One of the most sustaining traditions throughout the history of human civilization is the desire to celebrate achievements. This is especially true during times of challenge. The Mayans and Aztecs often celebrated overcoming challenges like poor crops or encroaching enemies.
The Romans had their own version of this celebratory tradition with nights of debauchery following particularly bloody battles.
Today, this type of release is part of our common culture. College students are renowned for marking the end of a strenuous exam period by flying to Cancun or Florida to drink fruity libations all week. The popular CBS series Survivor depicts castaways celebrating after completing some ridiculous feat like being dropped in the middle of the South Pacific and having to paddle for 39 days.
Corporate America is another culture that celebrates achievements in the face of adversity, as recently demonstrated at the seventh Investor Relations Magazine US Awards. After one of the toughest years in IR history, over 850 attendees at this year’s awards were ready to feast.
Rewarding consistency
Three things made 2001 and early 2002 particularly challenging for US IROs: a downturn in the US economy, the devastating terrorist attacks of 9/11 and a major corporate scandal. ‘It has been the kind of year where all bets are off and things changed dramatically from a momentum perspective,’ reports Blair Christie, director of investor relations for Cisco Systems.
Award-winning IROs were especially pleased to get praise from analysts and investors during such a volatile period. ‘It was a pleasant surprise and an honor, especially considering how difficult 2001 was from a performance standpoint,’ says Tom Katzenmeyer, VP of IR at the Limited, which won best communications by senior management.
Award-winners were determined by a survey of over 1,800 US portfolio managers, securities analysts and retail investors. It was conducted for Investor Relations magazine by independent research firm Erdos & Morgan using a database provided by Thomson Financial. Respondents were asked to rate companies and IROs in 20 different areas of IR.
One of the underlying messages of this year’s US Research Report is that consistent IR during an especially challenging period deserves praise. Many of the companies that were recognized for excellence in investor relations also watched their share price drop this past year, suggesting that Wall Street measures IR professionalism and stock performance separately. ‘This is clearly not a contest to see whose stock shot up 100 percent; it’s really about who the Street thinks is helping them do their jobs,’ says Mark Aaron, vice president of investor relations at Tiffany & Company.
Three companies – General Electric, Tiffany and AmeriCredit – took Grand Prix awards for best overall investor relations as well as best IRO in their market cap categories. Aflac was another company that stood out, taking home the Grand Prix for best overall investor relations in the large-cap category and best annual report.
Transparency is key
‘What makes this so rewarding is that last year was miserable in terms of price depreciation,’ says Ken Janke, senior vice president of investor relations at Aflac. ‘There were some execution issues that we had to explain that affected our results; it was a challenge from a communications standpoint and we are thrilled that it didn’t affect the broad perceptions of how we do our job.’
Janke has been IRO at the Columbus, Georgia-based insurance company for 17 years. His policy has always been to point out risks as they arise. The IR team aims to be thorough, detailed and accurate in its information. As Janke says, ‘We are as candid and open as possible given regulatory and competitive constraints.’
Aflac’s annual report was also cited, with one respondent saying it was more transparent than most ‘and had one of the best MD&As – not the usual PR stuff.’ Aflac is one of a few companies that do almost the entire annual report in-house. ‘The only thing not done by us is the photography,’ says Janke. Aflac’s investor relations department is in charge of writing and overseeing the production of the annual and gets contributions from the company’s financial reporting team. In producing the report, Janke works on the assumption that what is good for the retail market is also good for the institutional investor. ‘When writing a document, we always try to make sure it can be easily digested by individual investors.’
For the last three years, Aflac’s IR department has incorporated the company’s popular duck mascot into the annual report. ‘We try to make our financial communications consistent with our advertising,’ notes Janke. The company has been running a series of TV commercials featuring the duck squawking the company’s name. Janke says the interplay between marketing and IR has boosted Aflac’s visibility among investors as well as consumers.
Team effort
‘The best thing we did was to keep an open line of communication at a time when a lot of companies went more quiet than usual,’ says Cisco’s Blair Christie. Although delighted with her award for best IRO, Christie insists her team be recognized as well. ‘No one person could have handled the type of year we had,’ she posits. ‘Our industry saw consolidation and our customers went through significant changes; virtually every factor of our business model changed.’
During 2001, Cisco had seven staff working in the IR department including two people focused on competitive financial analysis. Managing a successful IR team requires communication and camaraderie, says Christie. ‘We are in contact all the time either via cell phone or yelling across the office,’ she says. ‘And we laugh all the time; we have watched our stock go from crazy levels to crazy levels and have worked very long hours, so you have to have a good time together.’ In the last two years, Cisco’s stock has swung from a high of around $80 to its current price of around $14.
John Chambers, Cisco’s CEO, was awarded best investor relations by a CEO this year. According to Christie, Chambers is highly involved in the company’s IR activities. ‘He speaks to our group every day and participates in about three financial conferences a year,’ she says. Chambers also meets with investors regularly and moderates the company’s two-hour conference call to investors and analysts each quarter.
The interplay between Cisco’s IR group and the company’s CEO is beneficial to both parties, Christie notes. ‘What we give him is information on what our Wall Street friends are thinking – be it good, bad or ugly – and he gives us his perspective on that raw data.’
Long-term strategy
‘To be recognized for conducting really effective communications in a difficult environment is particularly satisfying,’ says Mark Aaron, Tiffany’s vice president of IR and winner of best IRO in the mid-cap category. Tiffany also took the Grand Prix for best overall investor relations and best annual report in the mid-cap category. This is the second year in a row the luxury goods company has received these three awards.
‘We have a very consistent approach to communicating effectively and providing meaningful information to investors and analysts. That probably represented added value during such a volatile year,’ Aaron explains.
The true test of a company’s sound IR program is communicating bad news. Like all retailers, Tiffany was strongly affected by the tragic events of September 11. According to Aaron, when an external factor impinges on the business it’s best to separate the things you can control from those you can’t. ‘We don’t have a crystal ball to predict where the global economic environment is going; all we can control is our business strategies and how we execute them,’ he says.
The key to successful IR is ‘to think long-term and admit if results are soft,’ says Aaron. In the third quarter of 2001, he put out an extra release about the impact of 9/11 on Tiffany. ‘Don’t hide from bad results; explain them and identify strategies to improve your results,’ he urges.
Building credibility
‘After all that has happened this year, to be at the top of [analysts’ and investors’] minds as someone doing a good job is especially rewarding,’ says Kim Pulliam, senior VP of investor and public relations at AmeriCredit Corp and winner of best small-cap IRO, along with her colleague Susan Sheffield. The company also won the Grand Prix for best overall IR among small caps.
When Pulliam started at AmeriCredit five years ago, it was a micro cap whose IR function was more administrative than strategic. ‘One of the things we started doing was disclosing more information and using the internet to communicate,’ she explains. For example, Pulliam’s team started posting historical financial statements in Excel format so it would be easier for analysts to build models. They also started providing information on the company’s credit quality on the web site so that retail and institutional investors could get that information at the same time.
Over the last few years the IR team has established a culture of clear, consistent communications with the Street. ‘Once you provide a certain metric or type of information, the investment community wants comparable data each period,’ notes Pulliam. ‘And you have to be prepared to put that data into context for people.’
Like Aaron, Pulliam views investor relations as a long-term commitment that doesn’t necessarily produce immediate results. ‘You build credibility over time and that is the intangible part of investor relations that is hard to put your finger on.’
Staying focused
Clearly, Wall Street applauded IR professionals who did not shift their focus during an extremely volatile period. ‘A lot of companies change their communication strategies based on external factors,’ says the Limited’s Katzenmeyer. ‘We made a conscious decision to be as transparent with the Street as possible throughout the year.’
The take-home message from this awards ceremony is that analysts and investors appreciate consistency more than ever. The IR professionals that stood out this year didn’t necessarily add anything special to their investor relations programs, they simply maintained credibility with the Street. As AmeriCredit’s Pulliam says, ‘We continued practicing a program that we have been putting in place for five years and it served us well during a tough economic time and with the Enron situation.’
According to Aaron, while transparency, consistency and support from senior management are all key ingredients of a successful investor relations program, passion is the single most important element. ‘An investor relations officer needs to be extremely well informed and needs to fully believe in what their company is doing and what they are communicating,’ he says.
Hopefully the US Awards 2003 will be a display of highly impassioned IR practitioners with healthy stock prices to boot rather than the high stakes game of survival that was this past year. Stay tuned.
For a complete list of winning companies and honorable mentions, click here
Changing landscape
Larry Bishop, winner of this year’s lifetime achievement award in investor relations, has watched IR evolve over the last 40 years. He has witnessed two key changes over that time: ‘One is the growth of the function as a strategic management activity.’ The other is ‘the integration of IR strategies with other communications strategies within a company,’ he says.
Bishop says when he started out the IR role was pretty tactical; it was elevated as companies started to recognize the importance of shareholder value. ‘The recognition that building shareholder value was important largely grew out of the craziness of the 1980s with all the hostile takeovers,’ he remarks.
Throughout his career, Bishop noticed a trend towards integrating IR with other communications activities. ‘Being able to speak to all corporate constituencies with a single voice was the second most important IR development over the last few years,’ he says. Bishop began his career in the 1960s doing financial PR for a scientific instruments company. He then moved to IR roles at Lockheed, Frontier Airlines and the Boeing Company. After seven years as VP of IR at Boeing, he retired and now works as a counselor with Denver-based consulting firm Genesis Inc.
Bishop, who joined Niri in 1971, says of the organization: ‘Initially, it was just a wonderful education, but it became a big part of my life both professionally and socially. Bishop served two terms on the Niri board and was instrumental in forming its senior roundtable. He was on the steering committee for many years until last June.
Bishop offers this to newcomers to IR: ‘It’s one of the few jobs – short of CEO – where you have a view of everything going on in a company and the investment world. You’re responsible for bringing the Wall Street view to senior management and your board, so suck up everything you can about the dynamics of the business.’
