Founded in 1969, NIRI is the professional association of corporate officers and investor relations consultants responsible for communication among corporate management, shareholders, securities analysts and other financial community constituents. The largest professional investor relations association in the world, NIRI’s more than 4,000 members represent 2,000 publicly held companies and $5.4 trillion in stock market capitalization.
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Feb 02 2010
Published by communication@niri.org - Morgan, Jeffrey under keyword: N/A
This past week was very active at the SEC, but before I brief you on the SEC actions, let me update you on the politics of Washington: • Obama’s “Rescue, Rebuild, Restore America” State of the Union speech seems to have been met by Washington insiders and the American public with both politeness and a resounding “prove it” that things will change. • Ben Bernanke was indeed confirmed for a second term as Federal Reserve Chair, but was (and many say unfairly) bruised in the process, becoming a scapegoat for Congress and others. • Blame continues with many in Congress (Democrats and Republicans alike) calling for Tim Geithner’s removal as Treasury Secretary, but Geithner coming on strong defending his actions. Many wonder if Congress is looking for scapegoats to avoid self blame. • Things remain unsettled in Washington and in the markets since the Republican Brown’s Massachusetts Senate win. Blame, finger pointing and a complete loss of focus in Washington seems to have placed everything into question. Frankly, I am amazed at the continuing impact of this election. Now on to IR news from SEC: • The SEC approved interpretive guidance on climate change disclosure providing more information on existing corporate disclosure requirements related to a “material risk” for companies. The yet to be issued release will go into more depth on expected climate disclosure related to:
> The legislative impact of existing climate change laws to your company, > International accords and treaty impact as it relates to climate change, > Indirect business trends or consequences related to climate change, and > Physical impact of climate change on your business.
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Jan 26 2010
Last week Washington and politics showed their influence on the markets. The impact began with the win by Massachusetts Republican Brown for the late Ted Kennedy’s Senate seat, shocking all who follow politics. The resulting loss of the Democratic supermajority in the Senate forces a bit more Republican input into upcoming legislation. Things seemed to completely unravel as the week progressed after President Obama announced a proposal that would prohibit banks from taking ownership in proprietary trading, private equity and hedge funds. Without any definition of these items, many wondered if this was a political move due to the Democratic loss in Massachusetts, and whether this could eliminate key risk management abilities for bank clients. While this discussion will take months of debate, other things in Washington are more certain. President Obama will deliver his State of the Union speech tomorrow, and it will give some indication of his priorities. Though his Senate confirmation is uncertain (although I still believe very likely) with many in Washington politicking on both sides, Ben Bernanke’s continuing status as Federal Reserve Chairman should be determined late this week. What does seem certain is that Treasury Secretary Tim Geithner is currently being marginalized while the voice of Obama advisor, and former Federal Reserve Chair Paul Volcker, is increasing. Geithner’s moderate views are being pushed aside for a more aggressive stance on reform. Some have said this policy change has a direct correlation with Brown’s win in Massachusetts. Regardless, markets don’t like uncertainty and this past week we all saw the impact of Washington on a fragile financial market. Some items with a more immediate IR focus include: • The SEC will meet tomorrow and one of the agenda items is to “consider a recommendation to publish an interpretive release to provide guidance to public companies regarding the Commission's current disclosure requirements concerning matters relating to climate change.” NIRI will bring you more information as this discussion develops. • According to the Wall Street Journal, RiskMetrics Group Inc. has put the company on the auction block. Rumors are that Bloomberg and Thomson Reuters are among those interested. I have to wonder whether current SEC analysis of proxy advisory services plays a role in this decision by the seller and also by potential buyers. • Rumors have been circulating that the SEC will implement an alternative uptick rule in February. Reports indicate the alternative uptick rule would require trades to be executed above the best existing bid when shares fall 10% in a day. • Barney Frank held hearings last week on executive compensation for the financial services industry. If you get questions from investors on your executive compensation plan, I suggest your review the testimony of Nell Minow with The Corporate Library to see where the fingers are being pointed on current compensation practices. • The Supreme Court made a ruling last week that now allows companies, labor unions and other organized interest groups to spend unlimited sums on political advertising. I would not be surprised to see Congress discuss trying to increase more disclosure of political spending for companies or even move this to a proxy vote for company shareholders in the near future. In NIRI news, if you missed the webinar last week on the new SEC disclosure requirements that go into effect February 28, I encourage you to listen to the replay at your leisure. Finally, I appreciate all of you who are participating in the recently launched NIRI eGroups. This is a great way to communicate with other members and share practices and information – join in today! Until next week, Jeff Morgan, CAE President & CEO jmorgan@niri.org www.twitter.com/jeffreydmorgan
Jan 19 2010
Today all interested in politics, as well as most in Washington, turn their eyes north to Massachusetts and the outcome of the special election to replace the recently deceased Senator Ted Kennedy. Though it once seemed like an easy victory for the Democratic candidate, everyone is now holding their breath to see if the critical 60 seat Democratic majority will be maintained in the Senate. Without this 60th vote, issues like health care and financial reform may undergo significant changes as the Republicans would break the veto-proof Democratic “supermajority” and some bipartisanship would have to occur. Speaking of bipartisanship, it appears Senate Banking Chair Dodd is considering conceding some parts of the Senate financial reform, (such as the Consumer Financial Protection Agency), in order to win support of Republicans and conservative Democrats for other changes. This bill will be released in the next few weeks and I will be watching for portions that might affect IR and corporate governance. Reform proposals like say-on-pay, proxy access and majority voting are the ones I think are most likely to make it into the discussion. Activities get into full motion today in Washington as Congress and Senate are now in session, back from the holiday recess. Unlike our elected officials, regulators returned to work like all of us, just after the New Years holiday, and were very busy last week. Here are some of their activities: The SEC released updated interpretive guidance on the use of non-GAAP financial measures, and I recommend reading and understanding this new information. These C&DI’s consist of 32 questions and answers covering topics including: business combinations, nonrecurring charges and limits of use of “free cash flow” information, among other things. - The SEC proposed a rule on “naked access” to markets that ultimately prohibit high frequency traders and others from avoiding risk management controls and supervision. While this doesn’t directly affect IR professionals, reports indicate that somewhere between 38 and 50 percent of daily equity volume comes from naked access accounts. On the surface, the proposed additional safeguards seem to make good sense. - In the area of enforcement, the SEC announced guidelines for those who cooperate and provide information to the SEC. These guidelines, which include provisions for immunity and leniency, will allow the SEC to pursue cases with new abilities and tools similar to those available to the Justice Department. - The SEC also announced a concept release on market structure. Similar to a discussion paper, the full release is an excellent primer on some of the challenges in our financial market structure. I found some of the market activity data particularly interesting. For instance, here is the September 2009 estimated volume by trading center:
Jan 12 2010
Greetings from California, where I am attending NIRI’s “Introduction to IR,” as well as speaking to three NIRI California chapters this week. I am also stopping by our Annual Conference hotel, the Manchester Grand Hyatt, in San Diego to discuss June Conference plans. It is not too early to start making your plans for this annual NIRI event. With the two-for-one hotel night offer for those arriving pre-conference on Friday night (and receiving Saturday night free), we are seeing many members sign up for early bird registration to save even more money and maximize budget dollars. Now on to Washington news … Although Congress did not return to session until today, and the Senate remains out until the 19th, Washington was busy last week with President Obama’s return from his holiday. The primary newsmaker in Washington was national security in the wake of the Christmas Day airline bombing attempt. However, other financially-related news made it feel like things were returning to normal. First was the announcement by Senate Banking Chairman Chris Dodd that he will not seek reelection in the fall. Several other politicians made similar announcements, and a number of interesting conversations have developed as a result. One conversation is related to the difficulty Democrats now face in keeping their Senate majority. However, in reference to Dodd specifically, the conversation has been how this announcement might affect the financial reform he is spearheading in the Senate. Some suggest that his reform efforts can now be much more aggressive since he isn’t concerned about political contributions. Others suggest that he will not want to rock the boat as it is difficult for a lame duck to do much, especially someone who might end up going into private business. I tend to side with those in the second mindset and believe he will continue to try to get a bi-partisan bill through the Senate Banking Committee to the full Senate. My guess is he would rather go out with this accomplishment versus risking a prolonged and damaging debate as happened with healthcare. However, whether it is boom or bust for extensive financial reform chances, we will have to wait a few more weeks. Last week, I mentioned my hope for a release this month of an SEC concept paper or discussion draft on improved shareholder communications or proxy mechanics. After I made that statement, the SEC did announce a concept paper release, and though I was right on a release, I was ultimately wrong on the subject. Tomorrow the SEC will indeed release a concept paper, but the topic will be market structure and not proxy mechanics. This will still be of interest to IR professionals as it will discuss conceptual changes regarding market trading and structure, including high frequency trading and direct access. I will be discussing some of the impact of this SEC thought piece for IR in the coming weeks. As for the concept release on proxy mechanics, I am told we have to wait a few more months. I am also hearing, and of much interest to IR professionals, that the long awaited decision on additional short selling measures in the form of a tick test or circuit breaker could be announced as soon as later this month. It will be interesting to see the final decision, as well as the logic for the decision. Everyone in IR is hoping for some indication of a movement towards more short selling disclosure in the future as well. More on this as it develops in the coming weeks. Now I want to make you aware of a troubling matter that I learned of yesterday. The SEC filed settled insider trading charges yesterday against a NIRI member for using material non-public information for personal gain. This morning I spoke with this individual and accepted his resignation from NIRI, and I am pleased that he recognized his violation of the NIRI Code of Ethics. This incident provides a good reminder that as a condition of membership, every NIRI member agrees to this stringent Code which is grounded in the highest standards of integrity and ethical behavior – our profession demands no less. NIRI has due process for ethics-related matters that involves the NIRI Ethics Council and the NIRI Board of Directors. NIRI tolerates no deviations from our Ethics Code, and although we have had very few membership terminations resulting from ethics violations, NIRI will not hesitate to take this action if warranted. Finally this week, I want to bring your attention a very important upcoming member webinar. Last month the SEC announced new disclosures related to directors, compensation, risk and voting results. Next Tuesday we will host a webinar to talk about these changes as well as how IR is evolving to meet the challenges through increased involvement in the proxy process. If you can’t attend the live event, it will be available to members in archival form. Register now and plan to attend. Until next week, Jeff Morgan, CAE President & CEO jmorgan@niri.org www.twitter.com/jeffreydmorgan
Jan 05 2010
January is upon us and so is the start of 2010. I hope everyone had a wonderful holiday and is starting the New Year in good health and spirit. Since we have turned the calendar to a “10,” many are looking at the past decade in retrospect. Much is being made, and rightfully so, about the lack of U.S. economic growth and how we have slipped backwards during the past ten years. This Washington Post article provides a good summary including anemic economic output and net zero job creation. Brad Wilks’ (NIRI Chairman) upcoming January IR Update column discusses the impact on investor relations and highlights unique IR challenges created by these times. As we look forward to the next ten years, I am hopeful that we (politicians, regulators, companies and individuals) have all learned lessons and will be smarter in the future. With that though in mind, let us review what is likely to happen over the next few weeks in Washington. The House returns on January 12 and the Senate on January 19. The President’s State of the Union speech is not yet scheduled but usually occurs between January 19th and January 31st. I suspect the administration is considering the best date based upon several factors that include three near the top of the list: 1. Distancing the administration from any political fallout due to the botched December 25th terrorist attack. 2. Following the developments during the Congressional recess on health care reform as the Senate and House negotiate toward a compromise bill. 3. Monitoring how quickly Senate Banking Chairman Dodd can put forward a bi-partisan financial reform bill. The President wants to be sure he can put his presidency and the administration in the best light possible in order to jump start mid-term elections for the Democratic Party. This is a critical election year as on November 2, elections will be held for all 435 House of Representative seats and 36 (or about one third) of the Senate seats. There is no doubt these elections are critical to the Obama presidency and will also be in the minds of Congress as they make decisions during 2010. The tendency is to be more moderate and not “rock the boat” when up for re-election. As we look to the SEC, I expect several items relevant to IR over the next few weeks: 1. A focus by the SEC on retail education regarding the change to NYSE Rule 452 making the broker vote non-routine. Companies should also look for opportunities to educate retail shareholders. Together with several other groups, NIRI has developed standardized educational language that we have proposed to the SEC for public use. 2. I expect the SEC to approve changes to Notice and Access or e-proxy (Amendments to Rules Requiring Availability of Proxy Materials) very soon. NIRI submitted comments to the SEC in favor of these changes. 3. The SEC is also expected to release a concept paper or discussion draft soon identifying problems and suggesting changing in proxy mechanics. NIRI has been working hard on this effort as a member of the Shareholder Communications Coalition, and looks forward to the release. I think it is very possible that the SEC may release some or all of these items before staff heads to the annual Securities Regulation Institute event where many SEC staff will speak. I think it is unlikely that other items, like proxy access and short selling circuit breakers, will be announced this month. To conclude, I want to point out a couple NIRI-related items that may be of interest: 1. It is not too late to attend NIRI’s Intro to Investor Relations on January 10-13. There are a couple of slots left so don’t delay and register today. If you are planning to attend, I look forward to meeting you there. 2. There has been a terrific conversation thread in the NIRI LinkedIn group started by a member asking “Would you consider simply posting the prepared remarks for a quarterly report and allocate conference call time to just Q&A?” 3. Speaking of online networking, NIRI will launch our new social networking eGroups Communities on the NIRI website next Tuesday, January 12th. We will conduct a webinar that day at 4 PM Eastern Time to review the features and use of this powerful member-only benefit. This next generation robust online community has features beyond what LinkedIn can offer and will allow members to join communities that are customized to your interests. Until next week, Jeff Morgan, CAE President & CEO jmorgan@niri.org www.twitter.com/jeffreydmorgan
Dec 29 2009
As the year draws to a close, I find myself at my last message for 2009. In retrospect, it has been a challenging year for almost everyone. The majority of us are “recession fatigued” and looking forward to and hoping for a brighter 2010. I personally write these weekly messages about what is going on in Washington and in the IR space, and last week I reflected on what I believed to be the chart topping items for 2009. This week, I want to look forward and share with you a message from my friend Marshall Brown, who is a certified career and executive counselor. So many of us feel like we are doing three jobs, trying to keep our heads above water during these challenge economic times, and struggling with smaller budgets. However, no matter your situation, there are times we all must step back, take a breath of fresh air and look at things from a different perspective. For most of us, this is the time of year to reflect and set a path for a better tomorrow. With this thought in mind, here is the list given to me by Marshall for a healthier and more positive 2010. Top Ways to Start (and Maintain) a “10” in 2010! By Marshall Brown at Marshall Brown & Associates. The best way to have a good year is by living life on a daily basis, letting the good days accumulate, one by one. And it doesn’t have to be New Year’s to resolve to have a good year. Start anytime. Today, for instance: 1. Take time, slow down. Be present in your life and mindful of the present. 2. Care for your body, eat well, exercise, treat yourself to loving, nurturing self-care. 3. Spend quality time with family and friends. Communicate, keep in touch. Say I love you. 4. Tell people you appreciate them. 5. Take time throughout the day to renew yourself. Take a walk, read a poem or a good book, listen to music (really listen); bring beauty into your life. On a monthly basis, take a whole day for yourself — play, treat yourself to something you want to do; retreat from your daily life. Mark these special days on your calendar (in ink) so you’ll be certain to take them. 6. Clean up what needs to be cleaned up. Make amends, fix what’s broken, clear away clutter, forgive what needs to be forgiven and let go. 7. Commit to a project you really want to do or to learning something new or attaining something you want. Commitment is the first step. Then set achievable goals and work toward them on a daily basis. 8. Give yourself to a cause, volunteer at a nonprofit organization, a community group, your church or lend a hand to an individual or family who could use your help. 9. Practice your spirituality in whatever form you express it, on a daily basis. 10. Laugh every day. 11. Take time to dream. In the spirit of living life a bit better and shaking off some of the fatigue most of us feel, I hope you find these points to be a good reminder and will give you nudge. I sure did. I want to thank you for your membership in NIRI. I also want to thank those of you who choose NIRI to be your place of volunteer service. I know the chapters would welcome more volunteers, so if you feel like getting involved, the doors are open to you. From my NIRI family – the NIRI staff – to you and your family, I want to wish you all the best for a “10” in 2010! Happy New Year! Until next week, Jeff Morgan, CAE President & CEO jmorgan@niri.org www.twitter.com/jeffreydmorgan
Dec 22 2009
Snow is not uncommon in D.C., but snow in excess of 12 inches from one storm is very unusual. The storm over this past weekend delivered up to 22 inches of snow, making it the largest December snowstorm in D.C.’s history. Congress working late into the evening and on weekends is almost as unusual. During the past few weeks, the Senate has been working all hours, including through a crippling snowstorm, to reach agreement on a healthcare bill before the holiday recess, creating a very rare sight in Washington. It appears they have been successful, and the Senate will vote on Christmas Eve on healthcare reform. The real challenge will be reconciling the House and Senate bills in early 2010. However, for IR professionals, the healthcare debate keeps financial reform legislation on a much slower track in Congress and I, for one, am fine with that. This morning, NIRI members received an Executive Alert regarding the SEC’s new Proxy Disclosure Enhancements rules. I urge all IR professionals to read and understand these new SEC rules and to be part of the discussion in your organization on the impact and implementation of these changes. As a critical touch point for investors, you should be prepared to answer questions about these new disclosures. NIRI’s Executive Alert will help you find the critical pages from the 129 page document and make your reading easier. Since we are approaching the end of the year, I wanted to share with you a bit of personal reflection as I review my columns from the past year and pick the top stories for 2009. Here are my picks, in no order: 1. The recession and the impact on IR. 2. The SEC approves change to NYSE Rule 452 making director elections non-routine in all public companies. 3. NIRI and the Shareholder Communications Coalition are successful as the SEC agrees to evaluate overhauling proxy mechanics. 4. Social media expands as IR professionals move slowly forward integrating these new communication mediums into their IR toolkit. 5. The SEC approves new proxy disclosure enhancement rules. 6. The SEC moves to eliminate naked or abusive short selling by approving changes to Reg SHO as NIRI and others submit comments. 7. The SEC proposes changes to transparency for darkpools and other alternative trading systems. 8. NIRI celebrates our 40th anniversary of serving the IR profession. 9. The SEC moves to make changes to Notice and Access rules after much urging by many groups, including NIRI. 10. Congress and the Obama administration pursue financial oversight reform, including corporate governance changes such as proxy access. 11. The SEC reacts to the Madoff scandal by overhauling its enforcement area and increasing enforcement actions. 12. SEC provides additional Reg FD Compliance and Disclosure Interpretations. 13. NIRI Board meets with SEC to discuss, among other things, ownership transparency. Forward-looking guidance practices continue to be a focus in 2009. The list reminds me how important NIRI is in serving as your advocate on behalf of the IR profession in Washington and beyond. As I close for this week, on behalf of the Board and staff at NIRI, we want wish everyone a joyous holiday season!
Dec 15 2009
Greetings from the NIRI Houston Chapter, where I am making my last chapter visit for 2009. This past week has been a busy one so let’s get right to the Washington update: - Last Friday, Congress approved a 1,279 page financial reform bill with no Republicans voting in favor and twenty-seven Democrats voting against passage. The real battle for financial reform, however, will be in the Senate, and its proposed legislation will likely look very different from the House bill. The House bill creates the CFPA (Consumer Financial Protection Agency), imposes restrictions on derivatives, allows the federal government to dissolve faltering financial firms and requires payment of $150 billion from other financial firms to establish a fund for the government to closeout these faltering competitors. The bill also establishes a systemic risk council and allows the Government Accountability Office to audit the Federal Reserve, as well as increases resources for the SEC, including national subpoena power. It also includes provisions concerning corporate governance (i.e. executive compensation), investor protection and hedge fund regulation. The Senate bill, which also contains corporate governance provisions (as currently drafted and in Committee), will not likely come up for a full vote until at least March, and more likely in the April-May timeframe. While I believe Congress will hail passage of “financial reform” in 2010, the battle is far from over and it will likely be summer before we really get any idea of the impact to companies and investor relations professionals. - However, the SEC will address proposed rules tomorrow that will have a direct impact on investor relations. The focus of the new rules will be on compensation policies, director and director nominee qualifications, board governance structure disclosure, compensation consultants and risk. Note too, though, the Commission announced yesterday that it is reopening the comment period on its controversial proxy access proposal, in order to “seek views on additional data and related analyses received” after the comment period closed. I suspect this may be partially driven by a desire to see if Congress gives the SEC additional authority in these areas. In any event, I am hearing this makes it unlikely that any action on the proposal will now happen before March. Stay tuned for more information – IROs must understand these new rules as investors and the press will certainly be scrutinizing and asking questions about the new disclosures. - Last week the SEC released its “Select SEC and Market Data Fiscal 2009” report that is full of enforcement statistics and case data. The report shows issuer reporting and disclosure enforcement made up 22% of all actions – the highest category reported. Sixty eight were civil actions and 75 administrative proceedings. The majority of investor complaints were about redemption, liquidation or account closing problems, followed by short selling complaints and theft of funds. - With all the talk of social media and online communities, I thought you might find it interesting that the self regulatory body for those involved in selling derivatives proposed business conduct rules for some online activities by employees. Among other things it says, “Members should have policies regarding employee conduct. These policies could require employees to notify the employer if they participate in any on-line trading or financial communities and provide screen names so that the employer can monitor employees’ posts periodically. Alternatively, the policy could simply prohibit participation in such communities. The Member must, of course, take reasonable steps to enforce whatever policies it adopts.” It seems to me it would make sense for these same disclosures to be made by many more involved in the markets and for employers to know and take responsibility for those employees involved in equity trading. This might also add to the SEC’s enforcement case load. - If you have not already reviewed moxyvote.com, I encourage you to take a look. This website invites dissident shareholders to recruit individual investors for proxy fights. Advocates post their position and then recruit individual shareholders to support the position. We will see if this has staying power, but certainly you should be aware of this new web-based shareholder tool. Finally, for those who might be interested and did not listen to the NIRI annual meeting webcast, comments by NIRI’s former chair, Bina Thompson, and myself have been posted on the NIRI website. Until next week, Jeff Morgan, CAE President & CEO jmorgan@niri.org www.twitter.com/jeffreydmorgan
Dec 08 2009
As the 2009 begins to wind down, I am traveling to St. Louis for one of my last two chapter visits of the year. I look forward to sitting down with St. Louis chapter members to discuss NIRI, what is happening in Washington, the state of investor relations, and my thoughts on IR in 2010. Last week was the annual gathering of the NIRI Senior Roundtable. If you are the senior IR practitioner in your company and have 10 or more years of IR experience, I suggest you consider joining now as we expand our offerings in 2010 to provide even greater year-round value for our senior practitioners. Some of the “nuggets” I got from the two day NYSE-Euronext sponsored event included: - IROs must pay attention to continuing regulatory changes. Given our unique roll with investors, IR needs to be part of the internal proxy process discussion and understand corporate governance issues particularly considering the profound effect recent regulatory changes will likely have on the 2010 proxy season. - Don’t underestimate the power of your website as an information avenue for potential investors who use the entire breadth of information available to evaluate your organization. Don’t overlook opportunities to discuss your company’s relative position in your sector, as well as the macro outlook on the sector. - Short-term stock trading has gone from 15-20% to 60-70% of the market over the last decade (this is no surprise to many). In addition, market structure continues to evolve, so IR must work harder and smarter to understand market activity. - Given this increased churn, being “long” could mean holding for weeks, days or even hours as investors focus on a price target rather than timeframe. - Enforcement actions will continue in 2010 and companies need to be vigilant to ensure they have active compliance programs. I think everyone expects some interesting cases in 2010. Companies should focus on how confidential information might be inadvertently provided to those outside the company. Mentioned as sources of potential information leaks were expert networks, as well as peer-to-peer networks where executives have open discussions among “trusted” peers. - Social media is evolving but is here to stay. Just as IR evolved to use e-mail and the web, it must also do so with social media. Social media has many uses in companies including e-commerce, information gathering, online conversations and information dissemination. IR must be a corporate champion of social media as it relates to investors, and strategies like repurposing information and using social media to create a “larger microphone” for pushing out information (compliant with SEC and exchange rules) represent an easy way to begin. As we begin looking forward to 2010, I want to mention NIRI’s semi-annual “Introduction to Investor Relations ” seminar in Santa Monica, California on January 10-13, 2010. If you are new to IR, you will find that this must-attend event has become a “right of passage” for those new to the profession. Attendees are immersed in all aspects of investor relations, begin to build a critical network of peers, and have the opportunity to visit with important service providers to the profession. The sessions are taught by senior IR professionals who share their wisdom and also often serve as a long-term contact for your questions after the event. Check it out! I also want to mention NIRI’s 2010 Annual Conference (June 6-9, 2010 in San Diego), THE critical event for IR professionals to attend, typically drawing about one third of NIRI members. The IR profession is experiencing change from all sides including regulatory, corporate transparency, communication methods, buy and sell-side, and time management pressures. The conference helps you to get up to speed to manage this change. To allow for you to manage your expenses better in the current economic climate, we have opened registration to allow you to register now with 2009 travel dollars. Our partner hotel is also offering some great deals including free room nights to attendees based upon your arrival and departure. Finally, it is with great sadness that I share with you news of the recent passing of NIRI member and Vice President of IR for Avon Products, Renee Johansen. Renee was a member of the NIRI Senior Roundtable and Steering Committee, and in fact, many of us enjoyed her company at last week's Roundtable in San Francisco. We are all clearly stunned by this news. We learned from the company that her death on Sunday was sudden and unexpected and the cause has not yet been determined. NIRI will pass along charitable desires of family as soon as we learn of their wishes. As many of you know, Renee was a great colleague, loving mother, wife and wonderful friend. She will be truly missed. Until next week, Jeff Morgan, CAE President & CEO jmorgan@niri.org www.twitter.com/jeffreydmorgan
Dec 01 2009
Today we hold NIRI's annual meeting at 12:00 noon Pacific Time in San Francisco, and we transition to a new NIRI National Board. I’d like to begin my message this week by thanking Bina Thompson for her service as Chair of the NIRI Board. Bina has been an outstanding Chairperson for the organization and has been extremely helpful to me over the past two years as I became your CEO. I also want to thank Beth Saunders, Blair Christie, and Catherine Mathis as they complete their term on the Board. Each has done excellent work on your behalf to help grow and evolve NIRI to serve you better. I would also like to welcome Brad Wilks as NIRI’s new Chairperson, along with new Board members Hulus Alpay, Mary Beth Kissane, Andy Kramer and Michelle Levine Schwartz. I look forward to working with them as they continue the long-standing tradition of NIRI Board excellence. Today marks the first of December and I'd like to prepare you for what I expect will be a busy few weeks at the SEC. Here are several items I expect the SEC to announce:
Nov 24 2009
As we approach Thanksgiving and the official beginning of the holiday season, our thoughts turn to friends and family. Holiday shopping begins in earnest and will be watched closely as a critical indicator of the psyche of consumers, as well as an indication of the overall health of markets. As we approach this festive, yet market-critical time, I want to provide an update on just a few things. I spoke at an XBRL US national conference last week on the subject of XBRL and investor communication. For those that are interested, my perception of XBRL from an IR point of view is that we have yet to see the benefits promised for issuers. This may change with increased adoption, but for now I think few issuers are reaping benefits. Last week NIRI also submitted a comment letter to the SEC on the proposed Notice and Access amendment. We urged immediate approval of the proposed changes for use in the 2010 proxy system. We also recommended the SEC consider changing the 40 day notice requirement to 30 days as this item has been problematic for some issuers. Finally, we suggested the SEC expand its educational efforts beyond the proposed Notice and Access education to a more comprehensive retail shareholder education program. Earlier this month, NASDAQ filed a disclosure-related rule change that, according to the SEC filing, will become operative on December 7. This is a modification to their pre-notification rule that now mandates companies contact NASDAQ 10 minutes prior to issuing material news. The prior language simply required advance notification, and this 10 minute pre-notification is now consistent with the NYSE Listed Company Manual. Additionally, NASDAQ modified the language regarding disclosure methods in order to bring it in line with the SEC’s guidance for the use of company websites. For those with institutional investors in the U.K., NIRI’s U.K. counterpart, the Investor Relations Society, shared with me a newly agreed upon code of conduct for institutional investors (pensions, insurance companies and investment trusts) to enhance the quality of dialogue between institutional investors and issuers. This code was developed by the organizations representing institutional holders and is meant to improve shareholder returns, corporate governance, and reduce risk. The seven principles:
1. Institutional investors should publicly disclose their policy on how they will discharge their stewardship responsibilities 2. Institutional investors should have a robust policy on managing conflicts of interest in relation to stewardship and this policy should be publicly disclosed 3. Institutional investors should monitor their investee companies 4. Institutional investors should establish clear guidelines on when and how they will escalate their activities as a method of protecting and enhancing shareholder value 5. Institutional investors should be willing to act collectively with other investors where appropriate 6. Institutional investors should have a clear policy on voting and disclosure of voting activity 7. Institutional investors should report periodically on their stewardship and voting activities
Nov 17 2009
Good afternoon from New York, where I will moderate a panel this evening at a NIRI NY Chapter program with former SEC Chairman Harvey Pitt. I look forward to Mr. Pitt’s insight and a healthy dialogue with NIRI members. I understand the program will be attended by a delegation from China, sponsored by the Asia Pacific Investor Relations Association, that is spending time in the U.S. to learn more about investor relations. They will visit with NIRI members over the next several days and attend a NIRI chapter event that should really be a highlight of their IR immersion. Tomorrow morning, I’ll give a keynote presentation to the XBRL.US Annual Conference with my assessment the current state of XBRL use from an issuer perspective. I will share that with you in next week’s column. If you plan to attend the XBRL Conference, please stop by the NIRI booth and say hello. In Washington last week, Senator Dodd released his 1,136 page regulatory reform proposal for the Senate Banking Committee to digest and debate over the coming months. News coverage centered on the proposal’s sweeping reform of existing financial regulatory architecture and reduction in some Federal Reserve powers, while also giving the Fed huge discretionary power to manage bank failures. However, the mainstream news media did not focus on the corporate reforms buried in the proposal. These reforms include: federally mandated, non-binding, annual say-on-pay voting; compensation committee independence; clawbacks due to accounting restatements; additional proxy disclosure; majority voting; federally mandated proxy access; elimination of staggered boards; and disclosure of rationale for chairman selection and Chairman/CEO structure. Wow! Essentially everything, including the kitchen sink, is in this proposal that has been discussed as a possible corporate governance reform for much of 2009. This bill is much different from the Barney Frank’s House bill, so I expect that the Senate bill will change a lot before it comes out of Committee, and then again before the Senate votes on it. You can be sure it will get a great deal of news attention as hearings begin. You have heard me say it before, but with mid-year elections looming and Senator Dodd under a great deal of pressure in his own re-election bid, there is much speculation about the level of support for many of the bill’s provisions considering that they are politically charged and different from the Obama administration’s recommendations. Only this past week, a Pew Research Center study showed a great deal of anti-incumbent sentiment among voters, with 53% of voters not wanting to see most members of Congress return to office next year, but almost the same percentage believe their own representative should be re-elected. If the growing mood among voters towards Congress continues, it may turn voters against their own elected officials and cause Congress to not want to “rock the boat” leading into election season next year. While I do believe we will see some new legislation that Washington will hail as “financial reform” in 2010, I am not convinced it will have the kind of teeth that the Dodd bill (Restoring Financial Stability Act of 2009) proposes. My bet continues to be on the SEC and their focus in 2010 as having the biggest impact on IR. A couple of weeks ago I mentioned SEC proposed changes to darkpools, including an increase in pre- and post-trade transparency. The proposal, released by the SEC last Friday, provides for a 90 day comment period. NIRI plans to comment in early 2010. This week we will file a comment letter on the SEC’s proposed Notice & Access amendment, and I will share that comment letter with you next week. Until next week, Jeff Morgan, CAE President & CEO jmorgan@niri.org www.twitter.com/jeffreydmorgan
Nov 10 2009
I began last week’s message with a quote by SEC Commissioner Paredes about changes to disclosure, but noted that I was disappointed after realizing his comments were related to his concern about additional short sale disclosure. This week, SEC Chair Schapiro has renewed my sense of hope by making this statement, “Finally, in the coming year, we expect to begin a comprehensive review of our line item disclosure requirements for companies in their quarterly and annual filings. Our goal is to determine if some information we already require should be omitted — and if some information we don't require should be added. Again, our efforts will be targeted at making sure that investors are receiving the right information, and not just more information.” Needless to say this is a huge effort and one that I certainly applaud as something that is needed. My comment last week also prompted contact by University of Michigan Accounting Professor Reuven Lehavy, who is one of the faculty members of the summer NIRI / Michigan IR certificate program, Theory and Practice of Investor Relations. I pass along his research on “The Effect of Annual Report Readability on Analyst Following and the Properties of Their Earnings Forecasts.” This paper focuses on the linguistic complexity of written communication on the behavior of sell-side analysts using 10-K filings and how it affects their earnings forecast accuracy. The report finds that communication complexity reduces earnings forecast accuracy. Chairman Schapiro’s earlier quote is from a speech last week to the Practising Law Institute that I urge you to read. It is a concise presentation by the person who controls the SEC’s agenda on how she believes these issues fit together and why they are critical. NIRI has been advocating on your behalf on the majority of these issues, and I think you will agree that our advocacy efforts are important at this time of heightened regulatory change. Speaking of changing regulation, you may have read that the House Financial Services Committee passed the “Investor Protection Act – H.R. 3817” with a couple of contentious inclusions. In summary, the bill looks to tighten bank and capital market regulation while doubling the budget of the SEC and giving the agency new powers, including the authority to implement proxy access or mandate corporate shareholder nominated director requirements. The bill also includes a provision, pushed by NASDAQ and others, to provide relief to smaller issuers for SOX 404(b) compliance by exempting those with a market cap of less than $75 million. So what happens now? The bill will go to the full House for a vote likely to happen in early December. However, what happens in the Senate remains to be seen. Senator Chris Dodd, who likely feels even more political pressure after observing state election results last week, is planning to turn the focus of the Senate Banking Committee into broader financial overhaul. It will be interesting to watch this play out in the Senate, as this may create further delays in the ultimate passage of any financial reform legislation. Those delays continue to trouble members in Congress and the Senate who are concerned about their 2010 re-election campaigns. Political pundits predict, and I tend to agree, that the longer health care and financial services reform takes, the more muted or toned down any actual legislation will be. The analysis from mid-term elections seems to point to a belief that incumbent Democrats and Republicans are vulnerable if voters believe they are not doing the best job possible. Additionally, independents have a very strong voice in elections and tend to vote with their beliefs. The focus on 2010 elections is likely to have an important effect on the legislative agenda for Congress in 2010. Until next week, Jeff Morgan, CAE President & CEO jmorgan@niri.org www.twitter.com/jeffreydmorgan
Nov 03 2009
In a recent speech about disclosure, SEC Commissioner Troy Paredes said, “Ironically, if investors are overloaded, more disclosure actually can result in less transparency and worse decisions.” For IR professionals there are times we have all internally felt this way, as we have watched disclosures in the Q and K (and proxy statements) grow in length and repetition over the years. It was only a few weeks ago that a senior SEC staffer told me that it was the Commission’s ultimate desire for companies to disclose a piece of information once and reduce the complexity to a more easily understood format. I applaud that effort and was heartened when I thought Commissioner Paredes’ statement was in reference to the same desire. Unfortunately, the example he used was not about company disclosure, but about public disclosure of short sales or short positions, and how such disclosure could compromise proprietary trading strategies. Wow, was I disappointed as this is something all IR professionals would love to know for their companies. It is also an item NIRI is advocating for on behalf of companies and investors (rather than the traders of Commissioner Parades’ example). Comments like this provide a good grounding and a reminder of the continuing need for NIRI to educate and inform regulators and legislators. Speaking of education, for the last several months I have been providing you with weekly updates of the most IR-relevant activities in Washington. Next Tuesday (Nov. 10 at 4:00 pm Eastern time), I will lead a member benefit webinar with Paul Schulman, Executive Managing Director of the Altman Group. I will give you a summary of where things stand in Washington and then Paul will offer some practical thoughts on how your company’s relationship with investors is even more critical and how you might begin preparing for the 2010 proxy season. I hope to leave plenty of time for questions, so please join me for this interactive discussion. Continuing on the topic of education, many of the changes in Washington that I have been speaking about are directly related to the evolution of our capital markets. Over the past 18 months, NIRI has presented various capital markets seminars with the desire to help you better understand these changes. Based upon your evaluations and comments, we have fundamentally redesigned our capital markets seminar, and now offer The New Capital Markets seminar on December 9, 2009 at the Liquidnet headquarters office in New York City. The three major pillars of this new session include: trading, research and equity capital markets. I hope you will attend, and suggest registering early as space is limited. As my theme today seems to be education, our Annual Conference Committee is seeking CEOs and CFOs who are former IROs for speaking opportunities at the 2010 NIRI Annual Conference in San Diego. Please contact Kraig Conrad if you or someone you know may be interested in presenting at the largest IR event in the world. And yes, registration for the 2010 annual conference is available now for those of you interested in registering early. I should also mention there is the potential to get a free night’s stay in San Diego depending upon your arrival and departure. Consider this a personal reward for all your hard work in this challenging economy! At the time this IR Weekly arrives in your inbox today, I will be attending the NIRI Connecticut / Westchester Chapter meeting featuring former SEC Chairman Harvey Pitt. I am also pleased to be serving as Moderator for a NIRI NY Chapter event with Harvey Pitt on November 17, 2009. I look forward to seeing some of you at either of these events as I expect Mr. Pitt will be very forthcoming with his opinion of the actions now being considered by the SEC. Until next week, Jeff Morgan, CAE President & CEO jmorgan@niri.org www.twitter.com/jeffreydmorgan
Oct 27 2009
This week I want to start with an issue that you have no doubt read about in the news - the insider trading accusations at Galleon. In case you are not aware, it appears that an employee of an IR firm was involved in this SEC insider trading case. Thomson Reuters provides good background on the matter. The IR-related individual identified is not a NIRI member, and has never been a member. While this person has never agreed to NIRI’s Code of Ethics, the case raises some important issues for all IR professionals. What is your corporate or counselor policy regarding business confidentiality? In this case, the employee is reported to have been blogging about client companies or competitors in violation of a company agreement. While not implicated here, another troubling parallel situation could be an employee participating in “expert” consultancies like GLG (Gerson Lehrman Group). Are situations like this part of your compliance program? My sources tell me this may be the tip of the iceberg for other legal actions forthcoming, so please be sure your compliance program is up to date and reviewed regularly. When you join NIRI, every member agrees to abide by the organization’s Code of Ethics and that means you agree to be professional and adhere to fundamental principals of integrity, the highest legal and ethical standards and information confidentiality. Your membership also gives you the ability to tap into our Ethics Council of senior member peers for advice. Please don’t hesitate to use this valuable benefit. Last week I discussed an SEC proposal that NIRI advocated for to update Notice & Access regulation. While not wanting to sound like Santa Claus, this week I am happy to report on another SEC proposal relating to a second issue NIRI has advocated for on behalf of companies and IR professionals – ownership and trading transparency. This past week I attended a meeting where the SEC announced a welcome proposal to improve transparency for certain dark pool activity. According to the announcement, “The SEC's proposals address three specific concerns related to dark pools: • The first proposal would require actionable Indications of Interest (IOIs) - which are similar to a typical buy or sell quote - to be treated like other quotes and subject to the same disclosure rules. • The second proposal would lower the trading volume threshold applicable to alternative trading systems (ATS) for displaying best-priced orders. Currently, if an ATS displays orders to more than one person, it must display its best-priced orders to the public when its trading volume for a stock is 5 percent or more. Today's proposal would lower that percentage to 0.25 percent for ATSs, including dark pools that use actionable IOIs. • The third proposal that would create the same level of post-trade transparency for dark pools - and other ATSs - as for registered exchanges. Specifically the proposal would amend existing rules to require real-time disclosure of the identity of the dark pool that executed the trade.” The entire proposal has not yet been released, but this is an important step forward for IR professionals by reducing volume thresholds for orders traded in alternative trading systems to be subject to a public order display obligation. Halleluiah! Additionally, the SEC has indicated they will issue a concept release in the near future with more changes for dark pools. As I am sure you can guess, these changes will be opposed by traders. NIRI expects to submit a comment letter and continue to urge for improved transparency, but this is a step in the right direction. As for implementation, I would assume we can expect a final rule sometime in the first half of 2010 with implementation shortly afterwards. Finally this week, House Majority Leader Steny Hoyer is planning to introduce legislation requiring brokers to disclose to their street name stock holders when their stock is being used for short sales, and to ensure they are fully compensated for this use. It would also give the SEC authority to require brokers to publish daily: the identity of short sellers, the companies that are being sold short, the number of shares sold short, and any new “fails to deliver.” While the odds of passage are low, I am pleased by Washington’s increasing awareness of these kinds of issues, and I hope that as NIRI and others advocate for improvements we will eventually see passage of similar legislation. Until next week, Jeff Morgan, CAE President & CEO jmorgan@niri.org www.twitter.com/jeffreydmorgan
Oct 20 2009
NIRI and other organizations have advocated for changes to the SEC’s notice and access (or “e-proxy”) regulation since the first year of use. Our issuer survey in September 2008 clearly indicated that changes were needed in order to improve voting participation and usability. Now, as issuers are in the early planning process for the 2010 proxy system, change may be at hand. The SEC issued a proposal at the end of last week that pointed to making some uncontroversial rule amendments which are likely to be approved very quickly (after a 30 day comment period) and available for implementation in 2010, although the timing will be tight. With the change in the discretionary broker vote (NYSE Rule 452), the use of e-proxy is a focal point, especially for small to mid-size companies with heavy retail holdings. But everyone should be aware of the proposed changes and should be considering if and how e-proxy figures into your 2010 proxy strategy. According to the SEC, proposed changes include: “revisions to our rules to provide additional flexibility regarding the format of the Notice of Internet Availability of Proxy Materials that is sent to shareholders. We are also providing guidance about the current requirement for the Notice to identify the matters intended to be acted on at the shareholders’ meeting. In addition to the proposed changes and guidance regarding the format of the Notice, we are proposing a new rule that will permit issuers and soliciting shareholders to include explanatory materials regarding the process of receiving and reviewing proxy materials and voting. Finally, we are proposing revisions to the timeframe for delivering a Notice to shareholders when a soliciting person other than the issuer relies on the notice-only option.” (Italics added for emphasis). My thoughts on the proposal: 1. The SEC indicates the changes are designed to increase the retail vote. The option for issuers to provide informational or educational information is needed as every company has experienced shareholder confusion with the materials and use of e-proxy. However, the decline of the retail vote is a larger problem that goes well beyond notice and access – the retail vote has been eroding for years. 2. Many companies changed their formatting after the first year thanks to an effort led by Broadridge (and supported by NIRI), with an informal acceptance by the SEC. The SEC will now formally approve these changes and it makes good sense. Hopefully this change will lead to continuous improvement to increase understanding and usability. 3. Timeframe revisions do not include a reduction of the 40 day window (to 30 days) for issuers which some desire, but does include a proposal affecting soliciting persons other than issuers which would “amend Rule 14a-16(l)(2)(ii) to require the soliciting shareholder relying on this alternative to file a preliminary proxy statement within 10 days after the issuer files its definitive proxy statement and to send its Notice to shareholders no later than the date on which it files its definitive proxy statement with the Commission.” The SEC did include a statement asking about the 30 day change for issuers and a statement about other changes that may be needed to achieve greater shareholder participation. 4. The SEC also publicly directs staff “to develop a program to educate and inform shareholders, especially individual shareholders, about the notice and access model,” and my hope is this will include information companies can use on their website and elsewhere to educate investors about the proxy process. 5. Some personal concerns about the proposal include questions by the SEC about whether stratification of proxy materials between notice only and full set delivery should be mandated based upon size of holdings, thereby eliminating choice by issuers. In my opinion, this seems to imply issuers could be trying to manipulate voting and, if true, I find that implication upsetting. As you know, issuers employ the stratification methods as promulgated in the adopting release for legitimate economic and governance reasons. The SEC goes further to question whether it should limit the ability of an issuer to use the notice-only option where the issuer has experienced a decrease in shareholder participation. Finally, the SEC asks whether suspending the notice and access rules until shareholders understand e-proxy is needed. While I appreciate that the SEC is ensuring investors are protected and is looking at all angles, questions like these can be construed negatively toward issuers. I hope that I am just being oversensitive and this was not the intent. My message this week is a bit longer than normal but I want to share a couple of other items with you: • I will attend an SEC meeting tomorrow that will include a public discussion of dark pools and whether regulation is needed. For issuers and IR professionals, this is an issue to watch. • It is important for you to know that the Shareholder Communications Coalition (of which NIRI is a key member) sent a letter to CEOs of almost 1,000 companies this past week urging companies to support the modernization of the proxy voting system by placing this issue on your company’s public policy agenda. If you hear from your CEO on this issue, help them to understand why companies should voice their opinion and also understand how your membership in NIRI gives you and your company an advocate in Washington on these important matters. I also hope your company joins the Coalition’s e-mail update list to stay abreast of this important issue. Finally, the SEC and CFTC released their joint report on “Harmonization of Regulation” last week. This report calls for some twenty recommendations – including joint enforcement or anti-fraud squads, as well as making it unlawful to trade using non-public information from any government authority in the commodity futures markets! This report has been well received by many in Washington, but the proof will be in the implementation. Until next week, Jeff Morgan, CAE President & CEO jmorgan@niri.org www.twitter.com/jeffreydmorgan
Oct 13 2009
With the healthcare discussion moving into later stages in Congress, the House of Representatives is turning to financial regulatory reform legislation. Topics subject to debate include increased consumer protection, hedge fund oversight, OTC (over-the-counter or non-exchange) derivatives oversight, closing financial regulatory gaps, investor empowerment and increased corporate oversight, to name a few. As they have begun to both see the complexity of the financial system, and hear from their constituents, some in Congress are saying success will be “smart” regulation not just “more” regulation. While this may seem obvious to everyone outside the Washington Beltway, it may be an indication that politics are beginning to work, even in a Congress that is heavily dominated by one party. (For those wondering how this relates to IR, stay with me for a few sentences.) Take, for example, House Financial Services Committee Chair Barney Frank’s plan to regulate OTC derivatives – a plan which is very different than the Obama (Geithner) plan. The Frank plan includes numerous exemptions that some argue make it too lax on financial firms. Dr. Henry Hu, Director of the newly-established SEC Division of Risk, Strategy, and Financial Innovation, has indicated problems with Frank’s plan including the continued lack of regulatory oversight for some products due to new limits that would be placed on the regulator. He said that Frank’s plan would “inadvertently weaken the SEC’s anti-fraud and anti-manipulation authority,” and seems to “enable significant regulatory arbitrage.” As I see it, this is not where we want to go. IR professionals want to be sure the trading of our stock on cash markets – like the NYSE and NASDAQ – cannot be influenced by derivatives or other financial instruments as happened with abusive short selling. So what might be happening with financial reform in Washington and what might this early sign mean? It seems clear that Congress will pass some type of final financial reform legislation in the next year. Legislation has been promised by President Obama and I expect that promise to be kept. Could it also mean that politicians may step away from some of the more challenging decisions, hopefully empowering the regulator(s) with expertise to fix the problems? If this is true, then the SEC’s Draft Strategic Plan released this week is important. While I have attached the link (for those who would enjoy 55 pages of dry reading), the key points are the SEC is calling for significantly enhanced resources in the areas of staffing, technology and expertise. The Schapiro-led SEC is saying the agency needs a significant upgrade in critical infrastructure and types of manpower to do its job. This is at once a scary and welcome acknowledgement, and something we all need to watch. So the SEC continues to be the significant regulatory focal point for NIRI and for IR. A recent speech by SEC Commissioner Walter gave an excellent summary of her mindset – a Commissioner who also has the ear of Chairman Schapiro. I urge you to read the relatively brief transcript that gives a very good Commission perspective on MD&A changes, climate change disclosure, NYSE 452 adoption, proxy enhancements and IFRS adoption. These are all important updates and might even be helpful to pass along to your management team. I also think you will be pleased that the advocacy work on proxy plumbing by NIRI and the Shareholder Communications Coalition is a priority of the Commission. Finally, last week I attended a NYSE Advisory Committee meeting. The NYSE has also convened a governance task force with broad ranging expertise to examine many of the issues being discussed in Congress and the SEC. I mentioned in a recent IR Weekly that NASDAQ is doing something similar. Could it mean that if the SEC is starved for expertise, they too would seek assistance and that some of the discussion for changes may occur in the area of listing standards for public companies? From where I sit representing IR professionals, that discussion would be welcome as companies would have an equal seat at the table and help to decide the future fate of some very important corporate governance matters. Time and actions of several key entities over the next few months will show the exact path of financial regulatory overhaul. Until next week, Jeff Morgan, CAE President & CEO jmorgan@niri.org www.twitter.com/jeffreydmorgan
Oct 06 2009
On Friday, SEC Chair Mary Schapiro announced that the Commission would delay voting on either proxy access or federally mandated standards for shareholder nominated directors, from November 9, 2009 to early 2010. Schapiro indicated the SEC needed more time to evaluate comments, modify the final rule and vote on the proposal. This makes perfect sense as generally it takes four to six months after a comment period closes on an SEC proposal before a vote. The comment period on this proposal closed in mid-August suggesting an early 2010 decision, which is exactly the revised time table. So why did the SEC ever plan to approve the rule so quickly, and what other extenuating circumstances may have come into play at the SEC? Allow me to speculate – the SEC knew they had the votes to approve and implement proxy access for the 2010 proxy season. With all the work done over the years on proxy access, I suspect there was a feeling that an accelerated date would be easily met. But a few things have happened over the past few months that I believe also entered into their decision: 1. First, many believe the SEC’s legal authority to mandate proxy access is questionable without Congressional authority. Financial reform in Congress has slowed dramatically due to the time it is taking to get healthcare reform passed. Senator Dodd has indicated that final financial reform legislation will not pass the Senate until January 2010. So it makes some sense for the SEC to wait and see what happens in Congress before proceeding. Will Congress give the SEC proxy access authority? The legislation will begin to take form in late November and December so stay tuned. 2. Second, if there are delays beyond early November, and/or depending upon the intricacies of the final rule, could Broadridge implement the desired system changes in time for a 2010 start? It would be disastrous to move forward with a system that wouldn’t necessarily be fully tested by Broadridge in time for proxy season, and that has the potential to make 2010 proxy results questionable. 3. Third, I believe many are worried about the potential combined impact from eliminating NYSE Rule 452 and implementing proxy access. I certainly am. You may recall NIRI’s concerns on these matters in our comment letters on NYSE Rule 452 and proxy access. I think these concerns have grown over the past few months. An adverse outcome for public companies could have raised serious concerns about the SEC’s actions and had serious political ramifications. 4. Fourth (and I would like to think this was a very critical piece of the SEC’s thinking), NIRI and other groups that are a part of the Shareholder Communications Coalition have been pushing hard to shed light on problems with the proxy system, or “proxy plumbing.” I think fixes are needed before the proxy system collapses under its own weight. I believe the SEC realizes this as well, so waiting for some solutions in proxy plumbing along with a decision on proxy access is best for investors, issuers and our capital markets. Just this past week the Coalition spent several hours at the SEC discussing our August draft to improve the system. The SEC has acknowledged the problems and is working on proposals to fix proxy plumbing issues (NOBO/OBO, share lending, accuracy of elections, etc). I believe the SEC is sincere in its desire to improve this system, and will hopefully start to circulate potential solutions in early 2010 as well. 5. The fifth concerns the SEC’s two part proposal – one part would create federally mandated proxy access (14a-11), and the other part would allow shareholders the ability to amend a company’s nominating process using the normal proxy channels (14a-8(i)(8)). If the SEC acted in November, it would have likely only approved the latter ability (14a-8(i)(8)) due to the open questions as just discussed, despite their desire to approve both proposals. I suspect there was a belief that if the SEC only approved one part, it would be very difficult to get the other part approved at a later date. So the delay of a few months and one proxy season may enable the SEC to approve both pieces of the proposal in just a few months. The bottom line is the delay of a proxy access vote until 2010 – welcome news for issuers (if only for potentially a few months). But this announcement allows everyone to begin planning with certainty for next year’s proxy season. Companies need to focus now on preparing for the upcoming proxy season following the changes to NYSE Rule 452 and the loss of broker voting for directors, and this should include educating investors on the importance of their vote. Hopefully others (exchanges, SEC, broker dealers, etc.) will accept the mandate that they have the responsibility to educate on this point as well. Other news of interest to investor relations professionals from the past week includes: • The SEC held two days of meetings on short selling. It looks like the possibility of creating a pre-borrow requirement for short sellers beyond just locating the stock is dead (for now). But regular short position disclosure in a 13F-like filing seems to have gained new life (much like it did in the U.K. with last week’s FSA announcement), along with some type of circuit breaker or uptick mechanism. I am still hopeful the SEC will pass a final rule before the end of 2009. • Also this past week the SEC and CFTC missed the President’s deadline for a joint report on fixing the regulatory void between derivatives and equities, but announced a date of October 15 for the release of their proposal. Until next week, Jeff Morgan, CAE President & CEO jmorgan@niri.org www.twitter.com/jeffreydmorgan
Sep 29 2009
As September draws to a close, this week marks some important areas of focus in Washington for investor relations professionals. In addition, the last few days have also been full of IR profession-related news including: • Today marks the first of two days of public SEC meetings on “Securities Lending and Short Selling.” Before the end of the year, the SEC will likely announce new measures to control short selling with the focus on limiting potential abuse. There has been much discussion on this in Washington, with many divergent views on action – particularly a return to the uptick rule. The consensus seems to be pointing to a circuit breaker rule to ensure short sellers cannot “pile on” and pull a stock down in an abusive fashion when the decline meets a certain percentage threshold. NIRI is a proponent of additional short selling measures and I am pleased pre-borrowing (the ultimate fix) is also part of the discussion. • Tomorrow the SEC and CFTC are to report on ways to bridge the regulatory void between derivatives and equities. Resolution of this problem focuses on moving securities-related derivatives to SEC jurisdiction. Politics on the matter are strong in DC with the House Agriculture Committee Chair, the committee that regulates the CFTC (as it roots are in agricultural commodities), not interested in relinquishing oversight control. Fixing this regulatory void extends beyond Democrat and Republican politics and has been an ongoing battle of Congressional “oversight committee” infighting for years. • You may have seen SEC action at the end of last week in a Reg. FD selective disclosure matter against a former CFO of American Commercial Lines who was also the company’s investor relations contact. The individual was not a member of NIRI and reinforces, as I have stated several times over the past few months, the need to be vigilant and ensure Reg. FD compliance. It also reinforces the case of the value of membership in organizations like NIRI where continuing education, interaction with peers and a focus on best practices helps to ensure you have the knowledge and tools for compliance. • The NASDAQ Listing and Hearing Review Council is undertaking a corporate governance “best practices” review and soliciting input on what, if any, these practices should be. These are important initiatives and I am hopeful companies and others will express their views. This kind of action helps to create some balance to those sometimes one-sided views coming from Washington, especially in the areas of corporate governance. Finally this week, I want to congratulate Brad Wilks on his election as the 2010 chairman of the NIRI Board of Directors. Wilks is Managing Director of Sard Verbinnen & Co, a leading provider of strategic corporate, financial and crisis communications counsel and services. He succeeds Bina Thompson, Vice President, Investor Relations, Colgate-Palmolive Company who will end her term in December. The NIRI Board also approved the slate of four new NIRI National Board members. The NIRI membership will be asked to vote on the election of the four nominees by proxy ballot in mid-October. The candidates will officially be elected at the annual meeting in December. Candidates nominated for a four-year term are: • Hulus Alpay, Director, Investor Relations, Medidata Solutions Worldwide, New York, NY • Mary Beth Kissane, Principal, Walek & Associates, New York, NY • Andrew Kramer, Director, Investor Relations, Interactive Data Corporation, Bedford, MA • Michelle L. Schwartz, Director, Investor Relations, JDSU, Milpitas, CA Members will receive ballots for NIRI national board elections in the next several weeks with NIRI’s annual meeting occurring in San Francisco on December 1, 2009. Until next week, Jeff Morgan, CAE President & CEO jmorgan@niri.org www.twitter.com/jeffreydmorgan
Sep 22 2009
Washington was back to full speed this past week as momentum on all fronts returned to pre-summer recess levels. Congress and regulators alike are focused on action, so the timing was perfect when the NIRI National Board descended on the SEC late last week to discuss a wide range of topics. The SEC took the meeting seriously with 22 staff members attending and participating in the dialogue. The discussion included topics like ownership transparency, improved shareholder communications, short selling and challenges with financial disclosure. The Board and I were pleased with the exchange of information and the keen interest and serious commitment by the SEC to examine areas that included: e-proxy changes, empty voting, over voting, NOBO/OBO, proxy advisory service practices, and costs related to communicating with shareholders (distributing proxy materials). I believe the meeting was very instructive for all regarding understanding public companies’ struggle to identify their shareholders, the desire to streamline transparency including better use of technology and improvements to mandatory SEC filings, as well as the SEC’s current thinking on these matters. It was a very productive afternoon in terms of advancing the IR profession. Other noteworthy items for IR professionals include: • The SEC proposed a prohibition on flash trading due to the associated inequity of allowing select participants to act on market orders in advance of the public, thereby creating a two-tiered system. This was the right move by the SEC to ensure no one is disadvantaged. • The House has set September dates for testimony leading up to the overhaul of financial regulation and corporate governance. While the health care debate has slowed focus on this agenda, it is picking up steam. The lobbying on both sides is also taking hold with the outcome on whether there is really a need for another agency - the CFPA (Consumer Financial Protection Agency) - as a starting point. Many, including myself, are unconvinced of the need. Other early handicapping seems to indicate some rethinking by Congress. For instance, mandating the separation of CEO and Chairman is heading toward the sideline, while focus on a mandatory board certification process is increasing. To be sure, the lobbying is strong on both sides and the entire financial regulatory agenda, including proxy access, continues to be up for debate. Take a few minutes to visit either www.shareowners.org/ or www.stopthecfpa.com/ if you want to learn about efforts to create grassroots influence. • As the SEC has attended to other matters, IFRS has seemingly been in the back seat. However, the new SEC chief accountant, James Kroeker, did give some indication that the SEC will re-focus on IFRS in the coming months as pressure increases from the international accounting community for the U.S. to fall in line. • I was pleased to finally see the long rumored announcement from the SEC of the formation of an Office of Risk, Strategy, and Financial Innovation with University of Texas School of Law Professor, and past NIRI speaker, Dr. Henry Hu as the head. Hu has conducted extensive research into the separation of economic and voting interest in U.S. equities. I am hopeful that as the CFTC and SEC look at bridging regulatory gaps between derivatives and equities, Dr. Hu will help to keep both agencies focused on closing this dangerous gap, particularly in light of dramatic governance changes currently being considered such as proxy access. Until next week, Jeff Morgan, CAE President & CEO jmorgan@niri.org www.twitter.com/jeffreydmorgan
Sep 15 2009
When I suggested that watching healthcare play out in Congress would be interesting, I never imagined just how quickly it would happen! If Congressional reaction to President Obama’s speech is any indication of what is to come, it certainly promises to be an extraordinary fall. Congress was full of surprises last week with USA Today reporting that in a soon to be released biography, influential House Financial Services Committee Chairman Barney Frank says he would like to finish his career in Obama’s cabinet as secretary of the Housing and Urban Development Department. And despite the opportunity to take over for the late Senator Kennedy as chair of the Senate Health, Education, Labor and Pensions Committee, Senator Chris Dodd decided to remain as chair of Senate Banking, Housing and Urban Affairs Committee which many see as a signal that some form of financial regulatory reform will pass this year. There were, however, several developments more directly related to the Investor Relations profession last week: • The SEC provided detail around its upcoming short sale roundtable. It will now be one and a half days on September 29 and 30 according to the agenda. The Notice indicates that the purpose of the roundtable is to, “solicit the views of investors, issuers, financial services firms, self-regulatory organizations and the academic community regarding securities lending and short sales. The roundtable will include a comprehensive overview of securities lending and also analyze possible short sale pre-borrowing requirements and additional short sale disclosures.” This event is a positive development for NIRI members as short selling reforms are a part of NIRI’s advocacy agenda. • In a development that resurfaces periodically, Sen. Schumer plans to introduce legislation that would permit the SEC to keep fines it collects, according to reports. Though this self-funding bid doesn’t enjoy unanimous support, it may get further this time around given the momentum behind financial regulatory overhaul and the debate around SEC resource adequacy. • In a development with potentially favorable liquidity implications for NASDAQ-listed companies, Traders Magazine reported that the NYSE will begin trading all NASDAQ stocks on its AMEX market next year. Each stock will have a single designated market maker assigned to it, with one or more additional market makers, which the exchange operator calls supplemental liquidity providers, also assigned to most securities. Finally, you should know that in conjunction with this week’s NIRI Board of Directors meeting, a number of board members and I will meet with the SEC at their headquarters for several hours to make the Commission aware of the issues most relevant to the Investor Relations profession. I look forward to reporting back to you on this discussion, and continuing to advance the interests of the IR profession here in Washington and beyond. Until next week, Jeff Morgan, CAE President & CEO jmorgan@niri.org www.twitter.com/jeffreydmorgan
Sep 09 2009
Published by Administrator - Administrator, GM under keyword: N/A
Today Washington officially returned to business from summer recess. You may recall last month when recess started, I predicted that many politicians would return to Washington with a new sense of their constituents’ interests. I think many from Congress and the Senate heard an earful, particularly about healthcare. President Obama is under intense pressure on his healthcare initiative, and it will be interesting to watch this play out in Congress over the next few months especially considering the passing of Senator Ted Kennedy, who chaired the Senate Health, Education, Labor and Pensions Committee. Senator Kennedy’s loss also has the potential to create a new political dynamic around the corporate governance reform movement as Senator Dodd may switch his committee chairmanship from Banking, Housing & Urban Affairs to Kennedy’s now open chair position. For those focused on Investor Relations, here a few items of interest from the past week: • Speaking of change, I was pleased that the NYSE Euronext announced the creation of an advisory commission to examine corporate governance and the overall proxy process. In the past, the NYSE has taken a leadership role looking at proxy issues via the NYSE Proxy Working Group. But with the swirl of activity around corporate governance changes in DC, the need to reform the shareholder communications system and the need create better transparency of ownership, this is a positive step forward. The Committee will be chaired by Larry Sonsini. I believe this expanded focus can only help to highlight problems with outdated regulation and regulatory oversight. It is a constructive step to strip away political jockeying and look holistically at the entire system, suggesting positive changes for investors, issues and the integrity of the financial markets. I serve on the NYSE Individual Investor Committee and look forward to the dialogue on improving issuer-shareholder information flow, especially as a result of the elimination of NYSE Rule 452 (broker discretionary votes on director elections become non-routine on January 1, 2010) in the coming months. • If you follow me on Twitter, you may recall that I highlighted a news story about the change in the U.S. mutual fund universe. Year to date in 2009, more than 396 mutual funds have disappeared while only 156 new mutual funds appeared. In 2008, more than 438 funds disappeared, but 487 new funds were created generating a net positive for the year. This is a trend to watch for investor relations professionals as the world of passive ETFs (Exchange Traded Funds) continues to grow. I expect the world of actively managed mutual funds and passive ETFs will continue to evolve well into the future. One final note that I want to be sure to highlight is a new process this year for developing sessions for annual conference – you may have seen the announcement in last week’s IR Weekly. One of the core benefits of being a NIRI member is that you are part of an open and caring culture of IR professionals who help each other professionally. This is very evident at our annual conference where many members share experiences, best practices and cutting edge trends by speaking to their peers during the three day conference. In the past, the member-based NIRI Annual Conference Committee developed topics and then found members to speak on these topics. Next year, NIRI’s conference will be held in San Diego and we are asking members to self identify their area of expertise and consider submitting a session as part of the ”Call for Presentation” process. This will enable your Annual Conference Committee (which begins its efforts in earnest later this month) to pick sessions from those submitted, as well as develop session around topics of importance and interest to members. I think this will make our annual conference even better and with richer content. We announced this process last week and have already received submissions from several members. Thanks in advance for your consideration of sharing your story and expertise with other members next year in San Diego. Speaking of San Diego, we have some special things planned for next year’s conference, so please put the dates of June 6-9, 2010 on your calendar now so you don’t miss it. Did I mention free hotel nights?!? Stay tuned for details coming later this fall. Until next week, Jeff Morgan, CAE President & CEO jmorgan@niri.org www.twitter.com/jeffreydmorgan
Sep 02 2009
This is transition week in Washington as we approach Labor Day weekend. Schools, including colleges are returning to session. President Obama returned from his family vacation and Washington politicians are starting to ramp up their fall agendas. Next week things will return to full gear. However, for the remainder of this week, Washington remains quiet, so I will focus on just a few things of interest for IR professionals: • A segment of NIRI members received an invitation to take the third annual “Notice & Access” survey this past week. Your participation is appreciated as we collect e-proxy trends in conjunction with the Society of Corporate Secretaries. NIRI continues to pursue some minor Notice & Access changes at the SEC, and the survey results will be used to highlight the need for some tweaks in e-proxy regulation. Your participation ensures your voice is heard, as well provides solid data to benchmark yourself against peers. • The Wall Street Journal published an article (subscription may be required) last week on the fight brewing over the SEC’s proposed proxy access rule. While the comment period ended in mid-August, this will continue to be debated in Congress this fall as a federal proxy access mandate needs Congressional approval to ensure the SEC has the authority to enact such a requirement. • The SEC and FINRA issued a warning about non-traditional ETF’s. The focus is on leveraged and inverse ETF’s that use derivatives versus an index of underlying stocks. The CTFC has been investigating excessive speculation and many wonder if these types of ETF instruments have contributed to the ability for easy speculation. • I am pleased to see that University of Texas professor, Dr. Henry Hu, will be appointed by the SEC to a position overseeing risk assessment. Dr. Hu is an expert on the use of sophisticated derivatives and has done extensive research into the separation of economic from voting interests in public companies. Dr. Hu has been critical of hedge funds, and has spoken to NIRI members on hidden ownership of equities in the past. I look forward to his insight continuing to highlight and correct this troubling situation for investors and companies, especially in light of the elimination of NYSE Rule 452 and the contemplation of federally mandated proxy access. In closing, I want to remind those of you who may be new to investor relations; there is still time to register for NIRI’s “Intro to Investor Relations” in Boston from September 20th through 23rd. This program only happens twice a year and is a must for anyone who is in their first few years of investor relations or whose job responsibilities include IR. This is your chance to listen to experts discuss all the facets of the profession, as well as find out answers to your IR questions. Whether you are a new IR professional, a CFO or a communications professional that needs better understanding of investor relations, this is the place to be. I’ll be there and hope to meet you there too. Until next week, Jeff Morgan, CAE President & CEO jmorgan@niri.org www.twitter.com/jeffreydmorgan
Aug 25 2009
This week starts the beginning of the return to schools and colleges around the U.S., while politicians find themselves reaching the mid-point of their summer recess. We also find Washington becoming even quieter as President Obama enjoys some vacation too. Since things in Washington are quiet, and because I spent much of the week at the IR certificate program offered in partnership between NIRI and the University of Michigan, I am going to use this week to recap a few things that you may have missed over this past summer. 1. REG FD Update: Be sure to read the latest SEC Reg FD Compliance and Disclosure Interpretations released on August 14. Though, depending on your experience level you may not find too much new here, it is a great reminder for all IR professionals as well as a good pass-along to others in your organization. 2. Proxy Access Update: Hopefully you have read NIRI’s comment letter to the SEC on Proxy Access. I also encourage you to read the letter from the Shareholder Communications Coalition, of which NIRI is a member, on proxy access. Hundreds of letters have been sent to the SEC on proxy access and they can be accessed here if you are interested. In reviewing many of the proxy access comment letters, it appears the primary legal arguments against federally mandated proxy access are: 1) this is a matter for state corporate law; 2) the SEC does not have the federal authority to mandate this change (the SEC has even raised this question and Congress is trying to fix that); and 3) in a well laid out argument Stanford Professor Joe Grundfest believes the proposal violates the Administrative Procedure Act. This fall we will see proxy access debated in Congress and are likely to see an SEC rule by Thanksgiving. 3. Short Selling Update: Over the summer the SEC issued permanent Reg. SHO rules to ensure the potential for abusive short selling is curtailed. The SEC also had been expected to announce their decision on reinstating a new uptick rule or implementing circuit breakers in September. However, the SEC has instead reopened the comment period for 30 days and decided to hold another open meeting at the end of September on short selling. Everyone still expects the SEC to make a final decision on this matter in the fall. 4. SEC & CTFC Harmonization Update: NIRI continues to watch the world of derivatives as they can play a role in affecting the price of equities, and can also be used to separate the economic and voting interests of equities. The SEC and CFTC continue to move along a path of creating a new regulatory regime to address these issues. This past week they announced open meetings in early September to seek public input on harmonization. 5. IFRS Update: IFRS seems to be stalled as the current SEC is focusing on other matters. 6. XBRL Update: Large filers have begun submitting XBRL tagged quarterly reports to the SEC. However, this recent post on the EdgareView blog indicates things are not completely smooth. 7. Flash Orders Update: The SEC continues to indicate they will look at flash orders, dark pools and other parts of our evolving U.S. markets to ensure all is proper. However, according to a recent WSJ article (paid subscription may be required) the SEC is struggling to attract the right personnel knowledgeable about these areas. Enjoy the remainder of your summer!
Aug 18 2009
IR Never Sleeps and Washington Never Rests Washington lawmakers continued their recess last week, while the news showed these same lawmakers meeting with constituents in their home states. Full of headline-grabbing lively conversation, it will be interesting to see how this input will affect the agenda in Washington in the fall. While the lawmakers may be away, business continues and we all know IR never sleeps. Yesterday marked the closing of the SEC comment period for proxy access. NIRI filed our comments and I urge you to read the letter to understand our priority concerns. While we do not support federally mandated proxy access, we do support the ability of shareholders to amend corporate bylaws and add shareholder approved proxy access. NIRI views issues of shareholder ownership transparency and improved shareholder communications as critical for SEC focus. NIRI is very concerned that combining the recent broker vote elimination with proposed changes such as proxy access may lead to a “SOX” type impact on public companies resulting in unintended and potentially detrimental consequences – consequences that will be magnified without an improvement in ownership transparency and shareholder communications. To this end, a few weeks ago the Shareholder Communications Coalition publicly suggested changes to improve the ability of public companies to communicate directly with their shareholders. Some of these concepts are echoed in NIRI’s proxy access comment letter. I encourage you to join the Coalition’s e-mail alerts list to stay up to date on their work on behalf of public companies. In a response the Coalition received last week, SEC Chairman Schapiro said, “As you know, the Commission has directed the staff to undertake a comprehensive review of potential improvements to the existing regulatory framework governing proxy voting and shareholder communications, and I appreciate your support of this endeavor. I also sincerely appreciate the efforts of the Shareholder Communications Coalition and its members in discussing concerns regarding the existing regulatory framework with the Commission and the staff. With over 800 billion shares being voted annually at over 7,000 company meetings, it is imperative that our proxy voting process work well, beginning with the quality of disclosure and continuing through to the integrity of the vote results.” Like all of you, I look forward to this comprehensive review and the resulting improvements. You have no doubt continued to see the many stories on flash and high frequency trading. Some have confused these two terms and are targeting both as bad. The focus of the SEC’s review is not high frequency trading, which is not a new concept, but the potential for abusive flash trading. Ed Boyle, NYSE Euronext Inc., VP states,”This is leakage of information ahead of an execution to a small group of participants.” In my opinion, this would be considered a problem, and is why I am pleased the SEC is examining these inequities in the stock and now options markets. I should also mention two very recent SEC announcements beginning with Friday’s release of new required reading for IROs – the SEC’s Reg FD Compliance and Disclosure Interpretations. And yesterday the Commission announced that it is seeking public comment on an alternative short sale uptick rule. According to the release, this approach may be more effective and easier to implement than previously proposed price test restrictions and would allow short selling only at an increment above the national best bid. The SEC is reopening the comment period for 30 days in order to receive input specifically on this alternative. Finally, I want to mention again that I have joined Twitter and invite you to follow me at www.twitter.com/jeffreydmorgan. Last week, I tweeted about filing NIRI’s proxy access comment and within 30 minutes received an e-mail from a member about the letter. I am using Twitter as a way to provide those who are interested with real time updates about NIRI, as well as what I might be reading or seeing in Washington. It is also a great excuse to see what Twitter is all about.
Aug 11 2009
This past weekend Congress left en masse for a month long recess to return to their home districts and get away from Washington. They left after approving a new Supreme Court Justice (Justice Sotomayor) and a $2 billion fill-up for the cash-for-clunkers program. But they also left without desires fulfilled for major reform in financial regulation and health care. The legislative agenda for the fall is sure to be aggressive and will certainly be lively. I want to start my investor relations focus this week by mentioning a speech by Ethiopis Tafara, Director of the SEC’s Office of International Affairs, who discussed our present global financial situation and why financial regulatory reform is a global issue. Director Tafara explained that, “the four characteristics of the modern financial market are: 1. its global nature and the resulting mobility of capital; 2. the significantly increased competition among financial service providers; 3. the elimination of differences between historically separate financial products, sectors, and actors; and 4. the development of a large and relatively liquid unregulated institutional financial market paralleling the regulated markets.” In my opinion, this is also why IR continues to evolve and why we are now paying attention to trends that may never have been on our radar screen previously – trends such as “flash trading.” I was pleased to see this past week both NASDAQ and BATS announce an upcoming ban on flash trading effective September 1, as the SEC continues to examine any inequities created by these trades. Watch for more on this throughout the fall. I was also very pleased to see the SEC take enforcement action for a Reg. SHO abusive “naked” short selling violation. We had been expecting a final SEC pronouncement in September on further short selling measures like an uptick rule or implementation of circuit breakers. However, recent comments by SEC Chairman Schapiro have fueled speculation that the SEC may reopen the public comment period in what I hope will be a discussion on pre-borrowing. As NIRI stated in our May comment letter (pdf) to the SEC on this matter, a system of pre-borrowing at the time of a short sale is the ultimate solution to eliminating abusive short selling. Stay tuned as this plays out in the fall. Something else on the agenda of the SEC this fall and in the minds of IR professionals is an examination of the shareholder communications systems and changes to e-proxy. The SEC’s new Director of Corporation Finance, Meredith Cross, recently reiterated these as items of focus. Your NIRI Board will be meeting with Director Cross and others at the SEC this fall to discuss the IR practitioners’ perspective on these and other issues. In the area of shareholder communications, the Shareholder Communications Coalition , of which NIRI is a founding member, released a discussion draft (pdf) for improving shareholder communications. This was sent to interested parties in Washington and beyond and will be a starting point for discussion this fall on many of these issues. Another topic of much discussion this fall will be corporate governance – particularly shareholder nominated directors or proxy access. Next week I will share with you NIRI’s comment letter to the SEC, but for now I invite you to read a report (pdf) from the IRRC Institute titled “Proxy Voting by Exchange-Traded Funds: An Analysis of RTF Voting Policies, Practices and Patterns.” ETFs continue to grow in the U.S. and the impact of ETF funds is significant for IR, including the impact that ETFs may have after potential changes in governance, like proxy access. Finally this week, NIRI launched our new Web site a few weeks ago, and I hope you’ve had a chance to check it out. You will find new features and abilities expanding during the fall as we begin to use the new site’s full functionality. One significant area of improved functionality is our ability to publish this column as a blog and push it out through RSS feeds. I invite you to comment on the topics discussed in this weekly column. This past week, some of you have found me on Twitter at www.twitter.com/jeffreydmorgan. I am now using Twitter as a way to pass along my thoughts (and yes they are mine – including this column which I personally write) throughout the week. I plan to pass along news stories, comments and other posts that I believe are valuable to those in IR. If you have not stepped into the world of Twitter, this is your chance to learn a bit more about this communications tool while staying abreast of IR news. Also join the NIRI National Twitter site - http://twitter.com/NIRI_National. As always, I welcome and appreciate all of your comments and criticisms regardless of how they might arrive – in person, mail, phone, facsimile, e-mail, blog post, text message, LinkedIn, and now Twitter. Whew!
Aug 04 2009
August 8th marks the beginning of Washington’s “summer recess” – meaning Congress won’t go back into session until after Labor Day (September 8). Everyone goes home and reconnects with those who elected them. However, this won’t be a normal summer recess. Many of the legislative issues the Obama administration wanted to enact as new legislation by August 7th are still under discussion by Congress. So that means we can expect all sides to stump throughout the remainder of the summer on issues like healthcare and financial reform. The main spotlight will fall to President Obama who will use the next month to push his agenda as well. Get ready! IR has no summer recess, so let’s focus on what is happening in Washington: • Last week, I mentioned an announcement by the SEC that it will make permanent some temporary short selling rules that were set to expire. These temporary rules have gone a long way to stop abusive short selling. NIRI has been an advocate for making these rules permanent. You may recall our spring comment letter to the SEC on this matter. So, I was pleased with the action by the SEC regarding these short selling measures. In late September, we will likely hear more about short selling as the SEC should decide on reinstating the tick test and/or implementing circuit breakers. The SEC has also scheduled a meeting for September 30, where I expect pre-borrowing systems to be discussed as this is the best way to stop abusive short selling. • Is “flash trading” the next abusive trading issue to be addressed by the SEC? It could be, and it has come into sharp focus the last two weeks; we mentioned this in last week’s The Buzz section. Now Congress is involved and has asked the SEC to investigate. While algorithmic trading has been around for some time, flash trading plays off of price volatility and has dramatically increased since the implementation of Reg. NMS (pdf) a few years ago. If this volatility undermines the long term value proposition of a company, then it is problematic for all IR professionals. And, if flash trading creates an unfair advantage for traders with the right access, then this needs to be rectified. The SEC’s John Nester said, “The SEC staff is specifically examining flash orders to ensure best execution and fair access to information for all investors.” I am pleased to see the SEC jumping on this before it becomes another naked short selling type of issue that went unaddressed too long before the SEC stepped in. • On Friday the House approved the “Corporate and Financial Institution Compensation Fairness Act” (pdf) calling for an annual say-on-pay vote, and the implementation of a “Federal Pay Czar” to prohibit corporate pay practices within financial institutions deemed harmful to other financial institutions, or the broader economy. Also included in this legislation are new independence standards for compensation committees. After summer recess, the Senate will consider similar legislation within corporations. It is clear there continues to be a great deal of populist anger on main street America about corporate executives’ compensation and risk taking. In my remaining space for this week, I want to call your attention the Delaware State Bar Association comment letter (pdf) to the SEC on proxy access. I think this letter is typical of corporate thinking on this matter. NIRI will submit a comment letter to the SEC on this matter before the August 17 deadline. I encourage your companies to do the same. Until next week, Jeff Morgan, President & CEO jmorgan@niri.org
Jul 30 2009
This past week, the Obama mandate of change slowed a bit as members of Congress examined details of proposed legislation. Questions of costs, consequences, and debate about the necessity of voting before summer recess all slowed the process. The voices saying, “too much and too fast without proper analysis,” became louder in Washington.
In IR last week, there were several notable items:
· The Obama administration sent legislation to Congress that would allow the federal government to move large public companies (whose collapse would undermine the entire financial system) into government conservatorship when these companies are deemed close to collapse. This is a new financial crisis response role for the federal government. While it is meant to be an apolitical solution that creates a swift response mechanism in times of financial turmoil, I believe we must all watch the legislation’s language to see if it is so broad to include non-financial companies.
· The SEC has provided Congress with 40+ areas of desired changes to securities law that would allow it to be more effective. These changes include: authority to set the definition of “independent director,” the ability to obtain information about an adviser's clients (including hedge funds), and several other changes that already appear in legislation – advisory votes on executive compensation and ensuring the independence of compensation committees, as examples.
· I mentioned a few weeks ago about needed changes to the SEC’s authority over certain derivatives that affect securities pricing in the cash markets. The Derivatives Trading Accountability and Disclosure Act takes the talk and moves it to proposed legislation by allowing the SEC to oversee securities-related derivatives, while the CFTC would oversee agricultural, commodities, and futures-related products. This appears to be a good solution and would assist the SEC address suspected manipulative short selling using derivatives to apply downward pressure to equity pricing.
· Speaking of short selling, a bipartisan group of seven senators asked the SEC to consider addressing naked short selling by utilizing a stock location system to be operated by the DTCC. The system would create a hard locate of shares when shorted and bar the short sale unless the executing broker obtained a unique identification number for the specified shares from the DTCC. While this appears to be an excellent solution to eliminate abusive shorting, the SEC itself announced additional short sale measures yesterday, noting that it is still actively considering proposals on a short sale price test and circuit breaker restrictions.
· For those of you using or considering using Twitter, I want to point out the need for proper disclosure policies when using social media. I recommend familiarizing yourself with a recent Twitter example regarding Ruby Tuesday’s CEO. IR Magazine did a nice article on explaining this matter of a tweet on July 20th.
· Over the past couple of weeks, I have mentioned the SEC’s proposed changes of Proxy Disclosure and Solicitation Enhancements. As the SEC has indicated, “These new disclosures are designed to enhance the information included in proxy and information statements, and would include information about: the relationship of a company’s overall compensation policies to risk, the qualifications of directors, executive officers and nominees, company leadership structure and potential conflicts of interests of compensation consultants.
In addition, the proposals are aimed to improve the reporting of annual stock and option awards to company executives and directors as well as to require quicker reporting of election results. The Commission also proposed amendments to the proxy rules intended to clarify how they operate.“
While the proposal is 137 pages, you can find a quick overview in the July 1 SEC staff testimony. If your company believes the changes are inappropriate, write the SEC and let them know. I would also be interested in knowing your thoughts, so please post a blog entry or send me an e-mail. As I read the proposal, I wondered whether there will be privacy concerns regarding some of the disclosure. I am also hoping the SEC ensures these disclosures are in sync with any proxy proposal that may be approved.
Last Thursday you received an e-mail from me requesting your participation on a survey regarding proxy access. Your participation is critical, as it will help to craft NIRI’s response to the SEC. Please complete the survey if you have not already done so, and thanks to those that have already responded. I also suggest everyone reads an analysis of some of the contradictions with the current proxy access proposal as reviewed by Professor Joe Grundfest of Stanford University. Last evening I participated on a panel discussion that was attended by more than 100 members of the NIRI NY Chapter on this issue. I was pleased to see the high attendance and the desire to learn more about these proposed governance changes and its affect on IR professionals in 2010 and beyond.
Finally, I’d like to remind you that a great way for members to stay at the top of their game is through our partnership with the University of Michigan’s Ross School of Business Executive Education program “Theory and Practice of Investor Relations.” Offered August 16 – 21, 2009 in Ann Arbor, the weeklong immersion provides action-based learning – with special pricing for NIRI members. I participated in this program last year, and look forward to meeting many of our members again this year at this excellent IR learning experience. More information is available on the NIRI Web site.
Until next week,
Jeff Morgan, President & CEO
jmorgan@niri.org
Jul 21 2009
Published by amickahail@niri.org - Mickahail, Audrey under keyword: N/A
The heat and humidity of a typical summer in Washington finally arrived last week. The timing seemed right as the Obama administration turned up the heat on Congress to pass health care reform and continued with reform efforts in many other areas including financial regulatory reform - especially corporate governance. This past week, the administration delivered three types of draft legislation to Congress: · Hedge fund regulation which includes registration requirements and disclosure requirements. I will be watching the disclosure language closely. · Compensation committee reform which includes requirements of independence for committee members, consultants and counsel from management along with some spending authority. · Say-On-Pay legislation that would mandate an annual non-binding shareholder compensation vote and is very similar to the mandate in Britain. Any merger would also require disclosure and vote of golden parachute payments. Congressman Barney Frank, circulating his own legislative draft, indicated this could be voted on by July 30 and in place for the 2010 proxy season. Refer back to my comment last week about the proposed SEC TARP say-on-pay requirements that would likely apply to all companies or at least be the starting place for SEC requirements in new legislation. I want to call your attention to several other items this week: · A primer published in CFO Magazine titled “Sovereign Fund Investors for U.S. Issuers” by the Sovereign Investment Council. · An article in the New York Times that gives a continuing indication the SEC is working on a proposal for climate risk disclosure. · A report of recommendations on financial regulatory reform sponsored by the Council of Institutional Investors and CFA Institute Centre for Financial Markets Integrity. Mary Schapiro appeared before a House Financial Services Subcommittee last week to report on the SEC’s restructuring efforts and rulemaking activities. In her written testimony, she confirmed her commitment to begin a comprehensive evaluation of proxy voting issues “later this year.” She said, “At our July 1st meeting, the Commission also approved changes to NYSE rules by eliminating the ability of brokers to use their own discretion in voting their customers' uninstructed shares in director elections. This action recognizes the importance of director elections, and seeks to ensure that those voting in these elections have a financial interest in the outcome. We also announced that, later this year, we will undertake a comprehensive review of other potential improvements to the proxy voting system. With over 800 billion shares being voted annually at over 7,000 company meetings, it is imperative that our proxy voting process work and work well, beginning with the quality of disclosure and continuing through to the integrity of the vote results.” NIRI and many other organizations have been advocating diligently for reform and look forward to this effort getting underway. Later this week, you will receive a NIRI survey on proxy access. I urge you to complete this very brief survey as your comments will help craft NIRI’s comment letter to the SEC on this matter. This week I want to finish my ongoing thoughts on proxy access with a quick explanation of the second part of proxy access (Rule 14a-8). The proxy access proposal has two rules. The first rule (14a-11) is a federal mandate to include shareholder director nominees in proxy materials as I discussed in my July 14, 2009 column. The second rule (14a-8) revises an existing rule and allows shareholders meeting certain criteria the ability to propose company bylaw amendments that would increase disclosure related to board nominations or change the process for nominations, provided there are no conflicts with federal proxy access regulation. Many believe this second rule change is all that should be approved by the SEC, leaving it to the states to govern proxy access. Next week, I will speak more about the increased disclosure proposals the SEC announced last week. In closing, I want to call your attention to a new feature of my weekly message. Each week my column will appear on the redesigned NIRI Web site as an entry in our new President’s Blog. This new feature enables you to share your comments each week on this column, and I am hopeful we can create an active dialogue around the critical issues facing IR today. The new NIRI Web site is a big step forward for our organization. It provides us with a host of new benefits like RSS feeds, a content management system to store and publish documents, member customizable NIRI access, the ability to access your member record, and the ability to create areas for member dialogue and online communities. I am excited with the launch of the site as it provides a great way to continue increasing the value you receive from your NIRI membership. My hat is off to all the NIRI staff who have been working tirelessly on this effort concurrently with the implementation of a new association management system to better manage our internal operations. Until next week, Jeff Morgan, President & CEO jmorgan@niri.org
The heat and humidity of a typical summer in Washington finally arrived last week. The timing seemed right as the Obama administration turned up the heat on Congress to pass health care reform and continued with reform efforts in many other areas including financial regulatory reform - especially corporate governance. This past week, the administration delivered three types of draft legislation to Congress:
· Hedge fund regulation which includes registration requirements and disclosure requirements. I will be watching the disclosure language closely.
· Compensation committee reform which includes requirements of independence for committee members, consultants and counsel from management along with some spending authority.
· Say-On-Pay legislation that would mandate an annual non-binding shareholder compensation vote and is very similar to the mandate in Britain. Any merger would also require disclosure and vote of golden parachute payments. Congressman Barney Frank, circulating his own legislative draft, indicated this could be voted on by July 30 and in place for the 2010 proxy season. Refer back to my comment last week about the proposed SEC TARP say-on-pay requirements that would likely apply to all companies or at least be the starting place for SEC requirements in new legislation.
I want to call your attention to several other items this week:
· A primer published in CFO Magazine titled “Sovereign Fund Investors for U.S. Issuers” by the Sovereign Investment Council.
· An article in the New York Times that gives a continuing indication the SEC is working on a proposal for climate risk disclosure.
· A report of recommendations on financial regulatory reform sponsored by the Council of Institutional Investors and CFA Institute Centre for Financial Markets Integrity.
Mary Schapiro appeared before a House Financial Services Subcommittee last week to report on the SEC’s restructuring efforts and rulemaking activities. In her written testimony, she confirmed her commitment to begin a comprehensive evaluation of proxy voting issues “later this year.” She said, “At our July 1st meeting, the Commission also approved changes to NYSE rules by eliminating the ability of brokers to use their own discretion in voting their customers' uninstructed shares in director elections. This action recognizes the importance of director elections, and seeks to ensure that those voting in these elections have a financial interest in the outcome. We also announced that, later this year, we will undertake a comprehensive review of other potential improvements to the proxy voting system. With over 800 billion shares being voted annually at over 7,000 company meetings, it is imperative that our proxy voting process work and work well, beginning with the quality of disclosure and continuing through to the integrity of the vote results.” NIRI and many other organizations have been advocating diligently for reform and look forward to this effort getting underway.
Later this week, you will receive a NIRI survey on proxy access. I urge you to complete this very brief survey as your comments will help craft NIRI’s comment letter to the SEC on this matter.
This week I want to finish my ongoing thoughts on proxy access with a quick explanation of the second part of proxy access (Rule 14a-8). The proxy access proposal has two rules. The first rule (14a-11) is a federal mandate to include shareholder director nominees in proxy materials as I discussed in my July 14, 2009 column. The second rule (14a-8) revises an existing rule and allows shareholders meeting certain criteria the ability to propose company bylaw amendments that would increase disclosure related to board nominations or change the process for nominations, provided there are no conflicts with federal proxy access regulation. Many believe this second rule change is all that should be approved by the SEC, leaving it to the states to govern proxy access. Next week, I will speak more about the increased disclosure proposals the SEC announced last week.
In closing, I want to call your attention to a new feature of my weekly message. Each week my column will appear on the redesigned NIRI Web site as an entry in our new President’s Blog. This new feature enables you to share your comments each week on this column, and I am hopeful we can create an active dialogue around the critical issues facing IR today. The new NIRI Web site is a big step forward for our organization. It provides us with a host of new benefits like RSS feeds, a content management system to store and publish documents, member customizable NIRI access, the ability to access your member record, and the ability to create areas for member dialogue and online communities. I am excited with the launch of the site as it provides a great way to continue increasing the value you receive from your NIRI membership. My hat is off to all the NIRI staff who have been working tirelessly on this effort concurrently with the implementation of a new association management system to better manage our internal operations.
Comments (1)
Jul 14 2009
This past week there was yet another SEC staff leadership change. The resignation of Lori Richards, head of examinations division since 1995, was one more change in an almost complete management overhaul at the division head level in the last few months. While some of these moves are expected when a new SEC chair arrives, Chairman Schapiro’s internal changes have been sweeping. Chairman Schapiro’s agenda is also aggressive in the form of re-regulation. I cannot recall a six month period when the SEC has been so active in proposing and implementing new regulations in all areas. These actions mirror the political mandate of Obama administration and Congress across many areas that touch business. The SEC’s recent 3-2 vote to eliminate NYSE Rule 452 (broker discretionary vote) is an example. I expect 3-2 voting will become a trend for the Schapiro-led SEC as it appears Commissioners are lining up with party affiliation with the three Democratic Commissioners having the majority vote. This heightened politicization of our financial regulators has also reinvigorated differences among labor and business lobbying groups. The SEC posted the written release (PDF) of its “Proxy Disclosure and Solicitation Enhancements” proposed rule on Friday afternoon. At 137 pages, I have yet to read the entire release, but expect to write more about it next week. There will be a 60 day public comment period after publication in the Federal Register. Also proxy related was Broadridge’s release of an analysis (PDF) of the second year of use of Notice & Access. The report shows an increased use of the Notice and Access method for proxy distribution by more than double the number of corporate issuers. The report also shows a continued decline in the retail shareholder vote. You may recall NIRI’s September 15, 2008 Executive Alert that outlined year one Notice & Access results and identified several areas where a change in regulation could help to increase the retail vote. Organizations like NIRI, the Society of Corporate Secretaries & Governance Professionals and Broadridge have discussed needed changes with the SEC. While these changes have yet to be made by the SEC, other changes such as the elimination of NYSE Rule 452 and the new proxy access proposal heighten the need to maximize retail voting. Speaking of proxy access, in recent columns I have discussed areas of concern: federal vs. state law, director independence, and the lack of ability to offer a way for shareholders to vote for the company’s slate of directors in a block (directors must be voted on individually). This week I want to be sure you are aware of the director nomination process in the proxy access proposal. A company would be required to include director nominations up to a 25% limit of the total Board of Directors under Rule 14a-11. If the board is staggered, the 25% includes those directors elected by 14a-11. But the proposal also calls for nominations to be allocated on a first-come, first-served basis until the 25% cap is reached. This proposed process is concerning – I wonder if there will be a rush to the “door” to get nominations in first to fill up the 25% cap? I wonder if the best shareholder director nominees will be on the ballot? I wonder whether this type of “first-in” system is the best to avoid attempts at manipulation of director nominations? Hopefully those concerned about this proposed process will provide comments (including your company’s voice) to the SEC, and the best system will be considered when this comes before the SEC for a vote. Finally, I want to end by mentioning a survey done by our friends in Japan. JIRA, the Japanese Investor Relations Association, recently completed a report outlining improvements in annual meetings. The news release (PDF) gives a view into another country’s AGM and maybe will help to provide a different perspective to those in the United States as we deal with all the regulatory changes around governance. Until next week, Jeff Morgan, President & CEO jmorgan@niri.org
Jul 07 2009
This past week I attended an SEC meeting where the topics of discussion were: 1) proposed rules for the implementation of federally mandated say-on-pay for TARP fund recipient companies; 2) a proposal for increased disclosure (related to risk and compensation) and to clarify proxy solicitation rules; and 3) a vote on the approval of an amendment to NYSE Rule 452 (to eliminate the broker discretionary for director elections). In my opinion, every IR professional should understand the implications of each of these matters. Say-on-Pay The proposed say-on-pay guidelines (pdf) are currently focused on TARP recipient companies, however federal legislation is pending that may mandate an annual advisory say-on-pay vote for all companies, so assume these proposed guidelines may ultimately affect everyone. The SEC’s 60 day comment period will end in September and I encourage all companies to review this with their executive and legal teams and consider commenting on any concerns you may have regarding the proposal. I believe one of the key issues is the period of any advisory vote. If this is done annually, will shareholders have the time and resources to properly review and evaluate each company’s executive compensation structure or will they simply accept the recommendation of the proxy governance firms? Many believe the proxy governance firms are potentially conflicted due to their corporate governance evaluation and consulting services, yet this could add to their influence. Increased Disclosure and Clarification of Proxy Solicitation Rules The proposed rules have not yet been released, so I will spend more time on this in a future IR-Weekly column. However, based upon the comments at the meeting and in the SEC news release, the issues are “intended to improve the disclosure provided to shareholders of public companies regarding compensation and corporate governance matters when voting decisions are made. These new disclosures are designed to enhance the information included in proxy and information statements, and would include information about:
Jun 30 2009
This past week things in Washington got interesting as the SEC and CFTC seemed to agree in principle on how to regulate securities and derivatives. Over the years, turf battles have created a regulatory abyss causing problems for some, including issuers. It has also created opportunities for others who have used this regulatory void to capitalize for their own gain. President Obama’s regulatory overhaul plan did not call for the merger of the two agencies, but instead called for them to fill the gaps or harmonize their regulation. A few recent comments by SEC Chair Schapiro and CFTC Chair Gensler have given an indication of where things may be headed. The proposal has the SEC regulating all securities and securities related derivatives, while the CFTC would have authority over products related to interest rates, foreign exchange, and commodities. This is important for issuers and IR professionals as it means the SEC could deal with a broader abusive short selling solution in not only the cash markets, but also derivative markets, where derivatives products can influence cash equity prices. They could also change the use of equity swaps by activists who can accumulate a large voting interest in a company and avoid 13D disclosure rules. As you may know, swaps allow a third party (like a bank) to buy the shares of a company on behalf of another, but never technically transfer ownership and therefore avoid 13D disclosure. Those who use swaps claim they don’t own the shares, just the economic interest, but the owner (the bank) will vote as the investor desires. While changing the rules will likely take a while, having all this under one regulator is a huge step forward to moving towards closing this regulatory gap. The SEC’s 250 page proxy access proposal is both enormous and full of questions. Legal analysis and interpretations are beginning to emerge. While I am not an attorney, I want to start to highlight some of the specifics of the proposal that may be critical to IR professionals. I have mentioned previously that the majority of those involved with corporate law believe that proxy access requirements should be regulated at the state level, as Delaware has recently done, and not by federal mandate. This issue will play out over the next several months, as one can assume it will be challenged in court. That issue aside, a director has a duty and responsibility to all of the shareholders. If these directors are nominated by special interest groups, where does their duty lie? The nominating shareholder or group (yes, shareholders can join together to nominate) must certify they are not nominating a director for the purpose of “changing control of the company,” and that the nominee is independent and objective. However, one can expect the definition of the term “independent” will be discussed at length during this process. Independence as defined by the exchange, the SEC, or even by the issuer may vary significantly. Companies will need to ensure that all directors are focused on long term value and what is best for the company and all shareholders rather than a specific group that has nominated a director. As the discussion on proxy access continues over the next few months, pay attention to the director independence requirements as it is a critical piece of proxy access. Last week I attended the Society of Corporate Secretaries and Governance Professionals annual conference and sat on a panel with Ed Durkin who is Director, Corporate Affairs Department for United Brotherhood of Carpenters & Joiners of America. Ed discussed some of the challenges for annual say-on-pay legislation, and has instead proposed an approach that would require a compensation vote once every three years. It is a very interesting proposal (pdf) and while upcoming legislation may force an annual say-on-pay vote, I think this proposal is worth reading. Finally, the SEC will have a meeting tomorrow, July 1 and the agenda includes many things important to IR. I will attend this meeting and report more to you next week. At this meeting the commissioners are expected to determine the fate of NYSE 452 and the elimination of the broker discretionary vote. Everyone, including me, expects this (NYSE 452) to pass by a 3-2 vote and be implemented January 1, 2010. Additionally we will hear more from the SEC on proposed increased disclosure requirements that I spoke about a few weeks ago. Until next week, Jeff Morgan, President & CEO jmorgan@niri.org
Jun 23 2009
Published by NIRI - Admin, NIRI under keyword: N/A
This past week the markets survived their first across the board loss since May, but technical indicators showed that the “bears” have been unable to pull this market backwards until yesterday - when the bears were in full control of the market. Nothing, however, is pulling the Obama administration backwards as Washington is focused on two major issues – health care reform and financial regulation reform. Both issues will be fought out on Capitol Hill, where the House and Senate will focus on legislative changes necessary to put the plans into effect. This will coincide with stepped up advocacy efforts by virtually every special interest organization in Washington. There is little doubt that corporate America, as well as main street America, will be affected by the final regulation. Obama’s financial reform plan is detailed in an 89 page white paper (pdf), but key items for IR include:
Jun 16 2009
The stock market tracked sideways last week as bond yields increased to the point where many have said the stock market may stay “stuck in neutral” for much of the summer. Things in Washington were full speed ahead, as the focus was on the overhaul of financial regulation, executive compensation and details of the new SEC proxy access proposal. Before I delve into these matters let me close out a few NIRI 2009 Annual Conference observations: • On Saturday, June 6, I had the pleasure of helping honor the 2008-2009 Chapter and Chapter Leadership Awards winners. These awards recognize excellence in chapter programming and the countless hours that our chapter leaders devote to making NIRI's chapters successful. I was particularly pleased to introduce a new award this year, the NIRI National Volunteer of the Year Award. This award honors a NIRI member who best exemplifies NIRI's mission through volunteer activities at the national level. I was delighted to present the inaugural award to the very deserving Mary Beth Kissane of Walek & Associates. All awards and winners were announced in a press release posted on the NIRI web site (pdf), and let me offer my personal congratulations to all the chapter winners. • Yesterday in conjunction with our "NIRI Download" event, and in celebration of NIRI’s 40th birthday, NIRI Annual Conference Co-Chairs Nicole McIntosh, Brad Wilks, board members Derek Cole, Doug Wilburne, Mona Zeehandelaar and I opened the NASDAQ market. The NIRI Download panel discussion highlighted the most compelling themes from this year's Annual Conference. On the panel with me were NIRI members Brad Wilks, Managing Director, Sard Verbinnen & Co., Nicole McIntosh, Director, Investor Relations, Waddell & Reed Financial, Inc., Doug Wilburne, CFA, Vice President, Investor Relations, Textron Inc., and Derek Cole, Vice President, Investor Relations and Corporate Communications, ARCA biopharma, Inc. A replay is available here. • Travel is a challenge during these tough economic times and my thanks to the more than 1,100 attendees and participants at this year’s Annual Conference. Your participation created a great deal of excellent discussion. The sessions and handouts are available at the 2009 NIRI Annual Conference Knowledge Portal. This portal provides web-based access to videos of all Conference general sessions. You will also receive audio, video and speaker presentations from nearly all Conference sessions, as well as web links to additional resources. The member price is $395 and access is available here. We are offering this as I feel strongly that all members need an affordable economic alternative this year with so much going on in our capital markets and Washington. Taking advantage of this offer helps NIRI during these tough economic times as well. • During the Conference, I mentioned my belief that we will see SEC enforcement actions in the coming months against companies for Reg. FD violations as part of the SEC’s overall effort to increase enforcement and investor protection. This is an area where everyone in IR must remain constantly vigilant, and I encourage you to take a few hours and refresh your knowledge of Reg. FD by reading or re-reading the regulation on the SEC’s web site. After three weeks of suspense, the SEC released the 250 page proxy access proposal (pdf). I have only begun to read this proposal (and am amazed at the complexity), but am already hearing confirmation of statements I made a few weeks ago in this column. We will likely see court challenges centering on the authority of the SEC and usurping states’ rights if this is passed. Meanwhile, Congress is quickly moving on various paths to pass shareholder rights legislation ensuring the SEC has the proper authority to adopt proxy access. Organizations like the Chamber of Commerce have launched a campaign costing tens of millions of dollars to counter all the anti-business sentiment in Washington and on Main Street. Elsewhere in Washington, momentum increased as legislation mandating say-on-pay and executive compensation began to take shape. Chairman Schapiro also confirmed consideration of several items I mentioned last week related to increased corporate disclosure. Finally, the Obama administration is nearly ready to announce plans for a major overhaul of the financial regulatory system (as soon as tomorrow). One area of keen interest to NIRI is the regulatory void that exists between equities and derivatives. Rumors of a merger of the SEC and CFTC have apparently been shelved. This is likely due to Washington politics and power struggles. After spending nine years working on the CFTC and derivatives side of Washington, I am not surprised. However, I am anxious to read the proposal in hopes that it will help close gaps that allow the use of derivatives to circumvent SEC regulations designed to protect equities. Until next week, Jeff Morgan, President & CEO jmorgan@niri.org
Jun 09 2009
Greetings from the 2009 NIRI Annual Conference! If you are attending, I am sure you will agree the Conference has been terrific. I can assure you that the remainder of the Conference will continue with the same high quality educational programming. For those unable to attend, yesterday I served on a panel of NIRI members to discuss advocacy and emerging issues. This session was recorded and is available to all NIRI members via the conferences page on the NIRI website. At this session, I spoke about where things are headed at the SEC. I predicted that we will see the passage of NYSE Regulation 452 and a proxy access proposal over the next few months. We are also going to see the call for more corporate disclosure in the areas of compensation and Boards of Directors. Chairman Schapiro in a speech last week said, “Next month we will take up a broad package of corporate disclosure improvements, all designed to provide shareholders with important information about their company's key policies, procedures and practices, including compensation policies and incentive arrangements.” So what does this mean for IROs? It means that we are likely to see some or all of these new requirements proposed: