Let Your Voice Be Heard

With little fanfare or media coverage, the U.S. Securities and Exchange Commission last week said that for the next 60 days it is seeking public comment on disclosure requirements relating to a host of management, security holders and corporate governance matters.

SEC Chair Mary Jo White is leading a charge to address outdated and redundant disclosure requirements for the benefit of the nearly half of all Americans, who in some form, own stock in publicly traded companies—from direct ownership of individual securities, to ownership through 401-K and pension plans, IRAs, mutual funds and ETFs.

As part of the SEC’s “Disclosure Effectiveness Initiative”, the Commission wants to be certain that information disclosed by public companies and relied upon by investors to buy, sell, or hold, is as clear, accurate and comprehensible as possible, conveyed in a manner that is timely, and delivered making best use of today’s technology.

Amendments being considered address outdated and redundant disclosure requirements, and providing investors with what they need to make informed decisions.

Granted, for most Americans, revamping public company disclosure practices may not be one of the most important issues facing the world today. But if you are reading this blogpost, you likely are reasonably close to the heart of this matter, so let your voice be heard. You have until the end of October to do so.

Roger Pondel, rpondel@pondel.com

Read This Before Posting

I was listening to Marc Maron’s WTF podcast the other day when he equated the word “content” to corporate detritus that clogs up the Internet and bombards people with useless information. I don’t think you can make a blanket statement and say that anything deemed “content” is rubbish, but I do agree that there is a glut of content on the Internet that lacks substance.  It is also becoming increasingly difficult to distinguish “sponsored content” from content that is published without strings attached.

For example, a story that runs on WSJ.com about the virtues of an organic diet could be defined as content, although a journalist most likely synthesized the information to present an objective sequence of thoughts about this particular subject. Juxtapose a WSJ.com story with a sponsored blog post on the Huffington Post about the merits of an organic diet, and the word “content” takes on new meaning.

But is there truly a difference between paid content and content that isn’t sponsored?

The unsponsored content found in mainstream media and trade publications has often been influenced by the very advertisers (or sponsors) and subscribers that pay for the content to be produced in the first place.  And yet, I have to agree with Maron that the word “content” is beginning to smack of something manufactured, manipulated, and ultimately, unworthy of a read.

At PondelWilkinson, we are often in a position to create content, whether it is writing a press release, posting an image on a blog, or publishing a tweet. We strive to ensure that the content we create is substantive; to do that, we think obsessively about every single detail, including word choice, the audience, and the best way to deliver the content.

To help encourage the publishing of quality content, following is a list of items to consider before hitting “post.”

  • Know your audience. The best way to ensure your content is connecting with its intended audience is to know who you are targeting.
  • Write with intention. Writing a blog post with a goal in mind, a thesis to prove, a point of view to express will help ensure the content resonates with readers.
  • Pay attention to detail. Word choice, grammar and focus matter when asking someone to read something, even if it is 140 characters or less.
  • Provoke interest. Let’s face it, anyone can write or publish something on the web. Ask yourself if what you are writing is provocative or original.
  • Review analytics. Almost anything published online leaves a footprint. Understanding what analytics matter and whether you are hitting the right target audience will help you know if your content is worthwhile.

– Evan Pondel, epondel@pondel.com

Nudge, Nudge…Wink, Wink

Once upon a time I was an idealistic investor relations professional who assumed that when Reg FD (Regulation Fair Disclosure) was enacted in 2000, all public companies would follow the SEC’s initiative to the letter of the law.  No speaking to one before speaking to all, at least where material, previously undisclosed information was involved.

Did Reg FD have the impact the SEC was hoping for – a more level playing field? In 2001, CFO magazine quoted Boris Feldman, a securities attorney at Wilson Sonsini Goodrich & Rosati as saying, “Is the market better informed?  Of course not.  There’s more transparency, but less meaningful information.”  The article went on to say that in that year’s fourth quarter there were nearly 800 pre-announcements because “analysts are less likely to be told on the QT to shade their estimates.”  The Pepperdine Law Review in 2002 surmised that “the only thing that has changed is the amount of securities regulation operating on American markets.  The investors are no better off; the analysts are no worse off; the lawyers are the only ones who may have benefited.”

Although I could not find many examples of how Reg FD has benefited corporate disclosure or the investment community at large, there are many examples of the SEC’s enforcement of the rule. To name a few, in 2007 the SEC contended that Office Depot’s then CEO and CFO selectively disclosed to analysts and investors that the company would not meet analysts’ earnings estimates.  Office Depot paid a $1 million fine to settle the allegations.  In 2013, the SEC charged the former head of investor relations for an Arizona-based company for giving certain analysts and investors a heads up about an upcoming major development.  He paid a $50,000 fine.  Last year Bloomberg reported that since Reg FD’s beginnings, the SEC has brought 14 enforcement actions.

Today, the practice of meeting one-on-one with investors appears as robust as ever. In addition to non-deal roadshows, companies routinely present at broker-sponsored conferences with individual meetings sprinkled throughout the day, while one-on-one phone conversations between companies and their investors happen multiple times a day, every day.  What’s being said during these conversations?  According to a new article in the Wall Street Journal, Barry Diller, chairman of Expedia and IAC/InterActiveCorp, “analysts and investor-relations executives work together to keep estimates low.  ‘It is a rigged race,’ he says.”  The supposition is that companies send signals to analysts to ensure the companies meet or beat quarterly Wall Street expectations.  An analysis by the paper found that after the end of a quarter, earnings estimates often decline steadily.  The Journal looked at daily changes in analysts’ estimates at S&P 500 companies since the start of 2013 and compared them with what the companies actually reported for each period.  In nearly 2,000 instances, companies “would have missed the average earnings estimate if analysts hadn’t changed their numbers in the 40 trading days before the company’s quarterly earnings report.”

To avoid the potential of selectively disclosing material information, in this case where revenues and EPS will land in any given quarter, many companies have adopted stricter quiet periods and formalized processes related to analyst and investor communication. The idealist in me wants to believe that more companies than not adhere to the rules and don’t give some an unfair advantage over others.  However, while I in no way condone running afoul of securities law, the hardened realist in me thinks there will always likely be some nudge, nudge…wink, wink.

– Laurie Berman, lberman@pondel.com