The Case
Dinosaurs can be resurrected, but they have to adapt. In 1998, the Toronto Stock Exchange (TSE) was viewed as a bureaucratic entity, powered more by the interests of its
member-traded companies than by marketplace demand.
Recognizing that TSE's structure posed a major barrier to its future growth, the leaders of the exchange proposed to reinvent the TSE as a for-profit enterprise. This
proposition was a hard sell, as it would essentially require TSE member companies to vote themselves off the board. But a comprehensive issues campaign, speaking tour and road
show helped strengthen the proposal to demutualize the exchange. In June 1999, the TSE began its transformation into a for-profit venture. By September 2000 it had outpaced all
major world markets in annual growth, recording a year-to-date gain of 25%. So far, the exchange has set 39 all-time high records in 2000, including new highs in daily trading
volumes, value and transactions.
Business as Usual
For 121 years, the TSE was run as a member-owned cooperative. By 1998, this model was outdated. "The TSE was suffering from reputation issues," says Jane Shapiro, senior VP
and partner at Fleishman-Hillard Toronto, TSE's agency of record. "It was considered old-fashioned, slow and driven by industry member concerns rather than those of the wider
marketplace. It seemed more like a utility than a business."
Indeed, the inefficiency of TSE's consensus-driven model became more pronounced in the late '90s as global competition increased, and electronic trading revolutionized the
investment landscape. To shore up interest from foreign investors, many of the companies traded on the TSE had begun interlisting their stocks on American exchanges.
Fleishman-Hillard won the TSE business in the summer of 1998, just as the exchange was entertaining its proposal - known as the "Blueprint for Success" - to restructure itself.
But selling the proposal to TSE member companies would prove no easy task. Many member companies were set in their ways. They considered the old system adequate, and were
unlikely to vote in favor of demutualization.
When the blueprint's Oct. 1998 launch garnered a lukewarm reception, F-H realized it would take more than a pep rally to convince TSE members that change was good.
One-on-One Execution
Speaking engagements and personalized meetings were pivotal in the strategy F-H conceived for selling the blueprint model, both internally and externally. TSE's president,
Roland Fleming, and chairman, Barbara Stymiest, spent eight months meeting personally with every TSE member (roughly 90 companies), as well as editorial boards at national
newspapers and wire services.
To strengthen the road show presentations, F-H shot a video of testimonials from supportive board members and industry leaders. The agency also compiled data showing that
interlisted companies were better followed by analysts in Canada than they were in the U.S. (thus positioning the Toronto exchange as an attractive option). To broaden discourse on
the subject, the agency secured linchpin speaking opportunities with the Empire Club and other respected business forums.
Timing on Their Side
Two significant events occurred in the course of the campaign that helped bolster interest in the TSE's Blueprint for Success. In the fall of 1998, the TSE and S&P launched
the "S&P/TSE 60," a new market index for large cap equities in Canada. Later, in the spring of 1999, a realignment of Canadian exchanges positioned the TSE as the sole senior
exchange for equity trading in Canada. (The Alberta and Vancouver exchanges merged to form a new junior exchange, and the Montreal exchange repositioned itself as the single
market for derivatives and futures trading in Canada.) F-H seized the opportunity to adjust the blueprint messaging strategy, citing both "demutualization and realignment" as
harbingers of a bright future for the TSE.
Return on Investment
In June 1999, TSE members voted by an overwhelming majority (roughly 90%) in favor of demutualization and the blueprint was enacted. Since then, the TSE has outpaced all major
world markets in 2000 - particularly its G7 counterparts. "At a 25% gain, the TSE has outperformed the next best Italian market by 16%. In a narrower North American context, it
has outperformed the S&P 500 by 27%," Shapiro says. "It's outperformed the Dow Jones International Average by 32% and the NASDAQ Composite by 34%." On Sept. 25, the TSE's
benchmark index closed at 10630.98. (By comparison, the index closed at 5614.12 on Sept. 30, 1998.)
In June 2000, the TSE announced it had joined the NYSE and six other major equity markets to discuss the creation of a round-the-clock Global Equity Market. At the same time,
TSE and NYSE announced plans to explore a bilateral alliance.
(Shapiro, 416/214-0701)
What's Next?
F-H continues to work with the TSE in positioning the exchange for growth in the U.S. and worldwide. Its two priorities now are to repatriate business that was interlisted on
the New York exchanges, and to raise awareness of TSE-listed companies around the world.
Part of the current strategy involves identifying priority markets and platforms where the value proposition of the TSE is not well understood.
Key messages: the TSE provides unparalleled visibility, cost com-petitiveness and liquidity - particularly in sectors such as telecommunications, biotech, financial services,
transportation and natural resources.
This story was reported by Ray Josephs, APR, founder and retired chairman of International Public Relations Co. (New York), and Juanita Josephs. Ray Josephs is an active
member of the PRSA International Committee.
Inside F-H Canada
Founded: 1994
Location: Toronto, Ontario (parent company F-H International is headquartered
in St. Louis)
Key players on TSE account: Jane Shapiro (issues management practice)
and Anne LaChance (financial and investor communications).
Staff on TSE account: 6-8
Budget: Would not disclose.