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Ignorance is No Excuse: The Importance of Reg FD Training

You may remember that Martha Stewart spent time in prison.

She served five months behind bars and another five months of house confinement at her 153-acre estate in New York, wearing an electronic monitoring bracelet, for selling 4,000 shares of ImClone Systems before news of the FDA’s rejection of one of ImClone’s cancer drugs was made public.

ImClone’s former CEO, Samuel Waskal, a friend of Stewart’s who presumably gave her the stock tip, served a seven-year prison term after pleading guilty to orchestrating stock trades, as well as to other corporate misdeeds.

How much insider trading is going on in U.S. stock markets based on material, non-public information? At least four times more than regulators actually catch and prosecute, according to research from the University of Technology Sydney. 

Could Reg FD training have helped either of them avoid prison sentences? 

We’d certainly like to think so. For Waskal, of course, he definitely knew better as CEO of a publicly traded company. Stewart may have never heard of Reg FD, but she should have known better as well, based on plain old common sense.

Whether you’re working at a public company for the first time, or you’re a seasoned pro, being aware of Reg FD (Regulation Fair Disclosure) and how to avoid missteps is vitally important. Many companies provide periodic formal Reg FD refresher training even for public company veterans. Not only does such training help prevent employees from disclosure pitfalls, but it also serves as a record that your company takes disclosure seriously.

Starting with the basics, Reg FD became effective more than two decades ago to help the SEC prevent selective disclosure of material, non-public information, remedying the perception of unfairness in communications throughout the investment community. One of the key principles of Reg FD is that information must be broadly distributed, not selectively disseminated. A good rule of thumb is to provide full disclosure to all … all the time.

What constitutes materiality? If there is a substantial likelihood that an investor would consider the subject important in the total mix of information when making an investment decision, and if it is reasonable to expect that the information could have an effect – up or down – on a stock’s price, it’s probably material.

Things to consider include receipt of a big contract, M&A, a stock buy-back program, a director or officer resignation, among many others. Materiality can be somewhat subjective though, so it’s important to communicate with your attorneys if there is any doubt.

There are two simple rules to follow to ensure you’re not running afoul of the SEC (and that you don’t wind up like Martha Stewart):

  • Never buy stock in your company, or encourage others to do so, when you are in possession of material, non-public information.
  • If you ever have questions about whether, and when, you, as an insider, can buy or sell your company’s stock, contact your CEO, CFO or legal counsel.

Keep in mind that while there are remedies for inadvertently disclosing material, non-public information, you should strive never to have to use those remedies. But, just in case, here are the steps to take should someone slip:

  • Let an authorized company spokesperson know as soon as possible, so that that person can work to promptly determine the nature and materiality of the selective disclosure. (Authorized spokespersons are required to determine the cause of the selective disclosure and take appropriate steps to reduce or eliminate the risk of recurrence.)
  • Within 24 hours of the inadvertent disclosure, or at the next opening of market session, a company may issue a press release or file Form 8-K with the SEC containing the material information that was deemed to be selective disclosure.

If it happened to Martha Stewart, is can happen to anyone. “It was horrifying, and no one — no one — should have to go through that kind of indignity, really, except for murderers, and there are a few other categories,” Stewart told Katie Couric during a 2017 interview on the Today Show.

Aside from providing Reg FD training to pre-IPO and newly public companies, along with refresher sessions, PondelWilkinson has been approved by the California Bar Association to provide one-hour Reg FD training sessions to attorneys for CLE credits. While we have to know the ins and outs to be effective trainers, we’d love to hear about your Reg FD experiences.

Laurie Berman, lberman@pondel.com

­10 Tips to Best Prepare for New SEC Universal Proxy Rule Change to Shareholder Voting

For boards and senior management teams of publicly traded companies, a major law change by the U.S. Securities and Exchange Commission will soon go into effect for what some pundits believe could be a period of renewed activism ahead.

The new rule states that for annual shareholder meetings held after August 31, 2022, parties in a contested election must use universal proxy cards that include all director nominees presented for election.

Without going into all of the details, the rule gives shareholders the ability to vote by proxy for their preferred combination of board candidates, similar to voting in person. It addresses longstanding concerns that shareholders voting by proxy were not able to vote for a mix of dissident and registrant nominees in an election contest, as they could if they voted in person.  And very few shareholders, even before COVID, attend annual meetings in person.

The SEC’s new rule on shareholder voting will go into effect on August 31, 2022. Photo credit: Roger Pondel

As Gary Gensler, chairman of the SEC, said in a press release late last year, “Today’s amendments will put (all) candidates on the same ballot. They will put investors voting in person and by proxy on equal footing. This is an important aspect of shareholder democracy.”

No one knows for sure what will happen, and maybe nothing, but major law firms around the nation, proxy advisors, the National Institute of Investor Relations, and others have been talking it up big time in articles, webinars and conference panels.

On one hand, many smart minds – including our friend and long-time proxy campaign strategist Keith Gottfried, who recently addressed a PondelWilkinson staff meeting – believe that because it will be easier and less costly to run election contests, this hotly debated issue will “change the playing field dramatically” and foster greater shareholder activism. Gottfried, who just launched Washington, D.C.-based Gottfried Shareholder Advisory LLC, a boutique strategic advisory firm focused on shareholder activism preparedness and defense, said companies in the $300 million to $1 billion+ market cap range could be particularly vulnerable.

On the other hand, there is the thought that the new rule will stimulate a seismic shift in how activism is carried out. Rather than causing tumult at the annual meeting, there could even be increased engagement between issuers and activists that may foster cooperation and settlements.  

Our overview advice is for corporate boards, CEOs and CFOs to be armed with information and get ahead of the matter now to eliminate a potential sting and be prepared so there will not be an issue later. Consider the following:

  • Take a fresh look at your shareholder activist preparedness and defenses in order to react quickly, sans panic, for potential increased shareholder activism. With the help of a professional, revisit advance notice bylaws, corporate disclosure policies regarding director elections and determine whether changes are needed
  • Keep an eye on your peers. If there’s increased activism there, it may be coming your way as well.
  • Don’t get complacent in thinking that because your larger shareholders may have been quiet, they are not paying attention to your company. Periodically reach out pro-actively to them for updates.
  • Deploy best communications practices day-to-day, including transparency on quarterly conference calls and in press releases.
  • Think about conducting a Reg FD refresher training session for your senior staff and board. Having such a session “on the record” is a healthy omen that the company is sensitive to this important governance matter. 
  • Consider providing shareholders with an in-depth look at your company by hosting an investor day that showcases the operating tier of management, not just the senior-most corporate staff.
  • Know what your shareholders are thinking, even to the extent of conducting a third-party perceptions survey. The shareholders will appreciate that you are having an objective party ask candid questions. As the issuer, you may learn a thing or two and ward off a problem you may not even know existed.
  • Pay close attention to ESG matters, which are top-of-mind these days throughout the investment community in both large and small companies.
  • Be mindful of board composition, including diversity, experience and tenure.
  • Be alert, listen and do not be afraid of “well-wishing” shareholders who like to give advice on corporate growth, valuation and other board and management matters. Embrace them and pay attention to what they are saying. Often their biggest demand is for a company’s sale, not necessarily to “fix” anything or for a board seat.

It’s not only in politics, where voting rights issues are surfacing. The SEC’s new universal proxy rule is something to at least start thinking about seriously. If nothing else, it should prompt action for companies to take an inner look and be certain that best governance and communications practices are fully in place.

Roger Pondel, rpondel@pondel.com

Cutting Through the Clutter in 2022: 5 Tips for Better Listening

Another year into the pandemic demonstrated yet again that more people are online.

According to Statista, 3.6 billion people worldwide were using social media last year, a number projected to increase to almost 4.41 billion in 2025. In the U.S., 82 percent of the populace have a social profile, up from 2 percent last year.

It’s also very crowded on social. About 500 million tweets are posted each day on Twitter. That’s about 200 billion tweets a year. And every day, 400+ hours of content are added to YouTube, which already has well over a billion videos.

The numbers are staggering. A recent blog post from SocialPilot titled “367 Social Media Statistics You Must Know in 2022” puts important social media usage trends into perspective.

Are brands and companies really listening to what people think and want?

All this may seem overwhelming for any brand or organization looking to develop an online social presence. A common mistake we find is that these companies usually do not do the necessary preliminary research: listening.

There’s a difference between social monitoring and social listening, although they work hand-in-hand. Data is pulled and analyzed to better understand a target audience so that effective messaging is used to help a company or brand stand out from what has become what seems like an infinite-amount of social posting.

But how does an organization get started? It’s not that complicated, really. There are lots of options. Here are a few suggestions:

Surveys. Any organization can use polling to glean key trends relevant to a company or brand. Surveys vary in cost depending on size, scope and the audience of respondents, whether they are consumers or CEOs. Asking insightful questions will produce even better results.

Media audits. Knowing a specific reporter won’t necessarily get a story published, but having good relationships with journalists may be used to get unbiased insight into a company, brand or trend. Obviously, this takes time but something to consider when developing press contacts. 

Investor perceptions audits. If a company is publicly traded, perception studies are a great way to learn what Wall Street really thinks about an equity. Interviews with shareholders and financial analysts, along with a review of press coverage and social media can yield valuable insights that create stronger narratives that can help address concerns and enhance valuations.

Google. There are other search engines, but all roads still lead to Google. Heck, it’s the Internet. There is an infinite amount of data that can be searched, categorized and indexed on practically any topic or subject matter. That said, it’s the Web, so proceed with caution.

Social media. To follow or be followed, that is the question. Perhaps in the context of this blog it may be the former. Social platforms are where brands engage with key audiences. A lot can be learned by just “sitting back” and listening to learn more about what people are saying about current issues. There are lots of social media tracking and monitoring software programs on the market. Be advised, however, that while many people are on social media, take into consideration silent majorities that may alter broad consensus.

There are many other tactics for obtaining important feedback. The key is to be creative, and most undertakings can be done under the proverbial radar with minimal cost. Adopting listening campaigns before the launch of any major marketing or communications campaign is a great first step to align proper messaging with goals and objectives.

And it’s not just for larger campaigns and initiatives, but for day-to-day communications as well.. Know thy customer, otherwise communicating may be an exercise in futility, especially in the super noisy world of social media. Better connect with consumers, investors, businesses, customers and partners by knowing what they want and what’s important to them, so that more on-point messaging can be crafted and implemented.

Studies suggest how effective talking points can increase positive responses. Better messaging means better results. A little listing can go a long away in 2022 and certainly beyond.

George Medici, gmedici@pondel.com

Interning from My Bedroom: Lessons Learned While Working Virtually

By Maisey McGinnis

Pre-pandemic, I always pictured what my first internship experience might look like: commuting to a fancy office building in downtown Los Angeles or Century City, sitting around a big conference room table at company staff meetings, and maybe even attending a lunch or two with local reporters, investors or clients. My vision never included working from the comfort of my apartment, sometimes even from my bed.

Instead of commuting during the morning rush hour, I get to sleep in a little longer. The big conference room idea now is me at my desk joining meetings via Zoom. And although I do sit in on meetings with reporters, investors and clients, it is always behind a phone or computer screen.

My experience working remotely will likely continue, at least for the time being. Interning from my bedroom during the last seven months has not come without its challenges, so I thought I would share a few lessons learned:

PondelWilkinson’s Maisey McGinnis at home with her dog Crosby.

1. Don’t be afraid to ask questions, even if you need to clarify three or four times.

For me, the most nerve-wracking part about working remotely was being on my own without anyone at my side to guide or direct me. In my previous in-person jobs, I always had a boss or co-worker in the same room or close by that I could easily ask questions if I was confused or unsure of something. Working virtually eliminates that, so having clear communication becomes even more important. Asking questions – and lots of them – has been crucial in my understanding of what I need to do and how I need to do it. Virtual communication, whether that be phone calls, emails or texts, can often cloud meaning and intent, so making sure you fully understand what you are doing before you start is the key to avoiding unnecessary work.    

2. Check your email often. More often than you think you will need to.

Working virtually takes away from the natural connection people have with each other in person. A co-worker can no longer come to your office or desk and ask if you got their email. Even as an intern, I receive and send what seems like hundreds of emails a day (a few dozen is more likely). With all the work activity, it is easy to glance over and forget to reply to an important email, check the spam folder or hit send on a draft. When email (aside from the occasional Zoom meeting or phone call) is the primary method of communication with co-workers and clients, I don’t think we can check it enough. Refreshing the inbox every 10 minutes or so seems to work well for me.

3. Try to take a lunch break away from the computer.

Since the start of the pandemic, I have invested in several pairs of blue light glasses. Whether they actually make a difference is still unclear (no pun intended), but the amount of daily screen time from remote classes, remote work and general phone usage was concerning enough for me to take action. One of the most important lessons I have learned throughout this experience is the importance of taking lunch – or a break – away from the computer and the blue light. This may include eating lunch on my balcony or taking my dog Crosby on a walk. Breaking away from the computer has been a huge part of maintaining my well-being while working and attending school remotely.

4. Don’t put off your work just because you can.

Since I am not in the office, I can work on various projects at my leisure unless they have specific deadlines. I can start at 8 a.m. on Monday and noon on Tuesday depending on what I need to accomplish for the day. This flexibility is great when running an errand or attending to an appointment. The flexibility, however, also can have a negative impact, especially when I put off updating a calendar or media list and realize it’s 7 p.m. Not having the office space to distinguish between work and home blurs the lines for knowing when to be working. Just because we can do our work at unconventional hours doesn’t always mean we should. Maintaining a work-life balance has been one of the harder lessons learned.

Despite my initial expectations, I have learned more than I could have ever anticipated and believe my experience at PondelWilkinson is allowing me to grow professionally in my public relations and investor relations career. Interning from my bedroom may not seem like the most glamorous experience, but I guarantee I have learned just as much, if not more than I would have in one of the fancy office buildings I originally pictured. 

Maisey McGinnis is currently interning remotely at PondelWilkinson. She is a student at the University of Southern California studying communications, public relations and advertising. When she’s not working or studying, Maisey enjoys hiking, traveling, reading a good book, and taking her Maltese, Crosby, on walks at the park. After graduation, she hopes to put her new found skills to use in Los Angeles or New York.

Public Companies Prosper in Pandemic

PondelWilkinson’s CEO Roger Pondel was interviewed by Reporter Mark Madler of the San Fernando Business Journal for a special report titled, “Public Companies Prosper in Pandemic.” Read the full story below.

Performance Rules, but Perception is Everything: How to Know What Investors Truly Think About Your Company

This article was originally published by national news wire service BusinessWire, a Berkshire Hathaway company, on its global blog July 9.

If you’re familiar with the British sci-fi fantasy series, Doctor Who, you know that a common plot device is the use of “perception filters,” in which aliens attempt to alter reality to reflect what they want you to see. A favorite episode is with actor/comedian James Corden, who lives on the first floor of what appears to be a normal two-story building – only the building does not have a second floor, just a scary alien machine parked on top of it with a perception filter designed to hide its existence.

Wouldn’t it be nice if we could use perception filters to influence how investors and financial analysts think about public companies? I am sure many management teams would love to use something like a perception filter to ensure that only positive things are said about their companies.

Alas, we all know this isn’t possible. And yet, one of the more interesting things I have observed over the years is how many management teams believe they already know what investors think of their companies – as if they have a perception filter firmly in place.

While many C-suite executives and corporate IR professionals dialogue often with the investment community and glean valuable insights from their conversations, it is a mistake to assume that investors will share everything that is on their minds. As Peter Drucker, the celebrated author, educator and management consultant, once noted, “The most important thing in communication is hearing what isn’t said.”

How, then, can management truly gain insight into what investors think? Enter the perception study, a tool designed to gather unique and candid feedback. It is only through the use of an independent third party that companies can truly get to the heart of what investors think. Third parties are able to create an environment that protects anonymity and are better positioned to share tough feedback with management.

Designing a Perception Study

There are many ways to design a perception study, which at its core, seeks to determine how investors view the company, its strategy, management team and IR program. Perception studies often are particularly useful before and after major events, such as an investor day, or when a company is in the midst of transition.

In most cases, many investor responses are surprising. Also in most cases, a good perception study pays off handsomely by revealing tangible and actionable items, along with nuances, of course, that facilitate communication and potentially valuation improvement.

Perception studies create opportunities to:

  • Streamline business models that have become too complex.
  • Simplify messaging to better resonate with the investment community.
  • Improve an IR program in ways a company might not have seen.
  • Provide benchmarks for future comparison.
  • Let the investment community know that the issuer cares.

Dichotomy of Opinion

In a recent perception study we conducted for one of our clients, we found a fascinating difference of opinion about the company, with views that converged around common themes, but were almost polar opposites of each other. Interestingly, this dichotomy of opinion often was expressed by the same participant in the study.

For example, investors praised the management team’s ability to articulate the company’s investment attributes, but at times felt they could be too “promotional” in doing so. Investors also liked how the company positioned itself to capture emerging trends in its industry; at the same time, however, they believed the actions management took to take advantage of these trends made the business too complicated to grasp.

Perhaps most importantly, investors felt the company altered its strategy too frequently. While many praised management’s ability to pivot when the facts on the ground changed, the rate of transformation left investors and analysts wondering if management had a clear roadmap for the future, which, in turn, made it difficult, if not unnerving, for many of them to invest.

The perception study created an opportunity for our client to:

  • Clearly articulate its business strategy, highlighting its vision for the future.
  • Help investors understand exactly how management perceives the path to value creation.
  • Simplify its story and improve consistency in metrics presented. 
  • Provide a candid discussion of business performance, both positive and negative aspects.

Understanding what investors and analysts truly think is a fundamental responsibility of the management team and board of any public company. Such knowledge provides tangible results and can serve as catalysts for positive change.

Jeff Misakian, jmisakian@pondel.com

Disappearing Transparency: A Call to Action

Back in July, the SEC proposed new 13-F rules, including amending the reporting threshold for investment managers to “reflect today’s equities markets.” At first blush, the headline seems okay. When one digs deeper (actually, you don’t need to dig deep at all), the proposed rules represent a huge step backwards to a time when issuers and the investing public had very little information about stock ownership.

Source: Securities and Exchange Commision

A little bit more about the SEC’s rationale before diving into the heart of the matter. According to its July 10 press release, the proposal would increase the 13-F reporting threshold from $100 million to $3.5 billion, “reflecting proportionally the same market value of U.S. equities that $100 million represented in 1975, the time of the statutory directive.” From everything I’ve read on the subject, this rationale is misguided and imprudent.

According to IHS Markit, approximately 600 of the 5,200 investment managers that filed a Form 13-F last quarter manage over $3.5 billion in equities. Put another way, almost 90 percent of investment managers that are currently required to report their holdings, would no longer be required to do so. Further, more than 90 percent of the dollar value of the securities currently reported is held by these 600 firms. IHS Markit also noted that, on average, 55 percent of the investors on an issuer’s shareholder list would stop filing 13-F’s, 69 percent of the hedge funds on an issuer’s shareholder list would stop filing 13-F’s, and “IR Immune investors,” including index funds, quants and brokers would stop filing for 2 percent of their share value, while active investors would stop filing for 10 percent of their share value. Not good for an industry that requires more visibility, not less.

The National Investor Relations Institute (NIRI), has aggressively taken up the cause, rallying issuers, IR counselors and other prominent business associations. Last week, NIRI sent a letter to the SEC opposing the proposed rule. 237 issuers with a combined market cap of almost $3 trillion, five high-profile business associations and 26 IR counseling firms signed on in support. Additionally, NIRI reports widespread opposition from retail investors and small investment managers, who, in total, have submitted more than 1,000 comments to the SEC.

It’s not too late to take action, even if you’ve already signed on to NIRI’s letter. The deadline for submitting comments directly to the SEC is September 29. You can visit NIRI’s Advocacy Call to Action page for more information and suggestions on how you can help.

The SEC’s proposal would significantly hamper issuers’ ability to understand who owns their stock, who is selling their stock and who is buying their stock. Imagine a scenario in which an activist is slowly building a position, but you can’t see it happening and you are blindsided by a takeover attempt. Imagine how difficult it would be to keep current holders updated if you don’t know who they are. Imagine the inefficiency of having no way to prioritize incoming phone calls and meeting requests because you are in the dark about ownership status.

Perhaps Jim Cramer said it best. “If you believe Wall Street is important, if you believe business is important, if you believe the market is important, then the public deserves to know who owns what.” Use your voice to let the SEC know that you strongly oppose the proposed rule.

Laurie Berman, lberman@pondel.com

When the Viral Fog Lifts

Those who live in Southern California fully understand the terms “May gray” and “June gloom.” It’s that time of year when the sun comes out late afternoon. The temperature isn’t that cold, but gloominess permeates the air and stays around for most of the daylight hours. Most people hate it.

This year, at least for those who live in Los Angeles, the pre-summer grayness is no big deal. There’s a lot more to complain about than the weather.

Regardless of who you ask, or what television news station you watch, when that sun is fully bright again, there is consistent agreement that a “new normal” will surface. I am not one for pontificating about what’s ahead, especially when so much of the future remains racked with uncertainty. But in our niche of investor relations and strategic public relations, I will throw caution to the wind and make a few prognostications about how our sector already is transforming:

  • Few, if any, in-person non-deal road shows (NDRs), but plenty of virtual ones. CEOs and CFOs will love that. It will keep them in the office and save lots of time, to say nothing about eliminating many expenses, like air fare, hotels, limos, fancy restaurant meals. Virtual NDRs are in. They may be easier to schedule, but they must be visual and engaging to hold interest. Hello Zoom.
  • Virtual annual meetings already are the new norm. They will be on the rise and probably never go away. CEOs and CFOs may like that, too, but investors may not. Management will control the question and answer chat button, and the democratization of public companies may take one giant step backward. So watch carefully for a rise in activism for those companies that aren’t communicative and transparent, aren’t performing and aren’t unlocking shareholder value.
  • Desk-side briefings with journalists are history. There are fewer business journalists these days, anyway, and their time has become quite limited for casual background coffee klatches. A phone call or video interview will have to do, but there had better be something cogent to say.
  • Quarterly conference calls will become even more important. But management teams sorely need to interject more life into their presentations and not merely recite numbers. Yes, they will likely still be scripted, but it would be better if they could be turned into quarterly Zoom fireside chats for the Q&A portion.
  • Investor days are still important, but as with annual shareholder meetings, for the foreseeable future, they will be virtual. This will save money, possibly attract more attendees, and eliminate the free-lunch bunch. But to be effective, they need to be live, and engage with the audience, or attendees will be distracted while management drones on.  
  • Virtual investor conferences already have arrived and will likely increase in number. But be careful which ones to attend, either as a presenter or an investor. They can prove to be a waste of time. From the issuers’ perspectives, it’s important to know who’s really paying attention. Is anyone really listening? Sponsors should do whatever it takes to do it right, such as using video to make it worthwhile and come alive.
  • Assure that “out-of-sight, out-of-mind” syndrome does not set it. With much of the above happening in the privacy of one’s home office – or at least not in the offices of investors and analysts – greater attention must be paid to messaging for those who are listening.

The times, and the market, are changing fast. Balance sheets are more important than ever. Investors are looking for corporate measures to assure that capital is being deployed in value-accretive activities. With fewer, if hardly any, companies providing financial guidance, investors want to see actions that can translate into trackable metrics. They want to hear from management teams more often, and perhaps in new, or old, ways, like maybe bringing back the quarterly report. And once regarded principally as feel-good commentary, stockholders today look increasingly to investing in companies that focus on environmental, social and governance measures.

Unlike a CEO of a publicly traded company providing financial guidance on a quarterly earnings call – with significant consequences if wrong – no real harm has been done if my forecast for the future of investor relations is wrong. And maybe, just maybe, if I am right, the transformation will be good for all when the viral fog lifts. Except, of course, for missing some great meals in those fancy New York restaurants while on an NDR.  

Roger Pondel, rpondel@pondel.com

No Shut-down for Activism

While activist activity was down a bit in the first quarter of 2020, compared with last year’s first quarter, according to Activist Insight’s “Shareholder Activism in Q1 2020” report, there were still plenty of shareholder demands made of public companies.

By sector, industrials was the largest group impacted by activism, followed by financial services and consumer cyclicals. Large cap companies were the most affected, with U.S.-based companies making up 70 percent of those subjected to activist demands.

Shareholder demands are still being made of public companies, according to Activist Insight’s “Shareholder Activism in Q1 2020” report.

Lazard’s 1Q 2020 activism review shows that the number of targeted companies in the first quarter of this year was roughly the same as in last year’s first quarter. On the other hand, Reuters, reporting on the Lazard review, noted that while 2020 began on a strong note, with activist firms pushing for change at 42 companies in the first two months of the year, new activist campaign launches fell by 38 percent in March, when the global economic shut-down began in earnest.  Further, Reuters reported that new activist campaigns were, “launched at the slowest pace since 2013 and corporate agitators put the smallest amount of money to work since 2016.”  

Even so, there are several high-profile campaigns looming. One getting some buzz, according to Bloomberg, is Standard General’s proxy fight with Tenga, Inc., a $2 billion media company. This contest will be the first-ever all-digital board fight. With Standard General seeking four board seats, Tenga’s virtual annual meeting on April 30 will be a test for activism, both digitally and in the world of COVID-19. 

While virtual annual meetings are nothing new, counting contested votes remotely is. Bloomberg noted that Broadridge Financial Solutions Inc., which prepares, ships and counts most of the proxies for U.S. companies, doesn’t currently have a specific platform to allow for remote voting in a contested situation.  According to a Broadridge representative, the company, “lacks the technology” to count virtual votes when there are competing director slates. 

Bob Marese, president at MacKenzie Partners Inc., a proxy solicitation firm, said that it could, “be more difficult for proxy solicitors get investors to switch their votes in the lead up to the meeting because many are not in the office, nor are the bankers or brokers they may need to change their vote.” Other potential pitfalls include the inability for shareholders to ask tough questions in a virtual meeting setting. According to the Financial Times (as reported by IR Magazine), investors have become concerned that virtual annual meetings could “shift the balance of power” away from shareholders, as companies have greater control over managing Q&A sessions virtually.

What does the future hold for activist activity? Since many companies have curtailed stock buyback activity in light of the COVID-19 crisis, Lazard believes that activists pressing for return of capital through buybacks will not be a focus. 

Jim Rossman, the head of shareholder advisory at Lazard, believes that, “lower M&A activity and companies focused on conserving cash will mean that activists are likely to increase their focus on operational performance and how management teams react to the crisis as the basis for new campaigns.” He went on to say that activists will likely want to avoid looking overly aggressive during the pandemic as to not offend other investors, “whose help they might need in pushing their case later.” 

Chris Young, managing director and global head of contested situations at Jefferies, also believes overly aggressive activists could face media backlash for seemingly profiting off the pandemic. Young further believes that, “having lived through the prior period of sky-high market volatility, we expect there will be a decline in activist campaigns in the near-term. Once volatility subsides and corporate valuations reset at new normal levels, however, we expect activists could have enough time to initiate new campaigns, including submitting director nominations for proxy season 2021.”

While COVID-19 may be changing the activist landscape in the near-term, the same best practices apply to help make sure your company is ready in the event of aggressive shareholder demands. Analyze your shareholder base and stay in-the-know about changes in ownership, especially during a period of extreme volatility when activists can build positions more cheaply; be open to proactively engaging with investors, even while you hunker down to focus on the impact of the current health crisis and economic downturn; and, think about adopting a “poison pill,” or at least having one at the ready. 

Laurie Berman, lberman@pondel.com

If …

Do you remember any of your elementary school teachers? Think back for a moment if any remain in your memory.

My kindergarten teacher at Bateman Elementary School, on the north side of Chicago, was Mrs. Hart. I only remember her because it was kindergarten, and she was my first teacher. No one went to pre-school in those days.

The next teacher I remember was Mrs. Castle, third grade, at Laurel Elementary School, in the heart of the borscht belt, near Melrose and Fairfax, in Los Angeles. I only recall her name because we just moved to LA, mid-semester, and I was the new kid in class. She was nice to me, even though I was a little behind in my knowledge of cursive.

Then we moved again when I was in the sixth grade, also mid-semester, and again I was the new kid in class at Lankershim Elementary School in North Hollywood. Not easy when you are painfully shy and eleven years old. But this teacher, Irv Sherins, was different.

Mr. Sherins paid lots of attention to me. He even assigned one of the kids, Dennis Gass, to be my buddy and show me around the school. (Dennis and I remained friends through high school. He enlisted in the Army right after graduation and died in Vietnam.)

You might be wondering what my memory of Irv Sherins has to do with investor relations and strategic public relations, which, after all, is what this blog is supposed to be about.

I so vividly remember Mr. Sherins – not because he treated me well and made me feel comfortable as the new kid in class – but because of a two-letter word he wrote on a corner of the blackboard, that was never erased. It was a word that has relevancy for our clients, our staff and corporate executives, among others, everywhere: The word is “If…”

Between today’s political stress, the coronavirus, and yes, the steep stock market decline, impacting valuations and business conditions worldwide, the meaning of that one small word written by Mr. Sherins more than 50 years ago, and never erased, can help all of us now. It was the first word and title of a famous Rudyard Kipling poem circa 1895. It’s interpretation by Mr. Sherins:

If you can keep your head while others around you are not…

Roger Pondel, rpondel@pondel.com