Winning a Proxy Contest

Since 2000, the number of activist campaigns launched has increased by more than 500%, according to S&P Capital IQ and Ipreo Research.


In nearly two decades, I’ve seen my share of contentious proxy contests … from both sides of the table.  Here are some of the lessons I’ve learned for developing a winning strategy if you are on the side of facing an activist campaign:


  • No matter what, avoid getting emotional or taking it personally.

For boards and managements faced with a disgruntled shareholder’s demands (whether in the form of a letter to the company or an alternate proposed proxy), it’s understandable to feel like the attack is personal and unwarranted. Maybe your board or CEO has made an attempt to reach out – only to have the shareholder dig in his or her heels or make additional demands (like more board seats, changes in dividend policy, etc.).


It’s easy in those circumstances for frustration and emotions to start to escalate, but a cool head is critical as a board or management team considers the various options available in responding to a shareholder activist’s tactics.


  • Firing the first shot may not give you an advantage.

Unless you’re the activist, firing the first shot in a proxy contest will often do more harm than good. It is the equivalent to picking a fight – one that will likely result in the following:


o   The disgruntled shareholder will most likely become more entrenched and more likely to escalate the fight…and now, you’ve provided the ammunition to attack your position and put you on the defensive.

o   Other shareholders may begin to question whether the company’s management and board are open to shareholders’ concerns and feedback.

o   Employees may begin to question whether the company is stable and can become distracted by any resulting negative media attention.

o   Lastly, firing the first shot often places your board and management into a zero-sum battle with the shareholder and eliminates the likelihood of reaching an agreement or compromise. The only parties who benefit when a proxy fight moves into a zero-sum scenario are the multitude of consultants both sides will have to engage to try and win the war.


In most cases, the best strategy is to prepare for the first shot. By taking a wait and see approach, your team puts itself in a better position to have more options available in choosing a response that will reinforce your team’s credibility and perspective with all stakeholder groups….and force the activist into playing defense.


  • Don’t forget the other stakeholders who will be affected by your actions.

Often, the discussion around a proxy contest focuses on the board and management (“us”) versus the shareholder activist group (“them”).  Other shareholders are often viewed as battlefield prizes to be “won over” and other stakeholders who can influence the vote (such as employees and former employees who hold shares, as well as news media who write on the story) often are forgotten all together.


When developing your battle plan, it’s important to remember that your actions and statements will also be judged by several stakeholders and not just in the context of the vote or the logic of the arguments presented. Important thoughts to consider include:


o   Will our actions and statements be viewed as prolonging or escalating the fight or trying to facilitate a positive and quick resolution?

o   Does this action or statement put us in the role of “emotional instigator” or “cool-headed problem solver?”

o   Will our statements and actions be perceived as being responsive and considerate of shareholders’ interests or for the sake of self-preservation?


  • Keep the big picture in mind.

While it can be easy to forget the “big picture” in the heat of a proxy battle, it’s important that the board remember to always keep in mind its ultimate desired outcomes.  In most cases, the board and management’s ultimate goals are:


a) to preserve shareholder value to the greatest extent possible; and

b) retain majority control over the Company’s strategy.


Each action and reaction should be considered in the context of how it will facilitate bringing the company closer to its desired outcomes in the fastest and most painless way possible.  In a proxy contest, you don’t win points for how many punches or knock outs you can land – but for how you are able to move effectively in bringing the contest to a conclusion with minimal damage to your company.


–E.E. Wang,


Take $tock in Mama Mancini’s Meatballs

You may have heard the radio commercials with Dan Mancini touting his homemade meatballs.  But did you hear the one about Mama Mancini’s being a publicly traded company?


Thirty-second spots recently aired on satellite radio during CNBC’s weekly broadcast not only pitching Mama Mancini’s great-tasting meatballs, but alerting potential investors that the company is traded on the OTC (over-the-counter) bulletin board under the ticker symbol MMMB.


A steady stream of “investment” commercials has been hitting the airwaves since the SEC last year loosened its advertising rules for equities and alternative investment vehicles.


Much of this mixing of consumer and investment messaging is a relatively new concept, built on the premise that consumers are investors, too, and vice-versa.  It’s not just advertising, either.  Some publicly traded restaurant and sporting goods chains have hocked their ticker symbols at checkout.


The challenge is determining whether touting your stock to consumers is worth it, especially if the stock is trading for pennies on the dollar. This could potentially dilute the brand, both from the consumer and investor perspective, and create the perception of a company that is awkwardly trying to find new capital.


Creativity is the key for consumer-facing stocks marketing directly to customers.  Executives need to be aware of the impact these ads can have on a company’s brand perception.  What happens when the consumer has a bad experience?  Is he or she going to hit the investor chat rooms and bash the company?


Allowing consumers to “discover” that a company is publicly traded may have a greater impact and create a more interested investor.  If not, consumers may question whether the company is truly interested in them or promoting its stock.


– George Medici,



EXTREME IR: Fast, Furious & Highly Connected

Extreme IR

After practicing investor relations for more than 20 years, I’m always excited to learn something new.  And, I did just that at the recent NIRI 2014 Annual Conference in Las Vegas.


The first thing I learned is that I love live tweeting.  Sending updates from the conference sessions I attended really made me feel connected (which makes sense given the theme of the conference, “EXTREME IR: Fast, Furious & Highly Connected”).  It was fun being able to spread the vast body of knowledge represented at the conference, so I thought I would recount those tweets here, verbatim, (in more than 140 characters) so that they reside in one handy place for easy reference by my fellow IROs.  If you attended and have any thoughts to add (or even if you didn’t attend and have any thoughts to add), please share them below in the comments section.


  1. Regardless of who is setting up investor meetings, be clear about goals and expectations before the outreach starts.
  2. $1 billion market cap is preferred by investors for European NDRS.  $5 billion for Asia.
  3. 83% of buy-side wants cos. to hold investor day yearly.  Only 35% of companies host one yearly.
  4. Almost half of global buy-side won’t invest w/o meeting mgmt.  35% won’t invest before an avg. of 3 interactions.
  5. Law says corporations can keep profits and use them as they see fit. Boards not required to maximize shareholder value. Hmmmm.  Chatter that institutions could share holdings every 30 days with the companies they own is palatable. Will it become a reality?
  6. CEO pay ratio disclosure will become a requirement in the fall and will take effect next year.  Of 75 in session, 31% give quarterly guidance, 45% annual, 15% multi-year, 9% other.
  7. If non-GAAP measures are used as basis for exec comp make sure they tie to your company’s business goals.
  8. Non-GAAP EPS most common non-GAAP measure seen by investor community based on recent survey.
  9. About 1/3 of 40 participants in today’s session on guidance post full transcripts of earnings calls on their websites
  10. Don’t assume index investors don’t have an active interest in governance issues.
  11. Use letter from the board in proxy statement to discuss thoughts on compensation, succession planning, etc.
  12. More sessions on activism than any other topic.  Clearly a hot button issue for IR today.
  13. Boards need to be aware of what investors think even if it’s hard to deliver negative news
  14. There is a difference between active investors and activist investors. The latter trying to force change.
  15. Number of people moving into IR from finance grew 60% y-o-y.  Field is obviously getting more competitive.
  16. IR Certification will likely require 3 years’ experience to qualify for exam.  A bachelor’s degree is also recommended.
  17. Body language is important.  Hedge funds actively learn about “tells” to read between the lines when meeting with management.
  18. Analyst Day info attendees want: new initiatives; access to mgmt.; forward looking guidance; current financials; product demos.
  19. Q&A is most important part of an Analyst Day according to a recent investor survey.


— Laurie Berman,

IndyCar’s Rise Again: A Client Perspective

One of our clients, a leading e-cigarette company, recently inked a two-year sponsorship deal with KVSH Racing and four-time IndyCar Series champion Sebastien Bourdais that is proving to be very successful. Finishing a respectable seventh at this year’s Indianapolis 500, Bourdais currently sits in eighth place in the standings and is one of most successful drivers in history with 31 wins and 47 podiums. PW Senior Vice President George Medici was live on the scene with the following take on IndyCar’s return to glory.


KVSH Racing’s Sebastien Bourdais at the 2014 Indy 500.

KVSH Racing’s Sebastien Bourdais at the 2014 Indy 500.

Last Sunday marked the 98th running of the Indy 500, an event billed as the “greatest spectacle in racing.”  One can only truly experience the magnificence of this historical event if lucky enough to be present at Indianapolis Motor Speedway (IMS) during Memorial Day weekend.


Close to 300,000 people attend the race, which began in 1911 on a track of 3.2 million bricks.  A yard-wide strip of these bricks still remain across the width of the asphalt track.  It has become customary for the winning driver to kiss the “yard of bricks” after the race.


Ryan Hunter-Reay got to kiss those bricks last week as he became the 2014 Indy 500 champion, winning in dramatic fashion, holding off three-time Indy 500 winner Helio Castroneves by .0600 of a second, one of the closest margins of victory in IndyCar history.


As exciting as the race was, IndyCar Series, the premier level of American open wheel racing, is struggling to capture viewers.  The Series saw its viewership drop 22 percent last year for 19 race telecasts across ABC and NBCSN, compared with 15 telecasts in the prior season, averaging 953,000 viewers, down from 1.2 million viewers in 2012.   Much of the downturn has been a result of the infighting between IndyCar Series and Champ Car World Series (formerly CART).  The two finally merged in 2008, but left a trail of discontented fans fueled by top drivers leaving the series for Formula One and NASCAR.


There is some good news.  Ratings are up, a little.  This year’s Indy 500 scored a TV rating of 4.0, compared with a 3.7 score in 2013.  The added races in 2013 also led to increased total reach for the race series. Still, attracting eyeballs and fans in the seats continue to be a challenge for IndyCar organizers.  Industry insiders, however, are positive about IndyCar’s future, saying the series is “rising,” and that they are confident it will make its way back to the glory days of the 70s, 80s and 90s.


Ditto says our client, who already is seeing enormous return on investment as IndyCar attracts an affluent, well-educated consumer with greater discretionary income.  In fact, on-site marketing at races has not only generated wider brand awareness, but also is increasing sales.


Hunter-Reay’s win is a good start for IndyCar on the road back to prominence.  He’s the first American to win the Indy 500 in almost a decade, being quoted after the race promoting the series saying, “This (race) is American history. It’s where drivers are made.”


While this may be a recipe for success, it’s unclear if Hunter-Reay was solely responsible for the higher ratings.  Media reports say race fans were watching NASCAR driver Kurt Busch compete in both the Indy 500 and Coca-Cola 600, attempting to drive 1,100 miles in a single day in two different states.  Busch finished sixth in the Indy 500 and withdrew from the Coca-Cola 600 due to a blown engine.


It’s really about the drama that gets people interested.  Look what Tiger Woods did for golf.  Without him in the field, golf tournaments just don’t have the same cache when he plays.  Good, bad or indifferent, more people are watching Tiger.


IndyCar also can learn a thing or two from NASCAR’s playbook, such as extending the race season (which it did in 2013) and adding more drivers.  A side-by-side comparison between IndyCar and NASCAR shows stark differences, everything from more prize money to more races and drivers.


While adding U.S. drivers to the IndyCar Series may help spur fan interest, it’s hard to deny the talented array of race pros that hail from other countries, including Sebastien Bourdais of France.


Contrary to some public opinion, IndyCar is as American as apple pie.  A tour of the Indianapolis Motor Speedway Hall of Fame Museum is evidence of the racetrack’s impact on racing history, right here in the United States, a theme that may help carry the IndyCar Series back to national prominence.  In the interim, it may not be a bad idea to raise the drama level between drivers – because everyone loves a great race story.


— George Medici,

Does it Pay to Go Public?

IPORecently, a client pointed me in the direction of a very interesting Inc. article about the case for staying private. The author is the CEO of a privately held, family-controlled tech business, one that has name cache. He notes that being a public company is expensive and time consuming. He also believes that “the most critical benefit of staying private is the facilitation of a true focus on long-term goals.”

It’s not hard to argue that Wall Street is increasingly focused on short-term results, but does that mean that management teams need to adopt the same mindset? Maybe it’s a naïve belief, but some would say that if the stock market is working as it should, a company’s share price will reflect the company’s true value over the long-term.

The New York Stock Exchange predicts a busy year for IPOs in 2014, with about 150 to 200 new issues expected. Reuters points to first quarter IPO activity of $47.2 billion, a nearly doubling from this time last year and “the strongest annual start for global IPOs since 2010.”

Clearly, there are CEOs who still believe in taking their companies public, many in the technology sector. Perhaps they are in it for a large personal pay day, but perhaps they realize that it could be easier and less expensive to raise capital to realize their growth plans. Or perhaps, their Fortune 500 client base requires audited financials as a condition for doing business together.

The decision to go public is not an easy one, and it’s a decision that every company must weigh very carefully. If you’re contemplating an IPO to become like Hooli, the fictional tech company featured in the new HBO series “Silicon Valley,” it may not be the right move. But if you’re doing it to build something that can have a lasting impact, it might just be. Just make sure you surround yourself with good advisors to ensure a smooth process.

— Laurie Berman,

Remember the game, Telephone?

Prepping for Investor Conferences

With the 2014 investor conference season about to go bananas (J.P. Morgan’s behemoth healthcare conference hits Jan. 14), it is probably a good idea to do a little prep work before spending all that time and money on the road.  Think of it like going to sleepaway camp; you got your sunblock, check, bathing suit, check, toothbrush, check, compelling investor presentation, um …
OK, so unless you were the ultimate dork at summer camp, you probably didn’t bring an investor deck with you.  The point is it is absolutely critical that you have the right mindset and materials before you embark on the conference circuit.  Following are a handful of tips to consider:

  • Make sure your investor presentation reflects the kind of company you are right now.  Many of us get attached to clever graphics, analogies and even metrics that are no longer relevant to a story.  A few substantial tweaks could make all the difference when it comes to keeping investors engaged.


  • Manage your one-on-one schedule.  It is easy to feel pressured by your hosts to sit with everyone on your schedule, but not all of the folks who want to sit with you are interested in investing in your company.  Some are looking for industry trends or even making a bet that your company’s stock is headed south.  Bottom line: Keep a close watch of your schedule and feel free to say no and request a new meeting.


  • Piggyback NDRs.  Traveling is expensive, not to mention time consuming.  So, if you’re headed across country, let’s say to NYC, perhaps it makes sense to also do a day of meetings in Boston or Philly.  Or better yet, maybe an analyst from a different bank would like to set up a dinner in NYC after your conference.


  • Sleep well and eat right.  OK, I’m an IR guy, not a nutritionist.  But I’ve seen it before, the executive who has been up all night working, eating crappy food, and throwing back one too many glasses of scotch.  And then comes the investor presentation, at which point you can hear all of the air being sucked out of the room because the speaker has no energy.  I’m not saying stop drinking scotch, but I am saying it’s important to take care of yourself.


  • And finally, take notes and ask questions.  We usually assume that investors are the ones asking all of the questions, but maybe there is some insight to be gained if management teams ask investors questions.  Investors sit with hundreds of management teams and likely can impart a few nuggets of their own.

— Evan Pondel,

Will Hedge Fund Advertising Affect Brand Cache?

Just recently, the SEC lifted its ban on alternative investment vehicles advertising to the general public as amendments to Rule 506 of Regulation D, and Rule 144A went into effect on July 10.


Mandated by the Jumpstart Our Business Startups (JOBS) Act, these new rules will make it easier for companies and private investment funds to raise capital by engaging in broader communications and marketing efforts. The only hitch is that these issuers take reasonable steps to verify that purchasers of the securities are accredited investors.


Without getting into the legal ramifications of what constitutes “reasonable steps to verify,” although securities law firm Paul Hastings does a pretty good job of highlighting some of its key elements, the new rules seem to be a positive step for hedge funds and alternative investment vehicles looking to capture freed-up investor cash as a result of the economy’s turnaround.


Changes to these rules have been in the works since April 2012, when the JOBS Act was signed into law. While some alternative investment funds already have been exploring advertising options, very few have rolled out larger marketing or branding campaigns. (Pictured right: Agriculture Secretary Tom Vilsack of the United States Department of Agriculture explaining the American Jobs Act.)


Not everyone may look at the new rule as a positive change. The exclusivity of these types of investments has created a certain cache among would-be investors, sort of like a country club-atmosphere, allowing only those with the “right” pedigree to gain access.


Maybe this is an extreme analogy, but there is some truth in jest. It’s probably a safe bet to say that an established $10 billon hedge fund may not be putting up a Facebook page. However, newer or lesser-known funds will be using the new rules to generate brand awareness among qualified investors. The result will force many of the firms not wanting to advertise to do something, especially since they will be overshadowed by funds that are marketing their investments more broadly.


Therein lies the quandary. Too much marketing will create brand dilution that will negatively affect perceptions among existing and prospective investors. Too little advertising just won’t generate attention. Finding the right mix of traditional and social media will be the correct strategy, although this will be extremely difficult in today’s Internet-based media landscape.


Positioning fund managers as experts across financial media and investor platforms sounds like an effective strategy and a good place to start, so does an ad in Forbes or the Wall Street Journal. The key here is to create or maintain cache. Otherwise, we’ll see more funds commoditized, possibly even banner ads on Google touting the latest alternative investment vehicle. Ok, maybe a stretch, but let’s see what happens anyway.


— George Medici,



Industrial Might to Fiscal Blight

The financial collapse of Detroit is certainly sad, Detroit as the home of Motown now has the dubious honor of being the largest American city ever to seek bankruptcy protection in court. What’s even sadder is that the fiscal realities of this once proud city were ignored for so long, its demise was death by a thousand cuts.


Detroit’s woes didn’t happen overnight. It started in the early 1970s when the foundation and builder of the city, the car industry, took a one-two punch from the oil crisis and a deep recession. This opened the flood gates for a mass exodus from the city and the population began falling sharply. As Detroit residents began to flee the city, the tax revenue, of course, went with them. A city of 1.8 million in 1950 is now home to 700,000 people, as well as to tens of thousands of abandoned buildings, vacant lots and unlit streets.


By all accounts, the head-in-the-sand mismanagement of politicians and union officials is well documented. For decades, it seems, the fiscal numbers set off alarms bells, but in a political philosophy that has become all too commonplace, Detroit’s leaders lived in a state of denial, kicking the can down the road, hoping that some magical solution would suddenly appear, instead of admit that the city was dying.


It’s a harsh truth, but Detroit got what it deserved. It has been taking on water for decades and was feckless in plugging the holes. Bankruptcy is a painful chapter in Detroit’s story, but it is, as the governor of Michigan said, also an opportunity to stop 60 years of decline.


Let’s hope that Detroit, and other municipalities flirting with the same issues, remember the past so they’re not condemned to repeat it.


— Ron Neal,

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,