Relate to the Public

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Sometimes in order to practice public relations, you actually have to relate to the public. Today our firm visited the Daybreak Day Center, a place that provides food, shelter, clothing and showers for mentally ill homeless women.  We made lunch as a team for more than 20 women, had conversations with staff and volunteers, and shared a meal with some of the most courageous people we’ve ever met.
 
 

The Ski Season and the Fiscal Cliff: Happy Holidays

Skiing and the fiscal cliff have never before been written about in PW Insight and I suppose are rarely uttered in the same breath. But both are topical, actually have lots in common and are certainly part of this year’s holiday rhetoric.

Snow Summit

Snow Summit in Big Bear, California
(Photo Credit: Flickr: Cary N)

 
I learned to ski relatively late in life — at 40 — when my wife could still say she was 30-something, my daughter just turned 10, and my son was nine.  Some friends took the family to Big Bear, a Southern California resort that is just so-so as far as skiing is concerned, but an easy drive from most parts of Los Angeles.
 
My pal, Tod Paris, a CFO by day and sadistic amateur ski instructor when on the slopes with adult beginners on the weekend, started me out on what he said was the least daunting hill.  “Pizza, pizza,” Tod screamed.  Skiers know that pizza has nothing to do with food.  I fell, bruised my ribs, hurt my right ankle. I was frightened and swore that I would never ski again.
 
My family, however, did well.  So my swearing aside, to keep up with them, I eventually engaged several real instructors, each of whom instilled their own styles and methods to keep me standing and allay my fears.
 
Fast forward 20+ years.  The ski season is about to get under way, and I am excited. When I look back, what seemed like the steepest, scariest slopes then do not look so bad today at all.
 
Likewise, could it be that all the fears about the looming fiscal cliff — metaphorically a double black diamond that is being talked about non-stop — also will dissipate?  Los Angeles Times journalist Doyle McManus in an editorial last week called the fiscal cliff merely a slope that in reality “may not be as alarming as it sounds.”
 
With the holidays just around the corner, some progress is being made, although few believe a final resolution will be reached before the end of the year.  Both sides of the political spectrum are offering their ideas, perhaps akin to ski instructors espousing various teaching methods, and both sides are talking about meeting “somewhere in the middle.”  (How ’bout at the Mid-Chalet Café?)
 
Let’s also not forget that the tax increases set for the first of the year can be delayed by Congress, or as McManus wrote, “… by a stroke of Timothy F. Geithner’s pen.” Federal spending cuts can be slowed down as well.
 
So while there will likely be some pain ahead, just as there is on those first runs every season even for experienced skiers, let’s keep our wits and our faith that those Washingtonians in charge will lead us down the path in the least hurtful way.
 
Happy Holidays.

 

— Roger Pondel, rpondel@pondel.com
 
 

Special Dividends in Vogue as Fiscal Cliff Looms

Many companies these days seem to be declaring special year-end dividends.  And the list of businesses doing so is growing like wildfire.
 
Ahead of an expected tax increase in 2013, public companies are doling out early holiday gifts to their shareholders.  The current 15 percent tax rate on dividends could increase to more than 43 percent next year for top wage earners, making special dividends especially attractive to companies and their shareholders.
 
Among the latest on the dividend bandwagon are Disney, which increased its usual year-end dividend by 25 percent, Las Vegas Sands Corp., which nearly doubled its usual year-end dividend, and Costco Wholesale Corp., which declared a $3 billion payout to shareholders.
 
According to Bloomberg, more than 70 companies in the Russell 3000 stock index have announced a one-time cash payment to shareholders since September.  This is up from only 15 businesses in the prior-year quarter.  More than a dozen of the 70 companies the wire service highlighted pegged their actions to pending tax increases, but it’s a good bet that many of the others had similar reasoning.  Investor’s Business Daily reported that as of November 28, 173 companies had announced special dividends in the month of November.  More payouts are expected to occur as we inch closer to the end of 2012.
 
And it’s not just new dividends that are being declared.  Wal-Mart moved the payment of its fourth-quarter dividend from January 2 to December 27, while H.J. Heinz Co. accelerated its payment as well.
 
Some believe these dividend payments could boost holiday retail sales.  Jason Ader, head of Ader Investment Management and a former Wall Street analyst, believes that dividend payments arriving prior to Christmas “may very well help Christmas sales, along with having a multiplier effect in terms of credit and borrowing.”
 
At least one investor, however, does not agree with the recent spate of announcements.  During a recent interview with NPR, Jim Paulsen of Wells Capital Management said that companies should be looking for ways to increase their growth prospects rather than “handing out gifts to shareholders.
 
As companies continue to jump on the proverbial bandwagon and contemplate whether to declare a special dividend, it’s important to remember that each organization’s circumstances are different, and not everyone may benefit from taking the leap.
 
In the interim, maybe we all can take a lesson from Wile E. Coyote.

 

 

Laurie Berman, lberman@pondel.com
 
 

Video: The Next New Thing in Earnings

 
We can’t stress enough the importance of video and its pervasive use in today’s media landscape.
 
Aside from the sharing benefits and vast potential online media pickup, video creates stronger bonds with key audiences.  It’s why we love movies so much.  There’s no other medium that produces the same visceral effect.
 
Publicly traded companies are starting to realize this trend.  Early adopters are using this medium to complement quarterly earnings, embedding video links in press releases as we did for our client (see above), Kirkland-based Market Leader, Inc. (Nasdaq: LEDR).  Done right, videos that accompany press releases of all kinds should be news driven versus corporate slick, delivering more authenticity that is designed for viral uptick.  Other companies that have used video for earnings include DellCitiBASF, and InterContinental Hotels.
 
Leveraging video to communicate financial results can be quite daunting however, especially since these platforms are relatively new to investor audiences.   While the SEC’s Office of Compliance Inspections and Examinations offers guidance on the use of social media for investment advisers, the bottom line boils down to best company judgment, and of course, input from counsel.
 
Professional investors are watching too.  According to a study, 58 percent of institutional investors and sell-side analysts in the U.S. and Europe believe new media will become more important in helping them make investment decisions.
 
There’s no doubt that using social media to communicate to investors remains a fairly prickly topic among CEOs and the investment community.  The reality is that more Fortune 500 companies are blogging, tweeting and utilizing new media platforms to communicate to key audiences in ways never before.  Moreover, engaging in video builds social capital, a valuable network that ultimately enhances reputation, and we believe shareholder value, too.

 

George Medici, gmedici@pondel.com
 
 

PondelWilkinson Wins Two PRism Awards

PRism Awards

 
PondelWilkinson received two PRism awards this week at the 48th Annual Public Relations Society of America – Los Angeles chapter awards show.  The awards recognize reputation/brand management in investor relations for Market Leader, Inc. (Nasdaq: LEDR), a provider of online technology and marketing solutions for real estate professionals, and digital PR tactics/webcasts for Physician Therapeutics, a division of Targeted Medical Pharma, Inc., which is a specialty pharmaceutical company that develops and sells prescription medical foods for the treatment of chronic disease.
 
 

IR in Politics

 
Business folks usually don’t talk about politics, but politicians love to beat up on business.  During the debates, Romney took Obama to task on unemployment, and Obama ribbed Romney about his tax rate.  And yet, we haven’t seen any business leaders lambast the two candidates about the gobs of money they’ve spent to win the hearts of voters.
 
So far, Obama has raised approximately $934 million, versus Romney’s $881.8 million, according to the New York Times.   Between the two of them, we’re talking close to $2 billion, and that doesn’t include a whole bunch of money spent in support or against the candidates by committees, nonprofit groups and other super PACs.
 
In PondelWilkinson’s world, investors are constantly holding executives from public companies accountable for expenses and how well they can manage their income statements and balance sheets.   Votes in favor of a company’s financial performance usually result in rising shares.  The opposite is true for lackluster performance.
 
While racking up campaign expenses isn’t directly analogous to a company’s handling of SG&A, it strikes me as hypocritical when presidential candidates spend hundreds of millions of dollars to harness an asset (our country) that is ailing from the very same spendthrift ways that contribute to our nation’s growing deficit.

 

Evan Pondel, epondel@pondel.com
 
 

Is Aligning Executive Pay with Stock Performance A Good Thing?

According to a recent article in the Wall Street Journal, “CEO pay during 2011 was more firmly correlated to how well companies fared in the stock market, a change from 2010, when pay and performance were not directly related.”

New York Stock Exchange

The New York Stock Exchange, the world’s largest stock exchange by market capitalization (Photo credit: wikipedia.com)

 
Indeed, the 2010 Dodd-Frank financial-reform law, which gave shareholders an advisory vote on executive-pay plans, caused many companies to alter how, and how much, they pay CEOs.  One would think this is good news to investors, who have long clamored for the interests of senior management to be aligned with shareholders.
 
However, Lynn A. Stout, a Cornell Law School professor and author of “The Shareholder Value Myth,” believes this has inadvertently empowered hedge funds that push for short term solutions. She notes that the average holding period of stock was eight years in 1960; today, it is four months.  Ms. Stout argues that the directive to “Maximize Shareholder Value” has led to an epidemic of accounting fraud, short term thinking by management and myopic trading strategies by investors.
 
Because of the pressure exerted by hedge funds to push stock prices higher, which often comes at the expense of the organization’s long term value, Ms. Stout advocates limiting the role of investors so that executives and boards of directors are freed up to think about customers and employees, allowing them to invest in the company’s future and act socially responsible.
 
Ms. Stout and corporate governance advocates appear to have diametrically opposed beliefs on how corporations are best managed.  Perhaps a blending of the two views is appropriate: empower shareholders to safeguard their investments by actively preventing manager conflicts of interest and self-dealing, and lock investors into their investments so they do not push for short-term strategies.

 

PondelWilkinson, investor@pondel.com
 
 

Is Executive Compensation a New Marketing Ploy by Law Firms?

While the days of being “Lerached” are thankfully long gone, a new potentially litigious trend in the public company world seems to be emerging.

CEO Pay

 
This time the subject is executive compensation.  And unlike
those days prior to the infamous class-action lawyer William Lerach getting “Lerached”
himself, this time more than one law firm may be joining the fray.
 
I’m not one for being an alarmist, so don’t start worrying yet.  But one never knows, and perhaps PW Insight will be breaking this story first.  Just be aware that after two years of Say-on-Pay being part of the proxy lexicon, it seems that suddenly a number of law firms are launching “investigations” into potential breaches of fiduciary duties by boards of directors, seeking executive compensation approval.
 
Funny thing is that while the law firms are writing directly to these companies, they also are issuing press releases over the national wire services.  So far that we can tell, no company has publicly responded to the allegations.  And they shouldn’t.
 
All of the press releases we have reviewed thus far appear to use the same copycat language. They also have embedded links for interested shareholders to contact these law firms with words like “protect your investments, free of charge,” not to mention “Attorney Advertising” posted on the bottom of each release. Kind of a sick way of soliciting business, don’t you think?
 
While the 2013 proxy season is still far away, and perhaps nothing will come of this, public companies nevertheless must pay attention.
 
According to a recently published paper by law firm Paul Hastings titled, “Staying in Front of Shareholder Litigation Challenges to Executive Compensation,” nearly 80 companies failed to receive majority support on executive compensation since the Say-on-Pay rule was enacted.  The paper concluded that executive comp issues are “poised to escalate” and advised that companies should consider strengthening reliance upon the advice of independent, outside consultants by adapting “new corporate best practices” and engaging separate, independent compensation consultants for both the compensation committee and the board.
 
Everyone’s trying to be innovative in making a buck these days. Hopefully, however, we will not see the return of Lerach-style tactics as part of the marketing process.

 

Roger Pondel, rpondel@pondel.com
 
 

It’s 10 p.m. Do you know where your IR program is?

Investor Relations

Investor Relations (source)

I’m not really asking where your IR program is in the geographic sense of the word.  I’m asking where your IR program is in terms of effectiveness.  Every once in a while, it’s good to take a step back and evaluate whether your strategies and tactics are still productive.
 
A recent webcast, based on a survey conducted by Thomson Reuters, demonstrated that in today’s world of “risk aversion, macro dominance, reduced focus on active equity and equity fund outflows,” getting your story heard can be very challenging.  An article in CFO Magazine echoed the sentiment that “the rockiness of the equity markets and the prevalence of high-frequency trading and exchange-traded funds make cultivating the investor base tougher than ever.”
 
Are you doing the right things to be appropriately noticed by the investment community?  Respondents from the Thomson Reuters survey noted that knowledge of the business and ability to answer questions, responsiveness and timelines, and financial guidance are among the most important facets of a good investor relations program.  Interestingly, however, a separate survey conducted by the National Investor Relations Institute showed that the number of companies providing financial guidance has steadily declined over the last several years, with 76 percent of companies providing financial guidance in 2012, compared with 81 percent in 2010 and 85 percent in 2009.
 
While there will never be full agreement between the investment community and listed companies on providing guidance, and while every investor relations program is unique, there are a few things that all IROs should consider:
 

  • Build trust with the investment community through consistency, transparency and willingness to engage.
  • Take an individualized, targeted and precise approach to identifying appropriate investors.  Spend time with these prospective investors through one-on-one meetings, at conferences or by hosting site visits and investor days.  Stress quality over quantity.
  • Ensure your messages help the investment community understand your growth path and its trajectory.
  • Use business and financial press as an additional communications vehicle.  Include video in press releases and on your IR website to generate better engagement by making your story come to life.
  • Be aware of what’s being said about your company via social media, and strategically use social media to deliver your messages.
  • While any worthwhile activity generally requires time and patience, the long-term result should be enhanced shareholder value.

 

Laurie Berman, lberman@pondel.com
 
 

AP’s Right ‘Frame’ of Mind

Associated Press Logo

The Associated Press

Soon, reporters at the Associated Press will be equipped with smart phones enabling them to simultaneously report news across all social media platforms, according to insiders at the global wire service.
 
AP reporters, trained to write, will be able and directed to capture video, take wire-worthy photos, tweet live from a news event, and of course, “phone in” stories as appropriate. Incorporating video alongside online news is not exactly brand new, although wire service reporters trained on how to shoot video is something of a paradigm shift in the media reporting business.
 
AP’s move is indicative of the changing media landscape and how some news outlets are responding to today’s highly competitive, multi-media news cycle.  Although wire services have remained relatively unscathed in this new media environment, mostly because of their ability to produce and distribute 24-hour news coverage, editorial staffs still have been cut, and long gone are the days of simply filing news for the next day’s newspaper.
 
What’s interesting is the growing use of video in online news coverage, not to mention how traditional journalists are embracing this medium.  Ironically, a recent survey by PR Newswire found that 75 percent of journalists want to use video when gathering news.  This is a sharp contrast compared to only 43 percent of communications professionals who say video is important to journalists.
 
Video is new again. This is primarily due to the Internet and inexpensive technologies that enable people to shoot, edit and post good quality content.  More than 40 billion videos are viewed in the U.S. each month, says Jonathan Taplin, clinical professor at USC’s Annerberg School for Communication.  There’s also great value, too.  Videos can be shared with key audiences and picked up by online media, but most importantly, the content creates a deeper bond with viewers.  That’s why movies will never go out of out of business.
 
The lesson here is that video dramatically has changed the media landscape.  Remote multi-media reporters with real journalism experience will be the new modern day correspondents of the 21st century. While this sounds like a futuristic science fiction movie plot, the reality is that it’s happening now, not tomorrow or in the near future.

 

George Medici, gmedici@pondel.com