Around 40 IR professionals gathered at the Nasdaq Market Site in New York on May 5 for IR magazine’s first-ever US think tank event. Invitees were polled beforehand to find out what topics they wanted to talk about on the day, and those subjects (see below) formed the basis of the day’s discussions. Here are some of the most scintillating quotes from attendees, who were promised anonymity.
Guidance
‘If we are going to move away from guidance, you’re going to see more volatility.’
‘I’m not sure if I should call an analyst who’s an outlier. I’m not sure if I should give guidance and whether it should be quarterly, monthly or daily.’
‘The SEC is creating so much uncertainty. It loves to talk about promoting openness and the delivery of information and all the things that help investors, but what it is doing right now is just scaring everybody in this room and everybody else to the point where if they have to make decisions, they’re going to make them out of self-interest.’
‘Meaningful guidance is a necessary tool for analysts to make meaningful estimates.’
‘Guidance you put out is the guidance until something changes, and everyone should then be informed.’
‘It’s nice to give guidance and it’s kind of walking the fine line when you’re trying to deal with an outlier and manage expectations, especially when you have a small number of people covering you.’
‘When an issuer official engages in a private discussion with an analyst who is seeking guidance about earnings estimates, he or she takes on a high degree of risk under Regulation FD.’
‘In relation to Flowserve, I think the policy should be that that kind of guidance is valid until it’s changed because obviously you know more information as the quarter goes on, and you’re going to be changing your outlook.’
‘You put out guidance and that’s the guidance until it changes. If it changes, we’ll update you.’
‘In terms of the overall situation with reaffirming guidance, you should also take a look at what’s happening within your industry. How important is the bottom line and what else is driving the situation?’
IR and PR Convergence
‘We’re in a 24/7 real-time world where everyone is getting news from everywhere, and if there is a lack of coordination between IR and PR, you’re going to lose credibility very quickly with all of your audiences.’
‘You really have to speak the language the CEO understands – and the CEO understands numbers.’
‘The job of getting information from within the organization for a PR professional and an IR professional becomes a lot more difficult if there isn’t a sense that you have the C suite behind you.’
‘In an ideal world, all this information would be reported to the chief communications officer who would work very closely with the CEO – but that’s moving at a glacial pace throughout corporate America in terms of actually having a chief communications officer.’
‘There are a lot of insecurities throughout corporate America that make it very difficult to break down the silos [of IR and PR]. If the investor relations function is just going to sort of ride roughshod over PR, I think that’s going to be ultimately counterproductive.’
‘It’s not just safeguarding evaluation, it’s safeguarding reputation, and the two have to go together. That’s why PR and IR have to sort out their differences.’
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Changes on the sell side
‘Some companies have threatened to shut out an analyst because of a rating change.’
‘Because the settlement, in effect, solidified the Chinese wall between banking and research, we’re seeing more companies – although it did happen before too – go directly to the analyst and pressure the analyst.’
‘Research is becoming more objective. The ratings are subject to greater discipline now. It’s very clear to see. We have a higher proportion of sell ratings.’
‘Corporate access is just so important. If you asked the buy side what it pays its brokers for, it used to be research, deal allocation and sales coverage. Now the first thing mentioned is corporate access.’
‘There is a mindset among many buy siders – and this is going to be a little bit on the rude side but it’s not my opinion, it’s their opinion – that sell-side research isn’t worth the paper it’s written on.’
‘You have a lot of mid and small-sized companies that don’t have any analyst coverage, and unfortunately what we’re seeing is some of these companies going out and hiring analysts in these paid-for models.’
‘Every additional person covering me isn’t really adding that much value; where they could be adding a lot more value is by covering smaller companies because there’s a gap there that’s not being filled.’
‘The driver for independent research is going to be the buy side. If the buy side is not enthused about independent research or not incentivized for some reason, then independent research is going to wither.’
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IR and the board
‘Corporate governance put a stop to a great deal of the disclosure of information.’
‘Last year we saw a 180-degree turn: shareholders finally woke up to the fact that their voting rights, if they use them in the form of withhold votes, have a huge impact.’
‘IR should want to see all the proposals for the proxy slate, not just the three or four that get in, because you get a better feeling of shareholder attitudes.’
‘It’s interesting: there’s been a lot of talk about investor relations people earning a seat at the table [but] when the rubber hits the road, if you have nothing to add, you’re not going to keep your seat.’
‘You’ve all come up via a career path that is oriented to quantitative activities; to find a role with the board you have to learn about qualitative. What the board needs is advice on perceptions and what constitutes reality rather than rhetoric in terms of some of the Sarbanes-Oxley issues.’
‘If they’re going in [to the boardroom] face to face, how do IROs deal with a situation where they get questions that are awkward because they are about their CEO or CFO – who they always report to?’
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