Stories about trends in the U.S. and global economies. The hottest new IPO. A cool product or service intended to change the world. A big earnings gain or miss. Reports about various countries’ fortunes both politically and fiscally all across the world. CEO changes, restructurings and recessions, just to name a few.

Absolute Value is our sounding post where we hope to exchange ideas and commentary on why all of this matters. We believe our point-of-view about events and communications helps our clients matter more in an era of unprecedented global connection.
 

SEC Staff Releases Guidance on Proxy Advisory Firms – Long Wait with Little Impact
July 29, 2014

On June 30th, the U.S. Securities and Exchange Commission (SEC) released a staff legal bulletin, regarding proxy voting and the use of proxy advisory firms by institutional investors and registered investment advisers.  Specifically, in an attempt to enhance transparency, minimize potential conflicts of interest and avoid a widespread overreliance on proxy firms by institutional investors, the bulletin provided guidance about investment advisers’ responsibilities in voting client proxies and retaining proxy advisory firms.

magnifying glassProfessional organizations like NIRI have long urged the SEC to more closely regulate proxy advisors and their reports, which have often been criticized for perceived inaccuracies, being unclear and often offering “one-size-fits-all” voting guidelines, although this staff bulletin offers investment managers limited guidance and nothing more.  NIRI also believes that the “widespread use of proxy advisory services by institutional investors has resulted in these firms having a significant impact on shareholder voting. However, proxy advisory firms remain largely unregulated, and are not fully transparent about their methodologies and decision-making processes.”

So, what does the recent SEC guidance really mean for public companies in the proxy process? As you prepare for a significant shareholder vote the key as always is maintaining good relationships with your active shareholders. For proxy voting, our research has shown that the majority of buy-side institutions can have an impact on final voting responsibility. The legal and/or proxy department is also involved, but make no mistake–your primary contacts will have a say and their words will have weight. The onus remains on the Company’s IR team to keep the lines of communications open so at voting time, no one gets a nasty surprise!

Joe Calabrese and Scott Eckstein bring a wealth of experience to MWW’s Financial Communications practice.

Joe Calabrese is a Senior Vice President with approximately 20 years of investor relations experience. Working closely with publicly-traded and private companies, Joe provides strategic counsel, message and collateral materials development and has in-depth experience assisting IPOs, M&A transactions, restructurings, restatements, analyst days and management changes.

Scott Eckstein is a Director of Account Services at Financial Relations Board and brings over 15 years of experience in financial communications both in agency and corporate roles. Scott has worked with a number of companies developing integrated communications programs as well as developing targeted institutional and retail branding campaigns. He has also provided advisory services for a variety of small- to large-cap companies.

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Fed Signals Potential End to QE!
July 21, 2014

Federal Reserve and moneyEarlier this month, the Federal Reserve released the minutes from the latest Federal Open Market Committee (FOMC) meeting that took place in mid-June.

What was most significant was the potential end to the Federal Reserve’s monthly asset purchase program or Quantitative Easing, popularly called QE. Looking back, the Fed has already been reducing QE by $10 billion increments at each meeting since December 2013, to $35 billion a month from a high of $85 billion a month. However, the latest meeting minutes indicated that if the economy continues to generally improve as the FOMC’s members expect, QE could end with a single $15 billion reduction at its October 2014 meeting. The minutes also showed that the Fed plans to clearly specify to the market when its plan ends its bond-buying program.

This has led to wide speculation and analysis by many interested parties. But putting this speculation aside, what do we really know from reading through the minutes? One thing is clear: the Fed is obviously trying to let people know they will have ample warning that it’s going to raise interest rates before it actually does it. However, what the Fed is not saying is when this will happen. If you read through the minutes, you can see they offered no new clues on the timing of an interest-rate increase, with officials saying policy depends most “on the evolution of the economic outlook.”

Another interesting facet of this release was the Fed’s comments on investors’ complacency about risk and reading such as “signs of increased risk-taking were viewed by some participants as an indication that market participants were not factoring in sufficient uncertainty about the path of the economy and monetary policy.” Hopefully we have we learned something from our experiences in the past six to seven years!

Putting aside all the hoopla, I think this should be taken as a step forward. Let’s remember, the minutes clearly showed that much of these comments were the result of continuing economic growth and employment gains. True, we still have a long way to go and nothing is going to change overnight. That also goes for interest rates!

Scott Eckstein is a Director of Account Services at Financial Relations Board and brings over 15 years of experience in financial communications both in agency and corporate roles. Scott has worked with a number of companies developing integrated communications programs as well as developing targeted institutional and retail branding campaigns. He has also provided advisory services for a variety of small- to large-cap companies.

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Can a CEO Opt-out of Earnings Calls?
October 21, 2013

In case you missed it, last week Google’s CEO announced that he may not be joining future earnings calls. Some news reports are citing vocal chord troubles, while Page himself suggested it was a need for him to “ruthlessly prioritize.” But how can Larry Page be a CEO if he can’t talk? Do they do all of their strategy meetings via Google Hangout? And if it is a question of priorities, shouldn’t his shareholders be a priority four times a year?

Many are citing the precedent of Steve Jobs opting out while battling cancer, which was obviously an extreme example. Others may recall Jeff Bezos who was very clear that he wasn’t going to concern himself with Wall Street’s short term priorities. But that didn’t mean he didn’t show up.

What are the implications of a CEO stepping back from investor relations commitments like a 4-times-per-year call? I’ve had many a client over two decades that would prefer to decline the quarterly firing squad known as the analyst call. And I’ve had a few that probably would have been doing their Company, and their shareholders, a service by playing hooky on those days.

We know that at least one-third of a Company’s valuation is tied to intangibles. When pressed to get specific about what those things are, quality of management, leadership and vision are the most frequently cited variables. Perhaps Google feels that the CEO-investor version of playing hard to get will increase his perceived value?

Woody Allen said it best, “Eighty percent of success is just showing up.” My view: if you want to be the CEO, you have to show up.

Carreen Winters brings nearly two decades of corporate communications expertise to her position at MWW Group with special emphasis in corporate and executive positioning, reputation management, crisis communications, restructuring and financial transactions, employee communications and labor relations.

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Top Companies Explore Social Media For Investor Relations, As Most Still Lag Behind
September 5, 2013

Top companies explore social media for investor relations, as most still lag behind.

Since the SEC approved the use of social media for announcements in compliance with Regulation FD in April 2013, a few U.S. companies have answered the call by integrating social media platforms to help communicate financial information and engage shareholders.

This is highlighted by Yahoo and Netflix “breaking the staid tradition of executives huddled around a speakerphone” and utilizing live video conference and tweets for their recent quarterly results and Zillow soliciting questions submitted via Facebook and Twitter during their earning call.

Nonetheless, social media adoption by companies for investor engagement and financial communications remains in its early stages.

According to relatively recent research from NIRI “72 percent of IR professionals don’t use social media as part of their IR program” but almost half will reassess the issue within the next year. Reasons cited range from regulation, perceived lack of interest by investors and overall demand.

However, given Bloomberg has integrated live twitter feeds with its financial platform and Carl Icahn’s recent “multibillion dollar tweets,” IRO’s will need to be at least monitoring – if not engaging with – investors who are increasingly social media savvy.

Joe Calabrese is a Senior Vice President with approximately 20 years of investor relations experience. Working closely with publicly-traded and private companies, Joe provides strategic counsel, message and collateral materials development and has in-depth experience assisting IPOs, M&A transactions, restructurings, restatements, analyst days and management changes.

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CEOs Getting Social, Albeit Slowly
August 27, 2013

The power and influence of social media is undeniable.

It has risen to be the No. 1 activity on the Internet (I’ll let you figure out what it overtook…). There are now over 1 billion users on Facebook. If it were a country, it would be the world’s third largest. Every second, two new members join the LinkedIn club. And the fastest growing social network in 2013…Twitter, with the fastest growing age demographic of 55-64 year olds, registering an increase in active users of 79 percent.

So considering that, in today’s social-dominated world, CEOs of top corporations must be tapping in to these networks to uncover invaluable insights regarding their customers, competitors, and well just about every one else, right?

Well, no, not really it seems.

According to a new report released by Domo and CEO.com, 68 percent of Fortune 500 CEOs have absolutely no presence on any major social network.

When compared to last year, things look slightly better on the surface. A whopping ten new CEOs – a 56 percent increase from 2012 – joined the Twittersphere in 2013, most notably Warren Buffet from Berkshire Hathaway (who hasn’t tweeted since his first day on the site and still amassed over half-a-million followers). Presence on LinkedIn, the most popular channel for CEOs, also grew slightly, with a modest 9 percent increase since last year.

But look a little deeper, and things go from bad to worse. Of the 28 CEOs on Twitter, only 19 of them are “active”…that’s less than 4 percent of all Fortune 500 CEOs.

Why more CEOs aren’t rushing to “get social” remains a mystery. But considering the proven benefits, CEOs may want to at least start by wading in the pool.

Carreen Winters brings nearly two decades of corporate communications expertise to her position at MWW Group with special emphasis in corporate and executive positioning, reputation management, crisis communications, restructuring and financial transactions, employee communications and labor relations.

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Rating S&P’s Words
April 24, 2013

As practitioners of crisis communications, we regularly work closely with legal counsel to make sure that the communications strategy is closely aligned with the legal strategy. Our objective is to help protect brands and while the lawyers look toward winning in the court of law, we public relations practitioners aim for success in the court of public opinion. Words matter for each of us in arguing our case and we seek to be in sync in legal filings and corporate messaging. Yet, there are some times when friction can emerge between the road the lawyers are taking and what we believe may be best for our client’s reputation.

That rub is now being played out in fabulous fashion in a civil fraud lawsuit filed by the United States Department of Justice against Standard & Poors Ratings Service regarding S&P’s ratings and the 2008 financial meltdown. As The Wall Street Journalreporter Jeannette Newman points out in her excellent April 23 story on the case, S&P has long focused on the words “independent” and “objective” in selling itself as the grand arbiter of the quality and safety of corporate debt and a host of financial instruments. “Independent” and “objective” went hand in hand with “Standard” and “Poors” in how the Company described itself to investors and sold its expertise for very big bucks to its clients. The words are ubiquitous in the materials produced by S&P’s marketing and public relations teams and frequently repeated by company executives.

But facing the DOJ in court, S&P’s lawyers are now saying those words are just “puffery” and were never meant to be taken at face value. The company’s legal team, which includes First Amendment super-lawyer Floyd Abrams, cites recent Federal court rulings that call into question whether S&P’s watch words can really be depended on. Or as Ms. Newman recounts, the lawyers’ point is that “S&P’s ratings were objective, independent and uninfluenced by conflicts of interest. That, however, is beside the point.”

Whether this legal strategy will win in the court of law is yet to be seen but it looks like a very shaky argument in the court of public opinion. Ms. Newman’s quote in the story from Duke Law professor Samuel Buell sums up the issue quite well. He states that “Even if it’s a viable legal argument, it’s a pretty unattractive argument for S&P to be putting forward since they’re basically in the business of charging clients for their reputation. What they’re saying here is, ‘When we’re talking to investors about our own reputation, we’re engaging in meaningless puffery.’”

Now I do not know how and if S&P’s communicators were involved in litigation support, but this is a pretty big hole for the company to dig itself out of reputation-wise, especially when it is the subject of a front page WSJ article. Lawyers have their job to do and public relations professionals have their job to do. In the realm of litigation support, we must not be shy to argue our case to executives/boards and make sure they know all the potential ramifications of the legal strategy and words counsel are using. What may win the day in court could lose in the court of public opinion and impact business and the bottom line. That is why, particularly in the digital age when legal documents are more accessible than ever, it is important to review court filings from a brand and reputation perspective and provide communications counsel to executives/boards. At the end of the day, it is up to them to decide which way to go when lawyer words and brand messages conflict but a seat at the table when those decisions are made is crucial. Time will tell if S&P made the right decision.

Rich Tauberman is Executive Vice President of MWW and a leader of the firm’s Corporate and Financial Communications practices. He directs some of MWW’s top professional services and financial services accounts. Rich’s background includes managing communications activities for law firms, accounting firms, banks, brokerages, asset managers, insurance companies and healthcare organizations. He possesses an expertise in crisis/issues management, litigation support and investor relations.

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“Stupidest” and “Most Embarrassing” – Phrases You Wouldn’t Expect to See in an Annual Letter
April 10, 2013

That is until JP Morgan published Jamie Dimon’s annual letter to shareholders today. It’s a good read, all 29 pages of it, but what immediately caught my attention was Dimon’s blistering quote, “The London Whale was the stupidest and most embarrassing situation I have ever been a part of.” He followed that up with, “We had a gap in our fortress wall. For a company that prides itself on risk management, this was a real kick in the teeth.”

Dimon’s reputation, as well as the bank’s, has certainly taken numerous hits since news of the London Whale incident first broke. But the stock has made a roaring comeback since its bottom last summer. Of course, operating results have a little something to do with that run, but you have to give Dimon credit where credit is due in the repair of both his and the company’s reputation, which has certainly contributed to the stock’s performance as well.

This refreshingly frank annual letter commentary is quintessential Jamie Dimon. We applaud him and his IR team for owning up to the gravity of the issues they have faced, to mend the relationship with their shareholders and rebuild JP Morgan’s credibility.

Stacy Feit is a Senior Vice President at Financial Relations Board with over 10 years of investor relations and Wall Street experience. She provides strategic financial communications counsel and helps clients increase their visibility within the financial community. She has guided numerous clients through major milestones, including IPOs, spin-offs, acquisitions and restructurings.

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Could 2013 Be the Year IPO’S Have Waited For?
April 2, 2013

IPOs in the U.S. got off to a good start in the first quarter of this year with companies raising $8.91 billion according to data compiled by Bloomberg, a rise of 44%. Globally, public offerings raised almost $20 billion, up more than 18% over the prior year’s period. European companies generated $3.66 billion, a 25% increase over last year. Amongst the largest players was Pfizer’s $2.6 billion sale of Zoetis (ZTS), its animal health unit and Goldman Sach’s offering shares in German apartment landlord LEG Immobilien AG, which raised $1.6 billion.

Globally, IPO volumes rose 37 percent to $21 billion, as the surge in U.S. activity and a rebound in European volumes offset a 56 percent decline in Asia.

So what does this mean for the balance of 2013? From what we are seeing, the pipeline for 2013 in the U.S. is robust with private equity firms driving much of this activity across various sectors including industrial, retail and consumer, and healthcare as they seek to exit investments. Blackstone Group’s Pinnacle Foods – think Hungry-Man frozen dinners and Bird’s Eye frozen vegetables – went public on March 28, raising $580 million. Other large buy-out firms planning IPOs later this year include eye care company Bausch & Lomb Inc., technology products retailer CDW Corp., theme park operator Sea World Parks and Entertainment, and testing services company Quintiles Transnational Corp.

Further, in March the Dow Jones rose to a record level and the MSCI World Index rose to its highest in almost five years. Global economic growth is expected accelerate to 2.4 percent from 2.3 percent in 2012, while China is expected to tick up to 8.1 percent from 7.8 percent and Europe from contraction to expansion. If market gains can be sustained and projected economic recovery continues, we will hopefully see an increasing number of companies emboldened to pull the trigger on their IPOs which would ease the biggest global backlog of IPOs since 2007. While there are contrarian views, we are optimistic that this will indeed take place.

Marilynn Meek is a Vice President at Financial Relations Board and brings over two decades of experience as an officer of Wall Street securities firms and IR agencies. She provides strategic communications programs that include IPOs, M&As, capital raising initiatives, shareholder and analyst communications, and financial crisis communications for micro-cap to Fortune 500 companies.

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The Fiscal Cliff – Some Companies are Softening the Blow for Dividend Investors
December 5, 2012

It’s difficult to look at any news outlet today and not hear coverage on the impending “Fiscal Cliff” that looms over our nation. The implications of ending the Bush era tax cuts and potential tax increases and spending cuts are numerous, but specifically for one class of investors it raises a pointed question – what are the implications for dividend investors?

The simple answer is of course already on paper. Shareholders pay taxes on their dividend income according to their respective tax brackets. At present, taxpayers in the 10- or 15-percent tax brackets pay no taxes on their dividend income. For all other taxpayers, the tax rate on dividend income is capped at 15 percent. These rates are set to expire on December 31.

Bottom line – if nothing is done to avert this deadline then the maximum tax rate on dividend income will rise to 43.4 percent in just under a month. For individuals, the maximum individual tax rate will be 39.6 percent, with additional Medicare tax added on for households earning more than $250,000 or $200,000 if you’re single. It does not end there. For those lower income taxpayers in the 15 percent income tax bracket, who now pay zero taxes on dividend income, will pay 15 percent; and those in the 28 percent tax bracket – individuals making over $35,500 in 2013 – will see their dividend income tax almost double from 15 percent to 28 percent.

Companies’ responses to this potential issue have varied. In some cases, companies have tried to take action now to minimize near-term impact to their shareholders. As discussed in a recent Wall Street Journal article, several companies such as Oracle, Costco and Wal-Mart have accelerated dividend payments to allow investors to take advantage of existing lower tax rates. Others such as Las Vegas Sands have announced special dividends that will be paid before year-end to try and offset the potential impact.

While these acts have received praise from many investors, they also bring their own host of questions and its best companies are prepared to answer them beforehand. As some media outlets are highlighting, the big question is “if companies that have declared special dividends or accelerated dividend payments could have used the cash to fund growth opportunities instead?” Also, are “insiders the ones that will benefit the most from special dividends or a shift in regular dividend payments?”

The ultimate fate of the U.S. government’s fiscal plans is still unclear as bipartisan politics continues to fuel the uncertainty. From a financial communications standpoint, it requires at least a temporary reshaping of communications for affected companies to help their investors understand the potential impact. For the longer-term, this has the potential to significantly alter the investment thesis of companies that rely heavily on dividend / retail investors. If enacted, these companies will have to take a hard look at their core messaging strategies and possibly revisit them to ensure they remain attractive to dividend investors in the face of this new paradigm.

Scott Eckstein is a Director of Account Services at Financial Relations Board and brings over 15 years of experience in financial communications both in agency and corporate roles. Scott has worked with a number of companies developing integrated communications programs as well as developing targeted institutional and retail branding campaigns. He has also provided advisory services for a variety of small- to large-cap companies.

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Markets Are Closed but the Beat Still Goes On For Many Including Our Favorite Fruit
October 31, 2012

U.S. markets were closed again today as Hurricane Sandy continued to wreak havoc on the Eastern Seaboard. This is the first time inclement weather has closed markets for consecutive days since 1888 when a blizzard shut the NYSE for two days. With third quarter earnings season in full swing, many management teams and IR departments have been debating whether to postpone earnings announcements and conference calls or move forward anyway despite the frozen markets. While over 50 opted to postpone, a number of companies, including big names like Burger King Worldwide and Valero Energy, moved forward as planned, neither of which was to mask weak results. In the meantime, our friends in Cupertino chose to announce a major management shakeup yesterday. As one of the most actively traded stocks, making an announcement of this magnitude during this virtually unprecedented market closure smells of a classic attempt to bury the news. We’ll have to wait until tomorrow to see if the strategy pays off…just about everyone’s eyes will be on Apple at the open.

Stacy Feit is a Senior Vice President at Financial Relations Board with over 10 years of investor relations and Wall Street experience. She provides strategic financial communications counsel and helps clients increase their visibility within the financial community. She has guided numerous clients through major milestones, including IPOs, spin-offs, acquisitions and restructurings.

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