When it Bleeds, it Leads

When I started at The Wall Street Journal Online in the 1990s as a wet-behind-the-ears news assistant, I can still recall one of my editors making a crack in the newsroom about “when it bleeds, it leads.” The market had experienced a steep sell off that day and my editor was in the throes of putting a headline on a story about the blood bath stocks had taken.

The recent market volatility harkens back to the all-consuming frenzy that permeated the newsroom when the Dow dropped in a big way, and it got me thinking: Are financial journalists partial to writing stories about negative news, and if so, does that provoke even more irrational fear in the market?

To gain some insight on what people think, I decided to engage Twitter’s polling option, which is free if you tweet the poll to followers.  I wanted to drum up more than five votes, so I paid Twitter to promote the poll.  Following are the results:

 

Even though the question elicited 295 votes, the results were not very conclusive.  Nearly a third of respondents believe that media are more inclined to publish stories about a bear market, and the same goes for a bull market.  At the same time, 44 percent of voters claimed media are indifferent about publishing bull or bear market news, which is where I take issue.  Call me a curmudgeon, but I do believe that media are more inclined to publish negative news, after all who wants to read about positive news unless puppies are involved?

The German word schadenfreude comes to mind, which means to take pleasure in someone else’s misery.  A lot of folks have made a lot of money in the stock market during the last several years, and quite frankly, this recent correction may be validating for all of those other folks who haven’t been able to generate solid returns.   Getting your comeuppance on Wall Street is a sexy story to tell these days, with the hit movie “The Big Short” drawing hordes of crowds, not to mention Martin Shkreli’s rise to fame as the hedge-fund-turned-pharma-exec devil incarnate.

I fully support holding fraudulent companies, executives and anyone else in the capital markets accountable, although finding that balance can certainly be difficult when journalists’ salaries are miniscule relative to what folks make on Wall Street. Perhaps the only way to ensure that financial media are less biased toward writing bludgeoning stories is to get their salaries more in line with the people they cover.  And who knows, that might help ameliorate market volatility and put more money in the hands of everyone.

– Evan Pondel, epondel@pondel.com  

What Does it Take?

Over the past several months, I’ve given a lot of thought to what it takes to be a good investor relations practitioner. After more than two decades of helping companies through the trials and tribulations of being public, I’m not that surprised that many of the following characteristics or traits that are important cannot be learned from books, on websites or through advanced degrees.

  • Knowledge: Strong working knowledge of financial statements/rules and regulations/capital markets. This one is a no-brainer. It’s hard to do the basics of investor relations without the requisite comprehension of what it means to be a public company.
  • Analysis: Always be ready to review a situation, operating peer or balance sheet with a sharp and analytical mind. Data is readily available, but proper analysis of that data is priceless.
  • Juggling: I don’t mean apples, balls or in the case of a former client, coconuts, but instead deftly managing deadlines, priorities and multiple personalities (hopefully from multiple people, not just one). If you work at an agency, extra points for having to do the above for many clients at one time.
  • Patience: When your stock is dropping, the phones are ringing off the hook and your email is pinging every 30 seconds, it’s important to remain calm when talking to investors and working with management to solve the problem du jour. Everyone has their own ideas, solutions and timelines, so being able to take in all of the information necessary to make the best decision with poise, is key.
  • Brevity: Executives and investors are busy. Say what you need to say quickly and precisely. Get to the point, and get out. This holds true whether your communication is written or verbal.
  • Strong Shoulder: There will be many times throughout your career when a colleague, client or senior executive needs a sounding board and someone to lean on. CEOs are people, too, so when a company is facing challenging times, or a solution is hard to come by, just being available to listen is immensely helpful. I have spent many afternoons as therapist versus press release writer, but those are the times I realize that I am truly part of the team.
  • Sense of Humor: When all else fails, laugh. It’s contagious. Almost nothing is insurmountable, so a little lightheartedness helps everyone reset and refocus. Investor relations is not an easy profession, so have fun with it.We’d love to hear what other traits are important. Let us know in the comments section.

– Laurie Berman, lberman@pondel.com

Hello 2016

We’re excited to usher in 2016 and looking forward to keeping you informed on this blog about all things relevant to investor relations, strategic public relations and Julia Child’s secret recipes.  Now that your ears are perked, following are a couple of interesting tidbits from PondelWilkinson.

  • Evan Pondel recently wrote the cover story for IRupdate magazine on how to think like an activist.   He interviewed Chris Kiper, founder of activist firm Legion Partners, for a rare look at his playbook.  Check out the story on page six of the issue.
  • PondelWilkinson volunteered a couple of weeks ago at Working Dreams’ Holiday Toy Event, where PW helped foster children select presents that were donated to the organization.  Following is a picture of the team.Working Dreams
  • And last but certainly not least, Roger Pondel wrote the following New Year’s resolution on transparency.

2016 Resolution: Don’t Forget the Transparency

At the risk saying, “We told you so,” 2015 proved to be a year when companies that failed to heed our mantra, Transparency Adds Value, took it on the chin.

Whether privately owned or publicly traded, in times of crisis or when all is going well, transparency always pays off…period. And the lack thereof, almost always backfires bigtime.

Probably the year’s biggest lack-of-transparency story was Volkswagen’s emission-cheating scandal that actually began more than 10 years ago, long before the news broke. I guess it’s hard to keep those kinds of secrets forever. Want to buy a VW today? How ‘bout an Audi?

In our business, people sometimes have the misimpression that it’s all about spin. (I hate that word, except when it’s part of an exercise class and done to a Latin jazz beat.)

No, it’s not about spin. It’s about journalistic fact finding, developing a communications and messaging strategy, perhaps biting some bullets a la corporate castor oil style…then telling the truth to mitigate the damage and maintain reputation.

And it’s not all about crises. Just look at what happened in 2015 to the valuations of many once-considered-hot, pre-public tech companies that lost billions in combined valuation because of lack of transparency.

Lack of transparency hurts customers, employees and investors alike. And while no one is happy to hear less than stellar corporate news, the market rewards transparency. Companies that do not practice it would do well to heed our mantra in 2016 and beyond.

Here’s to a transparent 2016 that brings peace and prosperity to all!

Overused Words in 2015

The year is coming to a close quickly and reflecting on what we’ve learned in the last 12 monthsuni will hopefully set us up for success in 2016.

Much of our work at PondelWilkinson involves writing, and in the world of investor relations and financial communications, certain words are used more frequently than others in the span of a year.

Following is a top-10 list of the most overused words in 2015, along with (tongue-and-cheek) alternatives for the year ahead.

  1. Disruptive/transformeresque
  2. Unicorn/rhinoceros (two horns are better than one)
  3. Leading/simply the best
  4. Revolutionary/other worldly
  5. Activist/Laird Hamilton (one very active guy)
  6. Deep value/there’s treasure buried in them hills
  7. Emerging/turtle head
  8. Strategic alliance/friends with benefits
  9. Merger/friends with benefits (yes, a repeat)
  10. Consolidation/I crush your head

– Evan Pondel, epondel@pondel.com

For The Love of Polling

think it aboutMedia love polls. Data  helps identify trends that can be turned into stories or support or debunk a particular story narrative.

Polls have become instrumental in helping shape politics. Consider the GOP debates for the 2016 presidential election. Approval ratings are determining what candidate gets national camera time and who doesn’t.

Americans love polls too, unless they are asked, “Would you like to take a brief survey?” We get to find out what is the best-tasting ice cream or coffee, what is America’s favorite color (blue by the way), and that four out of five dentists recommend Trident to their patients who chew gum.

Polling in the U.S. pretty much started in the early 19th century during Andrew Jackson’s second presidential bid when supporters conducted polls at rallies. Much has changed since then, partly because in 1932, George Gallup through a new methodology accurately predicted that his mother-in-law would win a local Iowa election for secretary of state. The rest is history.

Today we have all kinds of polls, and not just political ones. There are straw polls, opinion polls, tracking polls, exit polls, and surveys of all kinds. But can polling really influence decisions? If the majority of Americans say they would vote for a particular candidate, would that sway someone’s decisions one way or another? Many political pundits say that President Clinton was notorious for using polls, but did that comprise a desire for popularity from doing what he believed was right? Whatever the reason, he certainly was one of America’s more popular presidents as the country experienced considerable economic growth and expansion during his tenure.

Polling helps keep the media business alive, and as many PR pros can attest, helps define business stories and trends that are so vital to reporters.

There is much debate on polling in America, some even calling for banning them. General consensus, however, believe otherwise, and say that polls serve a greater good. Another important question is how accurate are polls? Most experts agree that, when done right, they are accurate, which is corroborated by modern history, including Gallup’s 1932 prediction.

One organization that is surveying the attitudes and trends shaping America and the world is the Pew Research Center. Did you know that 51 percent of people across 40 countries including the U.S. believe they already are being harmed by climate change? That number drops to 41 percent among Americans. No doubt these numbers can impact policy making decisions whatever side the climate change debate you sit on.

So, it’s probably safe to say polls are good, unless the next poll shows that they aren’t.

- George Medici, gmedici@pondel.com

Peek-a-boo, I See You

Attention public companies: The Public Company Accounting Oversight Board, affectionately known as “peek-a-boo,” is watching you ever so closely…and wants to see even more of you.

That was the underlying message delivered by PCAOB Board member Greg Jonas as he addressed the recent second annual University of California-Irvine’s Audit Committee Summit, sponsored in part by PondelWilkinson.

“Regulators’ role is to be sure that investors hear the good, the bad and the ugly,” Jonas said. “Our challenge is to be useful and not just get in the way.”

Jonas spoke about the PCAOB’s “concept” issued in July, seeking public comment on 28 potential audit quality indicators to help identify insights into how high quality audits are achieved.

Jim Schnurr, Chief Accountant for the Securities and Exchange Commission, who is responsible for establishing and enforcing accounting and auditing policy and served as the event’s keynote speaker, interpreted the PCAOB’s project as a determining factor of whether additional public company disclosures should be made, particularly regarding greater oversight of management.

“The audit committee is in an excellent position to gain insight into management controls,” said Schnurr. “Avoidance of boilerplate reporting and minimizing the risk of litigation should be high on the directors’ agendas.”

Schnurr offered additional tips for audit committee members that should resonate with management:

  • Focus on effective disclosure
  • Increase the use of hyperlinks in communications
  • Periodically re-evaluate the relevance of disclosure items
  • Use solid judgment about what is not being disclosed
  • Be certain that audit committee members have the bandwidth to properly fill their roles

Two expert panel discussions followed Schnurr’s and Jonas’s addresses. Panelist Bala Iyer, audit committee chair at QLogic, offered a number of suggestions, focusing heavily on three: asking tough questions; trusting management; and taking the time to thoroughly understand the business.

The Sarbanes-Oxley Act of 2002, which created the PCAOB, requires that auditors of U.S. public companies be subject to external, independent oversight for the first time in history. The Board has no authority over public companies, but its work can have deep implications. Here’s looking atchya.

– Roger Pondel, rpondel@pondel.com

Yes, it’s Another Post about Activism

I’ve written about activism before, but a recent blog by Bloomberg Business caught my attention and spurred me to write again.

Though probably not a surprise to anyone, activism is on the rise, at least according to a survey conducted by law firm Gibson Dunn. Halfway through 2015, there were nearly as many activist campaigns afoot than for all of 2014. Further, the number of funds engaging in activist activities was higher for the first six month of 2015 than for the full year last year … 42 versus 35, respectively. According to the study, the most common reason for activist involvement so far this year has been board representation, followed by M&A, with return of capital a distant third. The New York Times recently noted that activist hedge funds now manage more than $129 billion in assets, compared with $29 billion just 10 years ago.

What does all of this activity mean? Is activism good for companies? Does it bring about positive change? A recent Wall Street Journal article asked the question: “Are Activist Investors Helping or Undermining American Companies?” After a comprehensive look at how activism has impacted large U.S. companies (greater than $5 billion in market cap), the resounding answer was maybe. According to the Journal, “Activism often improves a company’s operational results—and nearly as often doesn’t.” So, what’s the point?

As Wendell Willkie, II, visiting fellow at the American Enterprise Institute and of counsel at Steptoe, wrote for Fortune, activism has gone overboard, stating, “In their quest for quick returns, activists make the mistake of forgetting that it takes time and patience to position any company for success.”

A survey conducted by the National Association of Corporate Directors (NACD) reported in Accounting Today, showed that more than 20 percent of corporate board directors said their boards have been approached by activist investors during the past year. However, 46 percent of those polled do not have a plan in place for responding to activist challenges.

What should companies do when faced with activism? Or perhaps the better question is what should companies do before being faced with activism? Warren Buffet believes that “The best way to keep activists away is to perform reasonably well in your business and also to communicate well with your shareholders,” as noted during a speech at Fortune’s Most Powerful Women Summit in Washington.

Willkie says companies should plan for the emergence of an activist by taking proactive steps to increase shareholder value including share repurchases and cost reductions. But what if you can’t head them off at the pass? The Wall Street Journal recommends the growing popular belief that companies should not shun an activist or completely agree to all demands. The NACD survey pointed out that most frequently, boards have expanded compensation explanations in their proxy statements, revised executive compensation plans or implemented (or changed) their dividend and/or stock buyback policies in response to shareholder demands.

In my experience, when an activist comes knocking, most CEOs take it personally and dig their heels in to mount a defense. While that may be the proper response in certain cases, there is no one-size-fits-all solution. Know your shareholder base, treat each investor with respect (activist or not) and carefully evaluate any proposals that are sent to the board to ensure that whatever route you take will ultimately result in a win for the company’s shareholders.

– Laurie Berman, lberman@pondel.com

Join us in Orange County

Some big names in the world of public companies have agreed to share their insights at two fall conferences at which PondelWilkinson is among the sponsors: UCI’s Audit Committee 2015 Summit and the Orange County Public Company Forum.

UCI Audit Committee Summit 2015, October 23

James Schnurr, SEC Chief Accountant, will be flying in from Washington, D.C. to discuss the confluence of significant changes being contemplated or enacted by the SEC and other regulatory bodies that significantly impact audit committee responsibilities. Following Schnurr’s keynote address will be two interactive panel discussions.

The event will take place Friday, October 23, 8 a.m. to noon, at the Pacific Club in Newport Beach, 4110 MacArthur Boulevard. To register, visit merage.uci.edu/RegisterEvent/2015Audit.

Orange County Public Company Forum, November 18

David E. I. Pyott, former Chairman of the Board and Chief Executive Officer of Allergan, will provide his insight into the world of M&A, gained in part, from one of the highest profile M&A deals of the year, when Actavis acquired Allergan, and then changed its corporate name to Allergan. Pyott’s keynote address will be followed by an expert panel from all walks of the M&A spectrum.

The Forum will take place Wednesday, November 18, 7:30 a.m. to 9:45 a.m. at the Westin South Coast Plaza Hotel, 686 Anton Boulevard, in Costa Mesa. To register, please follow this link.

– Roger Pondel, rpondel@pondel.com

If David Letterman was an IR Guy

Perhaps even more unlikely than injuring yourself while playing Mahjong is the sliver of possibility that David Letterman will be leaving his new retirement life to become … wait for it … an investor relations professional. I can’t even imagine what the probability of something like that might look like as a percentage: .00000000000001%?

Source: Mass Communication Specialist 1st Class Chad J. McNeeley

Source: Mass Communication Specialist 1st Class Chad J. McNeeley/Released

What is possible, however, is coming up with one of Letterman’s famed top-10 lists to define key concepts of IR, especially for management teams that are new to life at the helm of a publicly traded company. Following is our initial list, and we encourage you to add to it on Twitter at #LettermanDoesIR.

1. Under promise and over deliver

2. Treat your shareholders with dignity, even if they’re seething with disdain

3. Love (or at least do not fear) thy activist

4. Show investors, don’t tell

5. Strategize, execute, perform, communicate
or
Strategize, communicate, execute, communicate, perform, communicate

6. Transparency wins

7. The numbers will tell

8. Perform, not promote

9. Do not bury the lead

10. The story is the business, not the stock price

– Evan Pondel, epondel@pondel.com

Turn Off Your Ringtone

Preparing clients for media interviews and press conferences are part of what we do every day. As always, one of the first things to remember is turn off your ringtone. It might sound simple enough, but there are countless examples of people forgetting to do so.

Following is a quick selection of my favorites:

Yesterday during a White House press briefing, Siri, Apple’s virtual personal assistant, responded to a reporter’s question on the Iran Nuclear Deal.

Seemed like a fitting answer.

Following is one of Bill Clinton with George Bush being interrupted at a scholarship announcement.

Now that was funny.

And finally, sometimes you just have to “Let it Go!”

Apparently, Sen. Pat Roberts is a fan of Disney’s “Frozen.”

So don’t forget the basics. Before you go on, remember to turn the ringtone off.

– Matt Sheldon, msheldon@pondel.com