn’t become a journalist to sit in an office from 9 to 5 Monday through Friday. We do take our work home. If news is happening, we’ll drop whatever we’re doing — even if it’s with you — to cover it.
5. You won’t be disappointed. Journalists are intense, driven, passionate folk. We carry those same attributes into our relationships, making it an extremely fun ride well worth the price of admission. … Our brains are a great resource. Ever go on a date with an attractive person and wind up wishing you hadn’t because everything they say is just, well, stupid? That’s not going to happen here.
-- Ron Neal, rneal@pondel.com
Well, it’s not exactly breaking news, but I recently came upon an interactive annual report/annual review that is worth sharing.
In a recent interview with IR Magazine, Stanley Black & Decker’s director of investor relations, Kate White, says that she “wanted investors to see the 10K brought to life, to see the numbers and the charts and the graphs, and to see the people who really drive it all. That’s what investors want time after time – to hear from the people who run the business day to day.”
The result is an informative, easy-to-watch and navigate review of 2009. Although the review did not fully replace Stanley Black & Decker’s more formal, glossy annual report, it is a great reminder that during a time when it is increasingly difficult to gain mindshare from investors, it is never a bad idea to think outside the box and bring life to your company’s story.
If you’ve seen any other great examples of creativity in the field of investor relations, comment here and let us know.
-- Laurie Berman, lberman@pondel.com
As management teams continue to focus on reducing expenses amid recessionary woes, it is important for companies to weigh the benefits of attending investor conferences.
When executives factor in time, travel expenses and networking opportunities, it is easy to understand the myriad variables that should be considered before committing to a conference.
Among the most important variables is the quality of investor meetings that the host, usually an investment bank, has scheduled for a presenting company.
We’ve recently heard stories about consultants who have managed to wiggle their way into one-on-one meetings and ultimately usurp an investor’s time slot. Unless a management team knows in advance they will be meeting with a consultant, the time is probably better spent meeting with the right investors.
Bottom line: Review the one-on-one meeting schedule before attending a conference and make sure the time and money spent to attend the conference is time and money well spent.
-- Evan Pondel, epondel@pondel.com
Ever try talking to a
Getting to where you are going in one piece is what counts when taking a
Are those your kids? As we all know, pictures of cab drivers’ kids often adorn the dashboard. How old are they? How’s your day been so far?
Lauren Collins, who writes for The New Yorker and reported on an unusual public forum in Manhattan—“Out from Behind the Wheel,” sponsored by public radio station WNYC—is kinda telling us that while it’s OK to talk to cabbies, there’s one thing you should never ask. (The forum, by the way, was for the much maligned drivers to talk about who they are; discuss strategies for coping with stresses on the road; and figure out ways to improve the industry.)
Collins reported that cabbies have lots of beefs that are not that unusual, from coping with drunks, to paying a $.50 MTA tax that ostensibly funds city workers’ pension plans, to credit card readers that don’t work, and more.
The one passenger question, however, that gets the goat of
-- Roger Pondel, rpondel@pondel.com
1. For private companies contemplating an IPO, be certain you want to be public for a long time. Don’t look to the IPO as an “exit,” rather as a “partnership” with public investors.
2. While it takes guts for CEOs to commit to long-term planning, it is crucial to do so, since public investors are more short-term oriented than ever. You have to give them reasons to stay.
3. Shareholders are quite a diverse lot, although they often like to present themselves as uniform. In order to secure their confidence and their votes, you must know more about your investors than they know about you.
4. Public company CEOs have gotten fat and lazy in terms of compensation, helped by so-called professional comp consultants. But compensation in the public company today, ever the topic of cocktail banter, is much more like the private equity approach with its specific metrics and goals—at least it should be.
5. There are two kinds of board members, those who “get it” and do the work, and those who don’t, instead keeping their hands clean and hiding behind not wanting to “meddle” as an excuse to stick their nose into things. The time required to properly serve on a board today is at least five times what it used to be. Meddling required.
--
On Wednesday, February 24, 2010, the SEC narrowly approved curbs on short selling, addressing what some consider to be one of the major contributing factors of the 2008 financial crisis. The new rule is a modification of the “Uptick Rule,” which was designed to be a preventative measure against downward spiraling stock valuations in turbulent markets. However, the rule was eliminated in 2007 because of its lack of efficacy.
The new rule will operate much like a circuit breaker, taking effect once the price of a stock has declined by 10 percent in a given day. Once triggered, short sales will no longer be permitted at or below the National Best Bid or Offer for the remainder of the day and the following trading day.
The modified uptick rule will take effect in approximately 60 days, but stock exchanges have up to six months after that time period to implement the new rule.
Highly debated since the 2008 financial crisis, short sales have been one of the most controversial issues facing the SEC. Opponents of such regulation have pointed out that financial stock valuations tumbled even after regulators imposed a short-term ban on short selling late in 2008. Others have voiced strong disappointment that the modified uptick rule did not go far enough to protect investors. One thing is for sure - this is not the last we’ll hear on short sales.
-- Angie Yang, ayang@pondel.com
