At CACI International, the corporate secretary and the investor relations officer like to ‘face off’ several times a week at their company’s Arlington, Virginia headquarters – in a manner of speaking, that is. Their friendly, work-related encounters directly support the governance and IR needs of small-cap CACI.
With just 20 yards of hallway between their offices, the corporate secretary and the IRO definitely prefer one-on-one meetings to telephone calls or e-mail. ‘Because we’re physically close, we can talk to one another directly – and we often do,’ comments Jeff Elefante, CACI’s general counsel and secretary.
Typically, Dave Dragics, the company’s IRO, will just pick up the phone, see if Elefante is available, and then ‘pop down to his office’ for an informal discussion. ‘It’s a lot better to sit and talk,’ agrees Dragics. And with direct reporting lines to the CEO, both these CACI executives ‘attend two staff meetings together every week,’ says Elefante.
In Toronto, at Manulife Financial, a large financial services group, the corporate secretary and the IRO don’t have standing meeting arrangements like their counterparts at CACI. Instead, their meetings are ‘governed by what is happening in the environment,’ explains Chris Ahlvik, Manulife’s corporate secretary.
Preparing for one important happening – the annual meeting of shareholders – requires pretty intensive coordination between corporate secretaries and investor relations officers at most publicly traded companies. Manulife is no exception. ‘That is not just a one-month process,’ says Ahlvik. ‘Our annual meeting is in April and our annual meeting deliberations probably start in September.’
Edwina Stoate, Manulife’s vice president of investor relations, describes a partnership in which there is a very clear sense of roles and responsibilities along with clear accountabilities. ‘We respect the skills that we can each bring to the table,’ she says.
Linked by needs
‘Investor relations acts as the expert on what the shareholders want and need in terms of communications,’ Stoate says, adding that the corporate secretary serves as the board’s resource for corporate governance expertise.
As Ahlvik explains, Manulife’s directors look to the corporate secretary to assure them they are in compliance with whatever rules and obligations the company is subject to, that all necessary charters are in place and properly drafted, and that the board is in compliance with its charters. Ahlvik reports to the general counsel at Manulife, while Stoate reports to the CFO. Both draw upon expertise available from other areas within the company as needed. ‘We have a really good partnership,’ comments Stoate.
While interactions get busier during proxy season, most corporate secretaries and investor relations officers partner on a year-round basis. ‘We collaborate a lot and often,’ confirms Janice Dobbs, corporate secretary and manager of corporate governance at Devon Energy, an oil and gas exploration company, describing the interaction she has with her company’s investor relations officers.
In addition to ongoing matters such as quarterly and year-end reporting obligations, Dobbs and the IRO work closely on mergers and acquisitions. There are other interactions, too. Depending on what’s happening, sometimes the corporate secretary takes the lead, sometimes it’s the IRO who gets things started. ‘It depends on who is carrying the ball,’ Dobbs says. ‘If I’m doing an SEC filing, I may generate the document but run it through IR.’ On the other hand, a press release may be created or initiated by the IR office, ‘but then it comes to me for review,’ she adds.
More formal process
For companies with good governance and disclosure, new regulations such as Reg FD and those coming out of Sarbanes-Oxley haven’t dramatically changed the way they operate. However, as a result of these rules, there is more formality in the ways things get done and more checklists to verify all bases are covered. ‘We used to do things more informally,’ recalls Mickey Foster, IRO at Maryland-based Millennium Chemicals. Now his company has an official ‘disclosure assessment team’ that holds formal regular meetings to go over all the documents and sign-offs.
Before Sox, Foster says, he used to ‘just send an e-mail around’ to get everyone’s input on the quarterly earnings release and the speech and slides for the conference call. Today he still circulates e-mails to develop final quarterly documents, but all of this precedes a ‘very formal’ meeting made up of the CEO, CFO, company vice presidents and the general counsel. The meeting takes place in the company’s board room and everyone’s input is discussed. Executives at headquarters sit in, too, while divisional participants call in from their respective locations.
One outcome of the meeting is the execution of formal sign-off documents. ‘Almost everyone reporting to the CEO and CFO would sign certifications,’ says Foster. He explains that the team certifies not only the financials – the earnings release and the 10Q – but also ensures that ‘all the disclosures are there, that there’s nothing misleading and that everything is consistent.’ Foster also meets with the audit committee for rigorous checks and discussions of quarterly disclosures, particularly the 10Q.
Paper avalanche
All the new rules have certainly spurred the growth of formal disclosure committees and disclosure certifications below the CEO and CFO level, and heightened audit committee involvement. Corporate secretaries find they are managing more paper and more checklists to make sure nothing falls through the cracks.
‘The paper flow to the corporate secretary has become pretty voluminous,’ reports Ahlvik, who is managing nonetheless. ‘Once you’ve developed your system, then you’ve passed your peak and the system carries you along.’ In fact Ahlvik notes that after the system is set up, ‘the workload lessens quite a bit.’
Any new system will have to include a strong degree of transparency. Millennium Chemical’s IRO and corporate secretary recently pooled their efforts to add a corporate governance section to their company’s investor relations web site. To avoid duplication they varied their activities. Foster pulled together research on governance information which other companies provided and helped the secretary with committee charters while the secretary took responsibility for getting the content reviewed and approved by the board.
Over at CACI, emerging issues demand proactive information collecting. ‘We gather as much information as possible about what’s happening,’ says Elefante. That might include ‘getting together all the primary documents that set the regulatory scene’, such as copies of new and proposed SEC and stock exchange rules as well as secondary sources such as commentaries from law firms that are reacting and responding to the regulatory network.
Having both the corporate secretary and the investor relations officer reporting to the CEO gives the CACI team the extra clout it needs to quickly pull together task forces comprising various parts of the company, creating what Elefante calls a ‘holistic, wide angle view’ of any new issues. ‘You also have to be proactive in communicating what’s going on to senior management, and educating [the management team] so there are no surprises,’ Dragics adds.
Collegial differences
Any partnership requires give and take. Because they come from two different disciplines, corporate secretaries and IROs sometimes have diverging views. For example, ‘IR may describe something in a more marketing way,’ says Dobbs at Devon Energy, who reports to the company’s senior vice president of administration while the IRO reports to the senior vice president of corporate development. ‘I would be interested in just stating the facts as opposed to creating more of a story,’ she adds. ‘They may be adding a different flavor than I care about. All I care is that proper disclosure is made.’
Barbara Hasenstab, IRO at Associated Estates Realty, a real estate investment trust, discusses the good-natured, collegial differences that can sometimes arise over how to deliver a specific message. ‘I feel that I am the expert in terms of what we should be disclosing and how we should be disclosing it,’ she says. ‘[The corporate secretary] is the expert in terms of any legal ramifications that surround those disclosures.’
According to Hasenstab, the corporate secretary at Associated Estates ‘always tends to be a little bit more conservative in terms of disclosure’, while she is far more concerned with being upfront and forthright. ‘Legally we may not be obligated to disclose something, but it might be the right thing to do,’ she adds.
When Hasenstab and the corporate secretary reach a tough impasse, they have no option but to negotiate. ‘We go back and forth,’ she says. ‘It may be just a matter of rephrasing something or moving it down a paragraph in a press release.’ Alternatively, taking some copy out of a press release and putting it in a conference call script, or vice versa, might be all that’s needed to reach an satisfactory agreement.
But sometimes intervention is needed from on high. Although Hasenstab believes it’s important for IROs and corporate secretaries to respect each other’s judgment, she also feels you shouldn’t back down if you have a strong belief that something should be disclosed. ‘Sometimes the CEO is the one who has to make that decision and draw that fine line between what we are legally obliged to say and what we should say,’ she explains. In Hasenstab’s case it’s extremely helpful that both she and the corporate secretary report to the company’s CEO. It’s just another way to make working together run that little bit smoother.
