Forty years ago this month, Ted Pincus launched the Chicago-based Financial Relations Board (FRB), the first-ever public relations firm dedicated to helping companies cultivate
a more open and prosperous relationship with their investors. The Financial Relations Board recently merged with BSMG Worldwide, the sixth-largest marketing public relations firm
in the world. Pincus is chairman and CEO of FRB and a vice-chairman of BSMG Worldwide. We caught up with the founding father of investor relations to discuss the narrowing
information gap between companies and investors, the potential of the Internet to promote better relations between investors and companies, and the outlook for IR in an age where
the sun never sets on the financial markets.
PRN: For the past 40 years you've been at the forefront of opening up communications between companies and their investors. Can you touch on some of the ways
you've helped the industry evolve?
Pincus: There are several techniques we helped pioneer that are in common usage today. First, about 30 years ago we began
encouraging clients to issue investment profiles, or documents that went beyond regular financial statements to lay out a company's long-term aspirations and strategies. Also,
around this time we helped create the area of market intelligence. Traditionally, networking for investors was done in closed circles. Company representatives would make pitches
at the local stockbroker club or analyst's society. Instead, we started canvassing the financial community to prequalify audiences. We hired people walk into brokerage houses and
mutual fund management companies completely cold and introduce our clients to them.
In the 80's, we worked with US Sprint to host conference calls accommodating hundreds of investors at once, usually following quarterly earnings announcements. Convincing CEOs
and CFOs to field questions from investors to discuss news, good or bad, wasn't easy. But we knew if it worked it would be a huge step forward in terms of building their
credibility. And it did. Plus, investors loved the fact that they could hear the opinions and concerns of their counterparts around the world. By the 1990s, quarterly conference
calls became a matter of policy for many companies.
PRN: And by the mid-1990s, the Internet became a commonly used mode of communication.
Pincus: Definitely. We started maximizing the Web as a
tool for audio-visual presentations, and for that reason these investor conferences became even more comprehensive. A CEO can better illustrate his points with charts and graphs,
with pictures. These days, some companies are even going so far as to Webcast their entire annual meetings so that investors who can't make the trip can tune in.
PRN: Is the Financial Relations Board involved with Webcasting?
Pincus: Yes we are. In December of 1999, we worked with Vcall and StreetFusion,
two financial-information sites, to take 85 of our clients an hour-long Webcast each. It took place over the span of a week, and got about 200,000 hits. It was so well-received
that many of the participating companies saw their stock prices go up as much as 10% immediately after their presentations. That wasn't our intent, but it definitely showed that
the Web works to spur investor interest.
PRN: What about the down side to the Web, those who use the medium to spread rumors and falsehoods about companies? Are they dangerous?
Pincus:
They've always been around. They used to show up at annual meetings, now they just hop online. I don't think they are a serious threat to our business. It's unproductive to
chase down every rumor that takes place. If you need to, you can squelch a rumor pretty fast. It's a matter of spreading the word via emails to your investors and to the press.
PRN: So how do you see future technologies affecting the evolution of investor relations?
Pincus: The technology affecting our industry is
only in its infancy. We're going to see a day when most annual reports are delivered on CD-ROM, when all news releases about a company go out through blast emails. As streaming
video technology gets further along we're going to see more company CEOs appearing live on the Web. Imagine turning on your computer to see the CEO of General Electric talking to
you about the company's future in real-time. Imagine also emailing him a question and having him answer you right away. We're on the verge of this.
PRN: How about the SEC's latest action on full disclosure? How will regulations calling for the more open distribution of company information change now that
the Web is making communication that much more seamless?
Pincus: Regulation full disclosure (RFD) is a win-win situation for everyone. All these methods we've
talked about are allowing company information to be disseminated in a less costly, more efficient, and more democratic way than ever. RFD laws are forcing companies to do
something that they should have been doing all along, which is to communicate more to the outside world. Plus, it gives companies added layers of protection if there's ever a
question of selective disclosure. By keeping all relevant company and investor information on your Web site, you've got a public interface that's always there.
PRN: You've been at the forefront of the investor relations industry for 40 years. Where do you see it heading in the next 40?
Pincus: I am
forecasting that the size of the investor relations industry is going to double in five years. There are about 11,000 publicly held listed companies in the U.S. that have
substantial market capitalization. Of those 11,000, over a third of them have no professional investor relations guidance at all. This doesn't mean that these companies aren't
trying to communicate. For example, investor communication is being done by finance, public relations, and advertising people who may or may not know how to do it effectively.
We're going to see more companies realize this and bring on investor relations professionals. (Pincus, 312/266-7800)