A: The new SEC rule that goes into effect on July 1 this year will not only allow companies to distribute material to investors via the internet upon request, but also fuel greater shareholder activism when it comes to their ability to exert influence on matters requiring shareholder approval. The reason is simple: if large shareholders have governance plans different from boards and management teams at the companies they own, it will be cheaper for them to distribute alternative proxy materials than it has been in the past. Many experts thus believe e-proxies will open a floodgate of fresh activism as the SEC slowly removes more and more obstacles protecting boards while safeguarding the interests of investors.
Q: I have to decide whether to commission a perception study by an outside firm or manage the process internally.What are the pros and cons of either option?
A: When it comes to perception studies, I am a firm believer in leaving the work to the experts. As with most professions, there is an art to certain aspects of the job. That art is in the way external independent thoughts are gathered – the unbiased way an outsider can ask a question and not lead the witness can result in purer, more constructive feedback.
Most people on Wall Street are not shy when it comes to sharing their views with management teams. By offering them anonymity, however, you get another level of candor altogether.
On the flipside, you have to make sure this is an area that warrants the investment compared with other budgetary items. Some IR professionals will take on these larger projects themselves because they feel they know the company, industry, issues and targets of the study better than a third party. This may be true – in fact, many IROs have worked for service providers that carry out perception studies, so this work may be second nature to them. However, if the IRO function is staffed by a corporate veteran who has spent most of his or her career with one company and in different non-IR-oriented positions, I would strongly recommend the work is done by an experienced independent third party.
In terms of timing, I would recommend that perception studies be done on a regular basis so they can be used as a benchmarking tool, in addition to capturing a current snapshot of the Street’s perceptions. Larger companies (with bigger budgets) do these studies quarterly or annually, or around the time of a significant event, like a merger.
