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

 

 

 

PW Clients Mistic and Rentrak Score Top Honors at PRSA Awards

PondelWilkinson clients Mistic and Rentrak recently received top honors at this year’s PRSA-LA PRism awards.PRSA awards

A client since 2013, electronic cigarettes brand Mistic® was recognized with the 2014 PRism Award for news release writing for its 2014 American E-Cigarette Etiquette Survey. Earlier this year, PR Week did a feature highlighting PondelWilkinson’s work on Mistic’s IndyCar campaign.

“This year’s award represents the second time this year that the Mistic team has been recognized by the PR industry,” said Todd Millard, Mistic co-founder and COO. “Not coincidentally, George Medici and the team at PondelWilkinson have been a key partner in working with our leadership to develop and implement Mistic’s strategic PR program, which has helped us in our on-going efforts to expand awareness of our company and products.”

Rentrak (NASDAQ:RENT), the entertainment and marketing industries’ premier provider of worldwide consumer viewership information, received the 2014 PRism Award  of Excellence for Annual Report – Corporate. The award was especially gratifying for the PondelWilkinson account team, who have worked with Rentrak for more than six years.

“It was a great honor to work with Rentrak’s talented marketing team on this year’s annual report,” said Laurie Berman, managing director for PondelWilkinson. “I enjoyed collaborating with the team to develop messaging that complemented the original report design they created in-house. Working together, we created an annual report that not only was visually impactful, but meaningfully communicated Rentrak’s corporate progress and achievements to its stakeholders.”

Congratulations to all of this year’s PRSA PRism winners!

– E.E. Wang, ewang@pondel.com

Glassdoor: Half Full or Half Empty?

glassdoorDuring the last couple of years, a website called “Glassdoor” has steadily garnered more credibility as a Yelp-like resource for job seekers, as well as a recruiting arm for employers. The former is what really drives attention to the site because you can easily search for information about average salaries, benefits, and CEO approval ratings at almost any company you can imagine.  The information is supplied by current and former employees and can be quite illuminating when formulating an opinion about a particular company.

For example, Walmart has been reviewed more than 8,700 times on Glassdoor, with 44 percent of reviewers recommending the retail giant as an employer, 47 percent approving of the CEO, and 31 percent having a positive business outlook about the company. Walmart’s overall rating: 2.8 stars out of five.

And then there is Facebook, which has an overall rating of 4.5 stars, with 89 percent of reviewers recommending the company as an employer, and a staggering CEO approval rating of 96 percent. Not sure about you, but if I had to pick one of these employers simply based on Glassdoor reviews, I’d go with Walmart. Not.

The point is, Glassdoor has become a powerful force in shaping a company’s online reputation, and it is not only job seekers who are leveraging the information – try customers, potential business partners, and, yes, investors. Think about the implications of a publicly traded company growing like gangbusters and then a former or even existing employee posts some sort of harrowing tale about the sausage being made.  So now what?

You call PondelWilkinson. OK, maybe that sounds too self-serving.  Yes, we can help put together a communications strategy on how best to deal with errant Glassdoor reviews, but more importantly, companies cannot ignore Glassdoor.  For good or for worse, it is shaping reputations faster than a viral video of a laughing snowy owl.  And it is not going away.  As of last month, Glassdoor had more than 6.5 million company reviews.

Quick tips for dealing with Glassdoor:

  • For starters, take a look at what people are saying about your company. Some of the information may be constructive and some of it, complete rubbish. Glassdoor apparently reviews all content before it is posted, but if something looks completely off, you should contact the site immediately.
  • Consider engaging in the conversation. Companies are able to respond to what is being said about them, but be forewarned, this could be a slippery slope once a precedent is set that you will actually engage with folks.
  • If you feel positive about your company and you know others do, too, post away and drive your company’s ratings up.

Interestingly, Glassdoor does profile itself on the site. The company has an overall rating of 4.7 stars, and CEO Robert Hohman’s approval rating is 98 percent.

Guess Mark Zuckerberg has some competition.

– Evan Pondel, epondel@pondel.com

Scholarship Defines Firm’s Legacy

Cecilia Wilkinson, who died in 2006, was a founding member of PondelWilkinson Inc., having joined the predecessor firm following her graduation from the University of Southern California, and enjoying an illustrious investor relations and corporate public relations career that spanned 25 years.

A nationally renowned industry leader, Cecilia has been honored since 2007 with an endowed scholarship fund in her memory for graduate students at the USC Annenberg School for Communication & Journalism.

Dale

Dale Legaspi, recipient of the 2014 Cecilia Wilkinson Memorial Scholarship, during a staff meeting at the offices of PondelWilkinson in Century City.

Each year, the Cecilia Wilkinson Memorial Scholarship is awarded to a first-year strategic public relations graduate student with an interest in corporate/investor relations and reputation management.

We recently had the pleasure to meet this year’s recipient, Dale Legaspi, a graduate student at Annenberg, who is now studying to obtain a master’s degree and merge his professional communications experience with a new set of expanded capabilities.

“We are delighted to be able to continue Cecilia’s legacy by helping talented individuals such as Dale, who are pursuing advanced careers in our sector,” said Roger Pondel, the firm’s CEO since 1986, who worked with Cecilia for nearly her entire career. “We are uniquely positioned to mentor these students who are studying a specialization that encompasses traditional and social media, along with Wall Street and financial know-how, as we help tell our clients’ stories to key audiences, both on Main Street and Wall Street.”

Legaspi already has nearly a decade of professional experience, having worked at two boutique agencies and as a freelancer, representing a variety of companies across the technology industry, including mobile and wireless, carrier and enterprise networking, cloud, data center and security.

Wilkinson earned master’s and bachelor’s degrees from Annenberg, where she later taught undergraduate and graduate classes as an adjunct professor. She was honored with the school’s Distinguished Journalism Alumni award, served on the Board of Governors of the USC General Alumni Association, and was a former president of the Los Angeles chapter of the Public Relations Society of America.

– George Medici, gmedici@pondel.com

Here’s Lookin’ Atchya

“Yorp photou don’t want to hear from us, since nothing good is going to come out of it.”

If those sound like fightin’ words, they are. They were spoken by Jay D. Hanson, one of five members leading the Public Company Accounting Oversight Board (PCAOB), www.pcaobus.org, affectionately referred to in corporate circles as “Peek-a-Boo.”   Like in “Peek-a-boo, I see you.”

Hanson spoke recently to an almost standing-room-only crowd at a half-day conference for audit committee members and CFOs of publicly traded companies, sponsored by PondelWilkinson in conjunction with the University of California, Irvine.

The PCAOB was established by Congress in 2002, following passage of the Sarbanes-Oxley Act (SOX), to oversee audits of public companies. SOX required that auditors of U.S. public companies be subject to external and independent oversight for the first time in history. Previously, the profession was self-regulated. The Board was created in response to the increasing number of accounting “restatements” (corrections of past financial statements) by public companies during the 1990s, plus the high profile accounting scandals and record-setting bankruptcies by large public companies, notably those in 2002 involving WorldCom and Enron.

“We cannot put people in jail, but we can end careers. We often ask candid questions that make executives squirm.” Hanson said. “Our focus is on internal controls. The most prevalent problems involve guidance, revenue recognition and fair value issues. It is surprising how many CEOs admit they have taken their eye off the ball when it comes to these matters.

“Particularly for small and medium-size companies, being on an audit committee is the hardest job in the boardroom today. Members increasingly are being targeted for lawsuits. And don’t forget cyber threats, as we all see more regularly on the news, impacting millions of people,” Hanson added, seemingly out of context as a thought he did not want to forget to convey. He duly noted that CFOs and audit committee members can also be seen as responsible for such maladies as well.

The Board’s mission is to protect the interests of investors and further the public interest in the preparation of informative, accurate and independent audit reports. It also oversees the audits of broker-dealers, including compliance reports filed pursuant to federal securities laws, to promote investor protection. All PCAOB rules and standards must be approved by the U.S. Securities and Exchange Commission, and although the Board has no authority over public companies, PCAOB work has wide implications for public companies and their audit committees.

Hanson’s parting advice: “Go beyond minimal requirements and make good use of these three verbs: explain, clarify and disclose.”

Other sponsors of the conference included independent auditing firm Squar Milner; law firm Paul Hastings; financial printer RR Donnelley; and insurance brokerage AON.

– Roger Pondel, rpondel@pondel.com

Paying Attention to IR Infrastructure Pays Off

News of the unintentional early release of JP Morgan’s earnings—nearly four hours before its scheduled distribution—is one of the more recent “fat finger” mistakes to occur in the investment world.  Similar instances transpired with Google and Gap that put a spotlight on investor relations infrastructure, something that typically goes unnoticed by investors, but is as close as lips and teeth to an IR professional.

It is easy to see how human error can enter the equation:  flawless execution is required at wire service providers, IR website providers, conference call and webcast vendors – and the need to publish company-curated content, in most cases, simultaneously with other communications.

As the number of communication channels grows, these gaffes, along with others at Disney and NetApp, highlight the need to regularly evaluate IR infrastructure and protocols, whether on the road to an IPO or as a seasoned issuer.  Creating a strong set of internal policies, procedures and controls is a solid first step to assuring optimal technical performance.

– Matt Sheldon, msheldon@pondel.com

Book Review: ‘Flash Boys’

flash-boysMuch is bandied about in financial media on high-frequency trading (HFT) and the implications for institutional and individual investors. The overarching thought is that the capital markets are gamed by high-frequency traders, known as flash boys, and there isn’t anything we can do about it, unless, of course, you’re a portfolio manager who decides to trade on an exchange that is devoted to evening out the playing field. That is what IEX is attempting to do, as the first equity-trading venue dedicated to eliminating the predatory practices of HFT. A new book by Michael Lewis entitled “Flash Boys” provides readers with a glimpse of this esoteric world, and PondelWilkinson’s Evan Pondel reviewed the book for IRupdate in this month’s issue.

Diversity Growing in Corporate America

Earlier this week we tweeted about the rise of women in the boardroom. The topic is pretty interesting to me so I figured this was a good place to share some views.

 

CFO recently reported that nearly one out of every three board nominees at Fortune 500 companies is a woman. According to a study from Institutional Shareholder Services, the number of women being tapped for board positions at the country’s largest companies has doubled in the last six years. Further, new board nominees at Russell 3000 companies were 22 percent female in 2014, again, doubling from 2008.

 

With board diversity a hot button among investors, it’s not altogether surprising that some companies are widening their approach to identifying new nominees. The Pax Ellevate Global Women’s Index Fund, which invests in companies with a high percentage of gender equality, names a few: Avon (not surprising), The Procter & Gamble Company (again, not that surprising) and Xerox Corporation (pretty surprising). Many would say, however, that it’s not enough. Several companies have been taken to task by activist investors (CalSTERS and CalPERS, for example) and media for maintaining homogenous boards amidst what seems to be growing support for diversity.

 

What evidence is there that diversity in the boardroom makes a positive difference? A blog post from the Harvard Law School Forum on Corporate Governance and Financial Regulation offers the following thoughts, among others:

 

• “Diverse boards engage in richer and ultimately more effective discussion and debate. People of diverse backgrounds bring different perspectives, experiences, concerns, and sensibilities to the boardroom.”
• “Directors of diverse backgrounds ensure that the perspectives and concerns of often-ignored constituencies are represented in board discussions.”
• “The presence of female and minority directors sends signals to various constituencies about a company’s values. Those constituencies include employees at all levels, customers, communities, regulators and other government actors, and the public.”
• “A company that does not have a diverse board is failing to tap into a significant part of the relevant talent pool, and is therefore likely to be less effective.”

 

For more tangible evidence, Business Insider reports that “Companies with women on the board crush companies that are only men.” Citing an older report by Credit Suisse, companies with market caps of more than $10 billion that have at least one woman on the board of directors, outperformed those with no women 26% from 2005 to 2011. A few years later a Thomson Reuters study revealed that the stocks of companies with mixed-gender boards have outperformed, on average, companies with no women on their boards.

 

Whether the evidence is empirical or anecdotal, I think we’d all agree that diversity – in all walks of life – is a good thing. My advice for any company is to broaden your search parameters, embrace variety and be a leader in effecting change. But, remember, diversity for diversity sake is not the best policy, so choose the best man (or woman) for the job.

 

– Laurie Berman, lberman@pondel.com