Heard During the Breaks

Often at professional conferences, the stuff one hears during the breaks and at the cocktail hour is more valuable than the content in some of the formal presentations. I’m not talking about gossip, but real trends and ideas that have practical use.

Here are a few random items worth thinking about that I jotted down from corridor and cocktail talk at the recent annual conference of the National Investor Relations Institute’s Senior Roundtable:

  • Cordial intervention with activist investors usually does more good than harm.
  • Certain things in a 10K or 10Q just cannot be easily explained in writing and can best be conveyed by a CEO or CFO at an in-person meeting.
  • Try participating in a reverse road show, where the portfolio managers come to you in small groups, often as sponsored bus tours in bigger cities with several public companies in relatively close proximity. It saves your CEOs and CFOs much time and expense.
  • How investment banks get paid by the institutions for helping to provide corporate access—a function that IR professionals formerly held—is under increasing scrutiny. Many CEOs and IROs do not even know that the banks get paid for this service.
  • Sustainability is gaining steam as a topic that public companies must pay closer attention to, but for which few in the C-suite really want to take responsibility. It could be a function that IR professionals should grab.
  • Watch for board tenure to become among the latest hot governance topics, regardless of whether the directors are doing their jobs well.
  • Activists usually operate in packs. So even if an activist only owns 1% of your shares, pay heed, because behind those shares could be a much bigger percentage from friends.
  • Boards must discuss continuous shareholder value improvement. It’s their job and does not mean they are being promotional.
  • The buy side, unless an index fund, regards access to management as part of doing proper due diligence—whether they are invited to the table by an IR professional, an institutional salesperson or a sell-side analyst.

As with most conferences, this one also had a motivational speaker who was not there because of the subject matter, but rather to re-charge the batteries of the attendees.  Yes, he wrote a book and did a signing. Since the conference was a private affair, however, you’ll have to call me if you want his or his book’s name.  It’s a quick, easy read, and I will take the liberty of ending this post with a thought from the book that I particularly like about the stresses we all endure in our jobs and having the right attitude:  “We are all lucky that we get to go to work each day…rather than we got to go to work.”

–Roger Pondel, rpondel@pondel.com

What Gates Learned from Buffet

After helping hundreds of companies with investor relations strategy and tactics over the past 20-plus years, I’m always excited to learn something new.  In fact, I try to learn something new every single day.  And, at the family dinner table, amongst the questions we ask one another every night is, “Did you learn anything new today or did anything surprise you today?”  So, when I came across this Business Insider article of a post Bill Gates made on LinkedIn about three things he learned from Warren Buffet I was intrigued.  After all, what could a genius in his own right learn from another?

  1. It’s not just about investing. Gates explains that although most people ask Buffet about how he thinks about investing, not nearly enough ask him about how he thinks about business. Rather than just being a brilliant stock picker, Buffet says it’s important to look at an entire business, inside and out and then deciding what it is worth. He says you have to be, “willing to ignore the market rather than follow it, because you want to take advantage of the market’s mistakes.” Outside of business and the stock market, this sounds like a pretty good life lesson. Don’t make decisions in a vacuum.
  2. Use your platform. Buffet often uses his annual report shareholder letter to deliver his messages. In these letters he speaks frankly and is not afraid to criticize those things he doesn’t believe in. Gates says that, “Warren inspired me to start writing my own annual letter about the foundation’s work. I still have a ways to go before mine is as good as Warren’s, but it’s been helpful to sit down once a year and explain the results we’re seeing, both good and bad.” Life lesson number two: Remain true to who you are.
  3. Know how valuable your time is. “No matter how much money you have, you can’t buy more time,” says Gates. Truer words were never spoken. Buffet only takes meetings that provide value to all participants and makes sure he’s also available and accessible to “the people he trusts.” Lesson number three: Make every minute count.

None of these lessons is earth shattering, but it’s very interesting to see that even Bill Gates finds worth in them and that he’s not afraid to say that he learned them from Warren Buffet.  No matter how intelligent you are (or think you are), take some time to listen to those around you and open your mind.  You might just learn something that helps shape your business future.

– Laurie Berman, lberman@pondel.com

Listen, Understand, Communicate. (Repeat)

Glass Lewis and ISS recently released new guidelines for the 2015 proxy season, which go into effect for shareholder meetings held on or after January 1, 2015 and February 1, 2015, respectively.

The new guidelines put greater emphasis on protecting shareholders’ rights with respect to bylaw/charter amendments, litigation, and shareholder proposals, as well as increased qualitative and quantitative scrutiny on executive pay and equity plans.

With shareholder activism continuing to rise and Glass Lewis and ISS guidelines increasingly defining how boards should conduct business, what should companies be doing to prepare for next year’s proxy season?

Here are three simple strategies for making sure your company is ahead of the curve:

  1. LISTEN. Do you know how your investors are feeling about the company and its progress…not just after you send out your proxy, but throughout the year? How often does your IR team engage with investors – not just to update them on your story but to also get feedback from them on management, company progress, etc.?There are two types of companies that typically get widespread voter turnout during proxy season: those whose management spend a lot of time listening to their investors…and those who spend virtually none and find themselves in the middle of a proxy fight.
  1. UNDERSTAND. Understanding your investors’ investment goals and philosophy can go a long way in learning how to most effectively communicate your company’s strategy and actions – before, during and after proxy season. Leverage your IR team and proxy advisory firm to help you gain a clear understanding of the investors who own your stock:
    • Breakdown of the types of investors holding your stock (retail, quantitative vs. qualitative buyside)
    • Buyside investors
      – How long does this investor typically hold? What price targets or corporate developments could cause them to exit your stock?
      – Have they been activist in the past? If so, what were their trigger points
      – What is the investment thesis of the firm? What are their typical entry and exit points? What factors led them to making the decision to buy your stock or increase/decrease their position?
      – Who is the decision maker at the firm? How do they prefer to communicate with the company –and how often?
      – Does this investor subscribe to Glass Lewis or ISS for voting recommendations? Who within your buyside investor’s firm is responsible for voting their proxy? (In many cases, it’s not the person who made the decision to invest in your stock.)
    • Glass Lewis and ISS
      – Is your management team and IR team up to date on the latest guidelines?
      – How do your current policies or potential proposals match up with ISS and Glass Lewis’ recommendations?
  2. COMMUNICATE. Strong shareholder relationships start with a commitment to communication. Waiting until proxy season starts again to talk to a dissatisfied shareholder – or any shareholder – is often too late.
    • Communicate with your investors regularly (especially with the ones who are unhappy)
    • Communicate to your board on investor sentiment and feedback quarterly.
    • Be positive and responsive to investors who request talking with your board. The best way to start a proxy fight is to ignore or dismiss a disgruntled shareholder.
    • Be proactive in communicating with Glass Lewis, ISS and shareholders on sensitive proposals

– E.E. Wang, ewang@pondel.com