Is there any question that the internet and e-mail have revolutionized the way IROs communicate with investors and analysts? It’s true, communication has been made easier. Now investor relations can reach much wider audiences more quickly. But what happens when you make a mistake while using these tools? Mishaps can damage a company’s reputation and even bring the stock price down. And since information travels instantly across the internet, it’s very difficult to backtrack once a mistake has been made. So, before you press the send button, check out these technology blunders.
Stop the presses
Even small changes made while preparing a press release can reveal a lot when the changes themselves come to light. Last April, the Wall Street Journal uncovered a handful of companies’ behind-the-scenes edits by clicking on the Microsoft Word ‘tracking changes’ function. Ameritrade Holding Corporation, Visa USA International, Allied Capital and Web Street (since acquired by E*Trade) all sent out press releases in Word format with the ‘tracking changes’ option still available. That meant readers could view changes that had been made in the process of revising the releases.
What companies chose to change or leave out was sometimes more telling than what was left in. For example, Ameritrade observers discovered that Joseph Moglia’s hiring as the firm’s new chief executive officer was big news in an earlier draft of the company’s earnings release but was edited out in the final version. This seemed to indicate that the company no longer viewed his appointment as one of the ‘right decisions’ it made during a difficult quarter, as was expressed in an early draft of the release. The lesson learnt from this experience is obvious: If you’re using the Microsoft editing function to review a release, get rid of all edits before sending it out.
Sneak preview
News spreads quickly when earnings results are leaked ahead of schedule. Last August, France Telecom was forced to send out part of its earnings results seven days sooner than it planned because of an e-mail snafu. It started with a routine e-mail blast with slides from the previous year’s analyst presentation. A new slide was accidentally included, showing that France Telecom’s Orange mobile business had exceeded expectations.
The IR department recognized the mistake and immediately sent out a second message without the new slide and asked analysts to disregard the first e-mail. But one analyst decided to investigate and noticed the new, non-public information. France Telecom was forced to send out premature announcements for its Orange and Wanadoo units. In the meantime, investors who were aware of the IR blunder started buying France Telecom and Orange shares and the stocks moved up by 6 and 8 percent respectively. The rest of the company’s results were officially disclosed a week later.
Compaq accidentally gave investors a special preview of its first quarter earnings release in April 2000 when it was posted on the company web site about twelve minutes before earnings were officially announced.
A participant in a Yahoo finance chat room revealed the blunder and the stock started moving up. About three minutes later, the premature earnings release was removed from Compaq’s web site, then replaced around seven minutes later when the results were officially disclosed.
Unless a draft press release is erroneously posted or sent out to the public sphere, the information is safe, right? Well, not if the company is using its internal network to circulate draft releases. According to one IRO, there have been cases where Dow Jones news reporters were able to get early versions of corporate press releases off a company’s web site. While these internal networks are protected by firewalls, it appears that it’s fairly easy to get to these internal documents. As this IRO suggests, ‘It’s really better not to use internal networks to circulate drafts of releases.’
Royal e-screw-ups
Most companies use e-mail to communicate sensitive information internally and it’s very easy for these e-mails to land in the wrong in-boxes. Last March, Cerner’s CEO, Neal Patterson, sent senior managers an angry e-mail complaining that employees and managers of the Kansas-based company were not working hard enough. The missive found its way onto the internet and the company’s stock dropped by 28 percent in the days following. The company’s dirty laundry was being well and truly aired.
Patterson apologized to his staff in a follow-up e-mail a few days later but the damage was already done. The message had been posted on a Yahoo web site and investors and employees then vented their reactions to the e-mail on a Yahoo message board for all to see.
Cerner was in transition at the time and didn’t have an IR person in place. Allan Kells was hired in June as director of investor relations and he says the e-mail was something he thought about before joining the company. But he adds that in talking with Patterson, the e-mail was put in context. ‘This message was driven by his passion for the industry more than by his management style,’ says Kells.
While no formal policy on e-mail communications has been adopted at Cerner, everyone is certainly more careful about using internal distribution lists to send sensitive information, says Kells. As for Patterson, according to Kells, he still uses e-mail to openly communicate with the entire associate base but the messages are much more general in nature.
Securing e-mails
Paper shredders are still used to do away with sensitive internal documents. But most of those confidential materials are circulated on internal electronic mail networks, which makes it easy for them to get in the wrong hands. According to Allison Wing, senior vice president of business development and marketing at Omniva Policy Systems, ‘Information on more than 50 percent of a company’s corporate assets is housed in e-mails.’ And because of the way e-mail messages travel from server to server, ‘This is actually one of the most insecure forms of communication.’
Some companies have a ‘do not copy, paste, or forward’ message attached to all internal e-mails. This does not guarantee that a message will not be leaked, but instead acts as a simple reminder. Some e-mail systems also let you recall sent e-mails as long as the receiver is on the same system. Even when e-mails are deleted, there is still a record of the message on the servers of both sender and recipient.
Omniva Policy Systems, a San Francisco-based software company, has a software product that makes e-mails self-destruct at a specified time. A second send button called ‘send with policy’ encrypts the e-mail and attaches self-destruct instructions. When the message reaches the recipient, the e-mail server requests the key from Omniva’s server to decrypt the e-mail message. Then when it’s time for the e-mail to disappear, the decryption key is destroyed and the e-mail is rendered permanently unreadable.
From an IR viewpoint, there are usually no excuses to offer except simple human error, and a sincere apology. That was the response both Compaq and France Telecom gave when their earnings results were prematurely revealed.
The truth is, the ease and convenience of e-mail and the internet far outweigh the damage incurred by mishaps. Now many companies are looking for ways to better control internal networks and e-mail functions. But we’ll never be able to entirely guard against the amplifying effect new technologies have on human error. It’s simply one of the realities of the modern workplace: small mistakes now have bigger consequences.
