The technology is moving from the fringes to the mainstream
As executive vice president for strategy and communications at PGi, Sean O’Brien’s job is to help craft and communicate the vision, strategy and corporate objectives of the world’s second-biggest ‘collaboration services’ provider. For more than three years, apart from in-person encounters, the former Wall Streeter has met with investors, analysts (and journalists) almost exclusively via the firm’s iMeet videoconferencing platform.
Sean O’Brien, PGi
Videoconferencing lets me have a more personal and human connection with people
‘I like it because it lets me have a more personal and human connection with people,’ says O’Brien, who is tanned and wears an open-necked shirt. ‘That’s ultimately important throughout business – but it’s particularly so for the IR practitioner.’
Indeed, videoconferencing’s business case always seemed like a slam-dunk for IROs who measure professional success largely by their ability to create trusting relationships. As the human face of a firm, the more face-time IROs have with their constituents – whether via technology or on the road – the better their chances of forging those relationships. And with budgets stretched and management’s time at a premium, videoconferencing screams out as a solution.
It hasn’t worked out that way, however. Despite a regular litany of industry claims to the contrary, videoconferencing has never really invaded prime time. Twitchy, geeky and expensive, the technology remained for years confined to IR’s braver and more innovative fringes. Even today, with most of those problems solved, videoconferencing a mass consumer phenomenon and business racing to deploy enterprise-level systems, IR departments remain among the last lonely holdouts against a communications medium that a recent Polycom survey once again predicted to be the world’s preferred business communications tool (this time by 2016).
What’s going on here? Why won’t IROs get with the program? O’Brien calls it ‘legacy behavior’ and draws parallels with IROs’ initially tentative embrace of social media. ‘Only a few years ago, not many firms took social media seriously,’ he points out. ‘Now it’s ubiquitous. Videoconferencing is headed the same way. Today, any IRO who adopts video technology is a pioneer. But those adopting it in the next 12-18 months will be late.’
Clearly, for O’Brien, videoconferencing’s attraction extends beyond its ability to efficiently communicate information. He is smitten, rather, by its unique ability to redraw the investment equation. He reaches for a thick ring binder on his desk and waves it at the camera. ‘The reality for us as a corporate issuer is that the entirety of our story is contained in the written communications – press releases, financial reports – that we give the Street,’ he says. ‘Then we say, Go make sense of it. Something’s missing.’
The human touch
Reflecting on his days as a hedge fund manager, dispassionately critical, boiling a business down to numbers in financial statements, O’Brien says investors are looking for more clues to help them make sense of the dry information load they face. ‘They are looking for the human element,’ he says.
In the presence of that ineffable substance, according to O’Brien, connections are catalyzed, and bonds more firmly established. ‘Soon, investors are seeing your company beyond merely words and numbers on a page,’ he observes. ‘They become more empathetic toward things like your strategy and execution plan.’ Even O’Brien, however, acknowledges a videoconference’s limitations. ‘It’s not the same as sitting across a table from someone and shaking his or her hand,’ he says. ‘But it’s a very good proxy and certainly an efficient use of everyone’s time.’
Louise Mehrotra, Johnson & Johnson
Videoconferencing lets our executives get to smaller investors
This pretty much sums up the views of other videoconferencing aficionados who echo O’Brien’s analysis. ‘You still need to visit your large investors in person at least once a year,’ says Louise Mehrotra, vice president of investor relations at Johnson & Johnson. ‘But once you’ve established a baseline, videoconferencing makes for a very convenient supplement.’
Mehrotra, who regularly follows up earnings announcements with video meetings with analysts and portfolio managers, is also keen to push forward on the non-deal roadshow front where videoconferencing already accounts for 15 percent of her firm’s roadshow activity. ‘Our executives love it,’ she says. ‘It saves them time and lets them get to smaller or more geographically diverse investors than might otherwise be possible.’
She adds that investors like it, too, especially when it offers a diverse range of management perspectives. ‘If an investor wants to talk about a particular segment of our business, we can, without much fuss, bring that investor the leader of that business segment,’ says Mehrotra. ‘Aside from getting the person downstairs to the conference room, it doesn’t really disrupt his or her calendar.’
The convenience factor is also highly rated by the senior management of St Paul, Minnesota-based St Jude Medical. ‘There can be a lot of stress in flying out of Minnesota in winter,’ notes JC Weigelt, IR director at the global medical device maker. ‘Flights are often delayed or cancelled. Videoconferencing eliminates the headache.’
Instead, Weigelt and CFO Donald Zurbay sit at their respective desks and turn on their computers. ‘We have done several half-days of back-to-back meetings with investors in Europe and a full day in New York,’ says Weigelt. ‘Next week, we’ll be spreading the love to investors in Toronto. We’re under constant pressure to meet with analysts and investors, and videoconferencing lets us extend our reach while maximizing management’s time.’
Perhaps one buy-side beneficiary of St Jude’s new reach is Toronto-based Signature Global Asset Management, which manages C$42 bn ($38.9 bn) as part of CI Investments. As a global money manager headquartered in a regional money center, Signature faces challenges staying up to speed with each of the 400 issuers in its portfolios.
‘As brokers and companies cut costs, there’s a risk smaller money centers can be left off the roadshow itinerary,’ explains Malcolm White, portfolio manager and vice president of portfolio management at Signature. ‘Even visa hassles can [dissuade] foreign executives and analysts from making the trip. Videoconferencing helps maintain the interactivity.’
White predicts his operatives will soon be using videoconferencing for 10 percent of the 2,000 high-level interactions they have with analysts and issuers each year. ‘A few years ago, we had fewer than five videoconferences a year,’ he recalls. ‘The technology just wasn’t ready for prime time. Today, that’s all changed.’
While impressed by the general pace of change, the specific technology White is referring to is provided by OpenExchange, a three-year-old videoconferencing outfit specializing in investor communications. A club of sorts, OpenExchange offers members (issuers, investment banks and asset managers) the chance to meet ‘in the cloud’ over a secure, web-based platform via just about any device or technology.
The man in charge of bringing OpenExchange to prime time is Mark Loehr. As CEO, he oversaw the firm’s partnership with Ipreo and welcomed the sell side to the club. Now, he says, OpenExchange has reached a critical mass. ‘We are busier than ever,’ observes Loehr, a former investment banker. ‘Everything is gaining scale and momentum. People love it because it’s easy to use and fits into their workflow.’
Loehr points to OpenExchange’s centralized market model as key to breaking the logjam of security, compliance and connection issues hindering IR videoconferencing. ‘You only have to worry about one connection: the one from your infrastructure to our cloud,’ he says. ‘That helps compliance and IT support our solution, and lets IROs organize calls any way they want.’
Interestingly, rather than ‘disintermediating’ the sell side, many videoconferencing IROs remain content to allow brokers their traditional role of selecting investors and providing logistics. A recent sample of 100 OpenExchange virtual meetings shows 90 percent were sell-side supported. ‘The sell side has been instrumental in multi-party or multi-session virtual meetings,’ says Loehr.
For their part, a growing number of investment banks are adding videoconferencing to their corporate access quiver. They are using it to widen participation in investment conferences, reach geographically remote investors during non-deal roadshows, and more effectively communicate with the market in special situations.
Confident in the sell side’s continuing advisory role for IR activities, Bill Quinn, US head of corporate access at Deutsche Bank, believes IROs should regard videoconferencing as supplemental to existing ‘on the road’ efforts. ‘We introduce the right partners to each other and then provide the forum for them to meet,’ he explains. ‘Video helps us do that. It’s better than a phone call but can’t replace face-to-face meetings.’
Gibson Smith, New York-based managing director of corporate access services at Citi, agrees. ‘Videoconferencing can be an effective tool for companies dealing with a crisis,’ he says. ‘The medium allows our clients to quickly get a robust and credible message out to key stakeholders without blowing up schedules for half a week.’
For now, however, he regards videoconferencing as an adjunct to, rather than a core component of, Citi’s corporate access offering. ‘Technology has its place,’ he allows. ‘But used indiscriminately it loses effectiveness and can work to depersonalize how we communicate. My hunch is IR professionals don’t want to depersonalize their relationships with the investment community anytime soon.’
Perhaps not. But one way or another, change is coming to the way many IR teams identify and meet with investors. The UK’s proposed new corporate access rules may have far-reaching effects (see page 18), although for now the role of videoconferencing remains unclear. But at least one observer believes it will be the regulatory rewiring that finally lifts videoconferencing into the IR mainstream.
‘The new rules mean everyone – companies, brokers and asset managers – will be looking for less expensive and more efficient methods to communicate,’ says Shane Smith, CEO of virtual roadshow provider International Capital Connections. ‘It’s been a long time coming but the stars are finally aligned for videoconferencing.’
How far video will disrupt regular business patterns remains to be seen. Laura Graves, vice president of IR at Polycom, sees a continuum of adoption patterns. ‘I can pick up the phone, call the buy side and say, Hey, do you want to have a videoconference with my CEO?’ she says. ‘It says, Sure – and away we go. Other firms may take another route depending on their size or industry.’
Graves notes global trading banks have historically been among those industries a little slower to adopt collaborative technologies, likely for compliance reasons. Still, she suggests IROs looking to dip their toe into video begin with their broker. ‘The next time they get a request for a bus tour or breakfast meeting, IROs should challenge that sell-sider to put together a videoconference,’ she recommends. ‘The broker can provide enterprise-grade equipment. It will save you money and your CEO will save time.’
That’s something IROs might consider before pitching their CEO a three-day trip to the Midwest.
The outer limits