West Coast Think Tank highlights

Apr 01, 2011
<p>Attendees discussed market intelligence, social media, the Galleon trial plus a host of other topics</p>

Below is a selection of comments made by people at IR magazine's West Coast Think Tank, held in Palo Alto on March 16.

Getting the most out of the sell side
‘If you ask buy-siders, they’ll all tell you sell-siders don’t know what they’re talking about and buy-siders don’t pay any attention to their reports. But the buy-siders can still quote those reports in quite a lot of detail. As much as they deny it, they’re clearly influenced by them.’

Market intel at work
‘We’re seeing companies start to do more analysis to understand how successful their corporate access meetings are and to identify which sell-side firms have better client bases in certain areas. Look back at the trips you’ve taken and do some real analysis of the results. Was there buying or selling? If so, why? And which firm has the most commission dollars in a certain area? That’s an indication of how many clients it has there.’

On the road with a negative analyst
‘A lot of IROs have the idea they should only go on the road with people who have a buy rating on them. I’d rather spread it out: I like to share the love between the 30-odd analysts who cover me. And I try to get the people whose opinion I think I can usefully change – the swing votes.’

Follow the sales guy
‘We’re evaluating sell-side firms to go to Europe with. Our research is pointing us to who are the good sales guys. With all the shake-up and movements among the banks, who do you follow: the good analyst or the good sales guy? We follow the sales guy.’

Meeting the say on pay challenge
‘It’s up to IR to be in your face with internal counsel and the HR folks who are drafting the compensation discussion and analysis (CD&A). No one else in your company talks to your shareholders as much as you do. They don’t know how your shareholders think.’

How to get a ‘yes’ vote
‘The CD&A now, more than ever, needs to be a well-conceived, well-thought-out sales document written in a manner designed to get institutions to vote ‘yes’. Start with an executive summary that checks the boxes for compensation governance, and clearly review how financial performance is connected to compensation decisions. The bottom line is that shareholders are more empowered now and you can’t just throw boilerplate in the proxy. If you write the CD&A in a thoughtful and compelling way, you’ll get a yes on say on pay.’

What happens if you get a ‘no’?
‘If you get a negative vote on say on pay, the repercussions can cascade down the line like a series of dominos. Activist investors will take a look at you – it’s an argument that the board and executives are not responding well to shareholders – and you could be faced with a short slate of directors. ISS and Glass Lewis both say if you lose say on pay two years in a row, the third year they’ll recommend withholds on your compensation committee. But there are other institutions that see a single loss on say on pay as a reason to withhold on directors.’

Take the fight to the buy side
‘We attacked it on two fronts. We worked with a proxy solicitor and had it reach out to the proxy teams at the institutions that own us. At the same time we worked the relationships we had with our top 20 shareholders, asking the portfolio managers and analysts to help us educate their proxy teams. It was definitely worth the effort. It was like a homework assignment: the portfolio managers did the follow-up and confirmed they educated the proxy team on our company and our story and why we should get a ‘yes’ vote.’

Disclosure update
‘Our general counsel looked at how employees have been approached by expert networks. We tracked it throughout the entire system and found they’re not coming at them through company email. Instead it’s through LinkedIn and other social networking. The more social networking plays out, the more these individual employees can be isolated and contacted.’

Mosaic theory on trial
‘If the Galleon jury accepts that these are pieces of information collected from people within companies, put together into a construction, a conclusion reached and a purchase or sale decision made, and there’s a guilty verdict at the end, then it’s the mosaic theory that’s been put on trial. But it could turn out that these are simply people who are buying information – just buying access to financial results ahead of time. Then in my view it’s not the mosaic theory on trial; it’s insider trading on a large scale involving some very high-profile people.’

Actually FAQ
‘On our IR website, we took down our generic FAQ and put up the top five investor questions we received in the 10 days after earnings, along with very plain English answers. We want the IR site to be the place people go for information about our company, and we try to think about how to do that in an efficient way.’

Monitoring blogs
‘Our PR team has been on high alert when it comes to blogging. How do you monitor it? It’s a message that goes out externally and you want to be able to control it, so our lawyers and the IR team look at every single blog that goes out. We have to do a lot of reading throughout the day but at least we know what’s being communicated externally, and it keeps us in control of that message.’

Communication across different audiences
‘Everyone’s talking about consistent messaging and using social media but they’re still approaching it the same way they have for 10 years. A lot of companies still start with the earnings press release, then do a script and Q&A. More recently they’ve said, Let’s take something out of this and put it on a blog or tweet it. Now we’re trying to take a step back and start with the handful of key messages we want to get across this quarter. Regardless of the channel they’re distributed through, let’s start with those messages, then they can go straight into a tweet, straight into a blog, and straight into the traditional forums as well. It’s great to use all the different channels, but don’t forget you should really change how you approach the content.’

Integrating IR and PR
‘With responsibility for IR, I have weekly meetings with our PR team and it’s extremely helpful. I look at the PR team’s calendar of events, it looks at mine, and we piggyback on each other’s events. You also need to be embedded in the different business units at your company. The best information you get isn’t going to be from PR; it’s going to be from deep inside the organization, from the people managing key products. I provide quite a bit of competitive information to others within the company, and they in turn provide me with feedback on what’s happening within their groups.’

Hedge fund analyst pooh-poohs social media
‘A lot of my job is separating the signal from the noise and it just seems like there’s so much noise on social media sites. If IR departments participated in those, it would sort of validate that noise, and then I would have to understand what’s being chatted about or tweeted about and incorporate that into my process. If there’s a very serious issue, you want to be responsive to that. But to answer every comment that’s been tweeted or stuck on Facebook seems like a waste of resources.’

IR Magazine Think Tanks are free, invitation-only events for senior-level corporate IROs. The next think tanks are in Chicago on May 24 and London on June 30.

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