Q – The options backdating scandal has brought executive compensation to the forefront of shareholders’ thoughts. While our company has not been implicated, we have had a few questions about our top executives’ options packages recently. Our options policy is spelled out in the proxy, but do you think we should be more overt in clarifying it?
A – Given the fact that this issue is top of mind with most investors, I am not too surprised that you are getting the general ‘fishing’ type of question from the investment
community. If you are getting more than a few generic questions and some specific questions, however, that’s a pretty good sign that there is something out of the ordinary about your top execs’ options packages.
As I do not know how your company’s options policy is delineated, it is very difficult for me to say how much more specific you should get. However, I would recommend that you review the policy and make sure that it is written in plain English to avoid any confusion or misperception. I would also recommend preparing for potential queries by having the appropriate responses on hand to ensure clear and consistent communications with the Street.
Of course, your responses should be reviewed by SEC counsel. Lastly, if there is truly more to your policy than meets the eye, raising the red flag yourself and swiftly acting to correct any problems will garner the most goodwill going forward.
Q – What’s the best way to introduce a new management team? We’re a small cap that’s gone through some major structural changes and we’re now in a turnaround phase with a new senior management team coming on board.How would you suggest highlighting their leadership skills with top holders?
A – It depends on how new the team is to the industry and the company, but I would recommend that you map out a plan to showcase the new talent at the top practically from day one. Members of the new team will need to begin establishing their own relationships with top holders and the constituents that matter the most to the company, including the broader investment community, employees, customers/clients and the media.
Early on, I would recommend that you schedule introductory calls for the new team with the company’s top holders. These should be followed by one-on-one meetings once the new managers have completely formulated their strategy and can truly speak confidently about the company and the industry. Don’t stop at existing shareholders; reach out to the analysts that follow the company. You should also be thinking about leveraging the financial media to help convey what drives these individuals and what they have planned for the business. Lastly, as the plan starts to take shape, consider hosting a conference call and/or analyst day to unveil the team and the plan together.
Hulus Alpay is senior vice president of New York-based IR and PR firm Makovsky & Company.
