Influence Ebbs for Proxy Advisers

JP Morgan

Influence is waning from firms whose mission, in part, is to recommend how investors should vote in corporate elections, The Wall Street Journal reported last week.  In one striking example, the roles of chairman and chief executive officer remained as one at J.P. Morgan Chase after a widely publicized contest, even though the two largest proxy advisers were in favor of splitting it.
 
Institutional Shareholder Services Inc. and Glass Lewis & Co. have long been key influencers when it comes to recommending votes, but with nearly 30 percent more proxy contests in May than last year, issuers have become a lot savvier about engaging investors before entering proxy season.
 
And rightly so.
 
The WSJ citing ISS said investors were able to secure board seats 73 percent of the time this season, compared with 56 percent last year. Nevertheless, issuers that are showing their muscle are starting to win, as was the case with J.P. Morgan.
 
It’s always easy to come up with a “should-a, could-a” list following proxy season.  But one prevailing concept should stick with issuers year round:  a well-devised investor communications and engagement plan helps ensure that management’s side of the story gets heard.  And if such a plan is implemented long enough in advance, investors will take the time to listen and come to their own conclusions long before the ballots are cast.

 

– Evan Pondel, epondel@pondel.com
 
 
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Any PR is (not) Good PR

We often hear the phrase, “Any PR is good PR,” but I’m convinced that negative PR will eventually cause a business to lose customers and flounder. I’m guessing the owners of an Arizona bakery feel different. What else could explain the mind-blowingly trenchant behavior of its owners, currently waging war on the social media front with, well, pretty much the entire free world.
After bombastic Arizona bakery owners Samy and Amy Bouzaglo got the boot from Gordon Ramsay on “Kitchen Nightmares,” they decided that sparring with every human being with Internet access would be a good idea.

Gordon Ramsay in 2010.

Gordon Ramsay in 2010. (Photo credit: Wikipedia)

 
When negative comments about the bakery brats appeared on Reddit, Facebook and Yelp, calling the Bouzaglos rude and arrogant during their reality TV performance, the couple had the brilliant idea to go on the attack, railing against reviewers and going on a rampage against Yelp and Reddit posters, threatening legal action and calling them idiots, morons and every other name in the book.
 
Can you say PR 911?
 
The latest twist from Amy’s Baking Company is a claim that all of their social media was hacked, and that someone else manufactured this social media temper tantrum. Hmm, that’s really not going to pass the smell test when in 2010, the Bouzaglos responded to a bad review on Yelp, telling the poster, “Do US a favor and keep your ugly face and your ugly comments to yourself and go back to the restaurant that you really work at!!” Their credibility already has been torpedoed by their “Kitchen Nightmares” misbehavior, so the “hacked” excuse holds no water. Furthermore, when a loose cannon like Gordon Ramsay thinks you’re too insane to work with, that’s not a good sign.
 
These two gems are so over the top, it makes you wonder if it’s all an act and that the show’s producers created these Frankenstein’s in an effort to boost ratings.
 
Whatever the case, Amy’s Baking Company could hire the best crisis communication team in the country and it probably wouldn’t make much difference. What they need at this point is a time machine, not a PR firm.

 

– Ron Neal, rneal@pondel.com
 
 

Who Do You Trust?

You say “po-tae-tow,” I say “po-ta-tow.” You say “tow-mae-tow;” I say “tow-ma-tow.”

An accent is one thing, but how can two respected financial organizations come to such disparate conclusions? A look at the overview comments by each tells a fascinating story:

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(Photo credit: Wikipedia)

Morgan Stanley, initiating coverage, says “Buy.” And Zacks, on the same day, with the same stock, says “Sell.”

Zacks:

  • “Disappointing results and rising regulatory concerns”
  • “Company has disappointed its investors in each of the last four quarters”
  • “We would advise investors to stay away from this stock for the time being”
  • “Longer-term recommendation of ‘Underperform’”

Morgan Stanley:

  • “Regulatory concerns are overblown”
  • “Compelling entry point”
  • “Underappreciated growth opportunity”
  • “Valuation does not reflect strong growth potential’”

Without mentioning the stock by name, since it is one of our clients, the recommendations just go to show how widely analysts can differ in their assessments of the same security, and how carefully investors should scrutinize recommendations when making investment decisions.

What happened to the stock on the day these opposing recommendations were issued? It went up.

 

Roger Pondel, rpondel@pondel.com 

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Investor Communication Gets Creative

Lotta Value.jpg

Cheers or jeers for Loews?  The holding company that provides business insurance, operates hotels and produces energy, recently stepped outside the box and created a comic strip to connect with investors.  With such a diversified business, it may make sense that Loews is testing new communications methods and aiming to simplify its message.  Or does it?

According to a recent BloombergBusinessweek article, the idea came to CEO, Jim Tisch, during a discussion with Loews’ annual report designer, during which he was considering a more engaging way to present company information versus more typical (and some may say tedious) measures. The Adventures of Lotta Value, Investment Hunter!” is meant to help retail investors decide whether to invest in Loews. The comic takes readers on a journey to find the key to the company’s success, which is “tucked away in vaults at each subsidiary.”

Loews is not the first company to experiment with catchy means to speak to external audiences. In conjunction with its 2012 user conference, dubbed SuiteWorld, NetSuite President and CEO Zach Nelson, and Founder, Chief Technology Officer and Chairman of the Board, Evan Goldberg, utilized a humorous video to discuss the company’s business.

What’s next? “A organ opera reporting on its latest fiscal year, a Facebook poetry slam, an IBM string quartet, or an Herbalife ballet,” pondered Stanford Law School professor and a former member of the Securities and Exchange Commission, Joseph Grundfest, in the BloombergBusinessweek article.

As long as public companies continue to use formal and approved outlets for disclosure of material information, finding an effective way to fight through the clutter and noise, and make investors smile along the way, deserves a big cheer from me.

 

Laurie Berman, lberman@pondel.com