Communications professionals now find themselves working in an investor-driven business context. Faced with a looming recession and all of the challenges that go with it,
business executives are increasingly quick to cater to the whims of investors to keep their operations afloat. In addition, shareholder activism is on the rise in an environment
altered by online interactions.
This wouldn't be striking if PR executives were fluent in investor behavior, but such is often not the case. Plus, acts of deception across all industries--political, financial
or otherwise--have upped the ante even further. With these realities at the forefront of business transactions, communicators, be they corporate, agency or nonprofit affiliates,
must learn strategic investor relations practices, and they must be prepared to revise these learned strategies early and often.
"The learning curve of investor communications has ramped up considerably in the last 10 years or so, thanks in part to the scrutiny of the Securities Exchange Commision and
Sarbanes-Oxley, which has served notice to issuers about their responsibility for full, fair and timely material disclosures," says Robert Ferris, executive managing director of
RF Binder Partners. Communications professionals play a role in these material disclosures, whether it's through relaying them to shareholders or the media, or preparing annual
reports.
While in-depth PR/IR guidelines could be an entire book's worth of real estate, consider this a primer in strategies and best practices for engaging shareholders in meaningful
ways.
*Transparency is king. It almost--almost--goes without saying, but transparency, especially in the wake of Sarbanes-Oxley, is an essential investor relations practice. However,
completely transparent communications are easier said than done, and the key to meeting a high standard is having a deep understanding of your audience--so said Dominic Jones, a
principal of Clarity! Communications of Canada Inc., and the founder of IR Web Report, in a conversation with Shel Holtz, principal of Holtz Communication + Technology (as
documented in Jones' IR Web Report blog):
"The root of transparency is empathy. Transparent companies are those that understand their audiences, who are able to relate to the people they are talking to because they are
good listeners."
Likewise, understanding and transparency imply credibility, which is, of course, essential.
"As recession becomes more of a reality in the market, companies, of course, should be mindful of conservative fiscal policies, and communications and investor relations
professionals should ensure that investors understand that this is the corporate attitude," says Ferris. "Adopting a 'doing what you say you're going to do' attitude is one of the
best ways to enhance relationships with investors and maintain their trust. Transparency is the watchword for credibility."
*Get aligned. In the same vein as transparency, communications professionals must aid the alignment between investor and management expectations, as any incongruence would
imply disaster.
"[A risk is] misaligned expectations between management and investors, and a lack of a 'license to operate,' which I think is a major risk for multinational corporations,
particularly those in industries sensitive to public sentiment," Jones said.
Regarding the increase in multinational organizations, Ferris says, "Foreign companies, newer to the U.S. capital market, have a lot to learn in [the area of investor
relations], but also have a lot of counselors standing in the wings to guide them."
The key for public relations executives, then, is being these counselors, and the first step begins now.
*It's an online world, after all. Annual reports are the backbone of investor relations and shareholder communications, as they disseminate financial statements to shareholders
and other constituents. With the push to go online, many annual reports have taken on a digital format, and PR execs are integral to making this transition in compliance with new
requirements.
Beyond this, though, is the growing presence of online activist shareholders, or those who use their equity stake in a corporation to put public pressure on its management.
This lends itself to dissident relations between companies and their shareholders, and in turn requires attention on the part of communications professionals. The sidebar below
offers tips for managing online activist shareholders in the context of one company's failed attempt to overlook the influence of one individual who was armed with nothing more
than an Internet connection...and 96 shares. PRN
CONTACTS:
Shabbir Safdar, [email protected]; Jeff Connaughton, 202.457.1110; Robert Ferris, [email protected]
Investor Communications Strategies In The Age Of Online Activist Shareholders
For decades, corporate management held the distinct advantage in their relations with dissident shareholders, who rarely could successfully challenge management plans. In the
last few years, however, significant developments have upset this balance; now, corporate communications and investor relations strategies must adapt to a new age of online
activist shareholders who--whether small and poorly funded or powerful and wealthy--are empowered by the Internet, zero-cost publishing and Web-based communications strategies.
One recent development is the SEC's new rules that permit the electronic distribution of proxy materials, lowering the cost for anyone to run a proxy fight without the high
cost of direct mail. The other developments are signified by the savvy techniques Walter Hewlett used unsuccessfully against the HP-Compaq merger in 2002, and by the more recent
fight Eric Jackson has taken against Yahoo.
In 2007, activist shareholder Jackson held a mere 96 shares of Yahoo; he had a desire to see the value of his stake rise. However, he was dissatisfied by the company's lack of
requirements for directors to buy stock. He relentlessly published his criticisms on his blog and on YouTube, and put his strategic plan ("Plan B For Yahoo!") up on a wiki. Months
later, he had accumulated a huge stack of press clippings, not to mention the satisfaction of seeing many of his suggestions reluctantly taken by a battered Yahoo.
The Internet and the SEC's new rules on the use of electronic proxies have changed the entire landscape for investor communications. To deal with these new changes,
corporations should consider the following strategies:
1. Monitor activist shareholders and online sentiment. A critic may own just a single share, but if a company ignores him/her and the arguments he/she makes resonate with the
market as a whole, that critic can become a spokesperson whose influence is too big to manage.
2. Engage the activists carefully. Yahoo should have rebuffed Jackson's arguments in writing. Instead it brought him in for a meeting with executives, thus giving him an
audience, and then refused to budge on any single point. This in turn made Jackson an even more motivated critic with a global voice.
3. Use traditional political campaign techniques to move opinion. Once an investor sentiment problem reaches a critical mass, corporations have no choice but to meet it with
the time-tested techniques of political campaign communications, including setting the agenda, amplifying supporter voices and rapid response.
This sidebar was written by Shabbir Imber Safdar and Jeff Connaughton, who
were part of a cross-agency team that provided strategic and digital communications
consultation to Hewlett-Packard during the proxy fight over the Compaq acquisition.
Safdar is the founder of Virilion Inc.; Connaughton is vice chairman of Quinn
Gillespie & Associates. You can read more about Walter Hewlitt and a detailed
case study about Eric Jackson's campaign against Yahoo and the implications
for investor communications at http://www.prnewsonline.com.