New York confab

Jan 01, 2010
<p>Highlights from the recent IR Magazine East Coast Think Tank</p>

Social media

‘The more information that’s out there and the more context, the more helpful it is to me as an equities analyst. Many companies are looking at social media as vehicles to connect with consumers of specific products and services. Frankly, they are under-used for reaching out to investor constituencies. Some companies are disseminating press releases via Twitter, using it like an RSS feed, but the most effective use of social media is a corporate IR blog: a discussion rather than a one-sided monologue.’

‘Step one is to start monitoring social media for anything to do with your company or industry. That gets senior management members intrigued and makes them part of the process. Next, you can start tweeting about your press releases, which translates into possibly tweeting about other things. Then work your way up to a blog; companies that blog simply go into a lot more depth on the most common topics.’

Multi-social media
‘When you add multimedia to your website or press release, it increases its ‘linkability’ – its viral spread. In terms of search engine optimization, the more links out there to stuff onto your website or press release, the higher it will rank in searches. All the sharing that happens when you produce multimedia really increases the number of eyeballs for your message.’

Market structure

‘There has been a significant increase in trading volume over the last two years but there’s actually less trading by investors who still hold your stock at the end of the quarter. The enhanced liquidity often talked about coming from high-frequency trading seems to be having more impact on large caps, which are pretty liquid to begin with. Small caps, which need more liquidity, have not benefited to the same degree.’

A market for long-term investors
‘There is a hypothesis that the markets should be designed to support long-term investors, and other people are welcome only if they contribute to a market that’s conducive to long-term investing. In today’s market structure, large, long-term investors are finding it harder to get their trades done, which is why they’re using dark pools instead of lit markets. That leaves the lit markets to high-frequency traders, who thrive on volatility and maybe even contribute to it. But is this combination making the markets less hospitable to long-term investors?’

New platform, same story
‘Long before dark pools, there was trading activity you couldn’t identify. Ten years ago I could call my specialist and ask why the volume was strange; he or she might know which brokers were executing the trades, but he or she didn’t know who the fundamental owners were. So dark pools have added a new concept, but I don’t think they have substantially changed the problem: we still don’t know who’s trading our stock on a day-to-day basis.’

Corporate governance

‘There’s this whole spectrum of options – tools shareholders can use to hold boards accountable. It’s very common for the media or other folks to think of them as all the same. But as an institutional investor, we think there are very distinct differences. We’re for proxy access, but against reimbursement of proxy fight expenses. We’re for the changes to Rule 452 giving more clout to withhold-vote campaigns, which are a tool that allows us to better hold management accountable, but we’re against say on pay, which we think is best left to the board and the compensation committee.’

Focus on retail voting
‘There is currently a big focus on retail voting issues. Companies with many retail shareholders used to have the benefit of brokers voting retail shares for director elections; that’s gone now due to recent changes in NYSE Rule 452. The companies it will affect most are those that changed from plurality to majority elections, where the degree of withhold or ‘no’ votes can actually make a difference and isn’t just symbolic. If investors have concerns about compensation, they often take it out on compensation committee members. There could be a real problem of directors not being elected.’ 

‘Everyone was surprised at how the retail vote disappeared when companies started using notice and access. Now companies are concerned about the power shifting to institutional investors and proxy advisers, and they need help figuring out how to engage retail investors and get them voting again. In most cases they can achieve a lot of the cost savings with intelligent stratification, sending physical material to significant retail shareholders and just a notice to others.’

Proxy roadshow
‘We had been through an options backdating situation, significant executive turnover and a lot of governance upgrades, so my chairman and I went out on an off-cycle trip and engaged 12 of our 15 largest shareholders. We started a dialogue with them, limiting the conversation entirely to governance. It was a really important step in building relationships with our shareholders. It allowed them to get a different view of our organization at a time when there was nothing else on the agenda. It was designed to communicate governance enhancements, and how we were focused on building value through governance was something they cared about a lot.’

IR Magazine Think Tanks are free, invitation-only events for senior-level corporate IROs.
The next one will be held in Palo Alto, California on March 18, 2010.

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