When it's released every quarter, a company's earnings report
can be a power-packed document for employees, laying bare bad news
about their employer or showing proof that jobs there are likely
secure. At best, the report can work as a tool for understanding
your employer better. At worst, it's just a bunch of
gobbleygook.
Nowadays, in the wake of the giant corporate fraud scandals last
year, more companies are working hard to explain the contents of
earnings reports to their staff.
"Employees want to know the company they work for is not another
Enron," says Maria Quillard, senior director of investor relations
for Xilinx Inc., a publicly traded, San Jose, Calif.-based
technology firm. "You've got to show them you're not."
To that end, says Quillard, Xilinx's CEO makes a point of doing
an internal Webcast about a week after the company has released its
earnings report, giving him a chance to address individual items in
the report and make them clearer to the company's 2,600 employees.
In addition, Xilinx conducts monthly forums where several employees
can lunch with the CEO and ask him financial questions. That, too,
goes out over an internal Webcast. And, said Quillard, when there's
lots of activity with the company's stock and employees become
upset or confused, the CEO is careful to send out a company-wide
email doing his best to explain.
This is especially important to do when the employees are also
stockholders in the company, says Dan Hucko, VP of corporate
communications for Harris Interactive Inc., the publicly traded
Rochester, N.Y.-based consulting firm best known for the Harris
Poll.
When Harris releases its earnings reports, it sends out a
release to the public and its employees at the same time. Employees
are then invited to take time out of their day to listen in on the
analyst conference call or to watch the Webcast on the company's
site. Thirty days after an earnings release, Harris makes available
to employees a transcript of the call.
"You have to be very honest with employees because they can
smell deception very rapidly," says Hucko.
The CEO of webMethods, a Fairfax, Va.-based, publicly traded
technology company, has taken this to heart, holding regular brown
bag lunches with employees to show them how to read a balance
sheet. Says Ivy Eckerman, webMethods' PR manager: "Our CEO will use
our balance sheet as a prototype, showing employees what to look
for and what the company - any company -- can improve."
Not only are more CEOs increasing their approachability and
trying to share more, but more employees are getting bold and
asking tough questions. And many companies welcome it.
For example, John Dienhart, the Boeing Frank Shrontz Chair for
Business Ethics at Seattle University, cites a Seattle company
whose CFO recently rose at a company-wide meeting and stated, "If
you ever see me doing anything wrong, I want you to go to the
CEO!"
Because of this new attitude, says Dienhart, "the middle man now
feels more empowered to challenge numbers that don't seem right to
him. Being a team player used to mean doing what the boss told you;
now it means doing your job right, by professional standards. That
can mean questioning the numbers."
That said, there are strict limits on how much a CEO or CFO can
tell employees about the company. That's because the Securities and
Exchange Commission prohibits public companies from releasing
material information to employees any earlier than the companies
release such information to the general public. The point? To
ensure against insider trading.
"There are things we'd love to share with employees -- a big
contract, a spike in sales - but we just can't," says Hucko. "So we
have to do a balancing act."
That act includes sending out an announcement to employees a few
weeks before the earnings release telling them the window has
closed on buying or selling company stock. It also includes going
into a quiet period prior to the earnings release and right after,
as per SEC rules. During this time, company leaders can't speak to
employees about the earnings or any of the company's other
financial matters.
It's true that lately more companies are spending time educating
employees on the bottom line. But according to David Schull, senior
VP of Thorp & Co., a Coral Gables, Fla.-based PR firm, the
trend actually started during the tech boom of the late 1990s.
"It was a time when companies began to better embrace employee
communication as a necessity for employee recruitment and
retention," says Schull, adding that since then, at least among
many public companies, communication has only escalated.
Among private companies, though, that's not been the case. With
no mandate from the Federal government to communicate their
financials to the public, many private firms don't communicate them
internally, either, notes Jeff Levy, president of Plainview,
N.Y.-based Corporate Authority Communications Inc. And that doesn't
seem to be changing.
"[Private companies] are still as tight-lipped as ever," Levy
says.
With time, though, that's expected to change among firms of all
shapes and sizes.
Says Schull: "Companies that are forward-thinking are making
sure they recognize employees as their biggest audience -- when
traditionally it's the audience that has been most overlooked."
The CEO and the Brown Bag
What's the best way to communicate financial information to your
employees?
The first step for a publicly traded firm is to make sure it's
not violating the Securities and Exchange Commission's Regulation
FD, adopted in August 2000. Reg-FD, as it's referred to, dictates
that when a company discloses material information to nonpublic
individuals such as analysts or traders -- or company employees --
the company must make public the disclosure of that information.
That means that anything the company tells the employees about
financials it must also be ready to tell the public.
Beyond that, the sky's the limit, say PR and IR executives. You
can invite your employees to listen in on analyst conference calls
when earnings are released, provide internal Webcasts of annual
meetings, encourage your CEO to email all employees with an
explanation when the company's stock does something odd, ask your
CEO to hold brownbag lunches to explain balance sheets - anything
that sheds light on the company's financials without bumping up
against Reg-FD.
Contacts: Dan Hucko, Harris Interactive Inc., 585/214-7470,
[email protected];
David Schull, 305/446-2700, [email protected]; John
Dienhart, Seattle University, 206/ 296-5714, [email protected]; Ivy
Eckerman, Webmethods, 703/460-2500, [email protected];
Jeff Levy, Corporate Authority Communications, 516/367-3690,
[email protected],
Maria Quillard, Xilinx Inc., 800/836-4002, [email protected]