The comprehensive "Origins of NIRI" presented here is the product of one of NIRI's founders and long-time members, Dick Morrill. This work was completed on the occassion of the 25th anniversary of the founding of the National Investor Relations Institute. DeWitt (Dick) C. Morrill was a founder of the Investor Relations Association, whose members launched NIRI in 1969-1970.

Author's Acknowledgments

The author who writes for a publication starts out in command of the material. Before he is half way through, the material is taking command of him. By the end, the material is the master and the writer the slave, so submissive and so enraptured he doesn't want it to stop.

Despite this tortured entanglement, it is customary to thank those who have provided information, guidance, sympathy and, one says unwillingly, pressure!

First in line in this roguish gallery would be Lou Thompson. Several months ago, the author offered to prepare a history of NIRI to help celebrate its 25th anniversary. Lou was both kind enough, and foolish enough, to accept. He has politely declined to say how many sleepless nights he has suffered wondering whether it would be done in time, or even done at all. He has also been gentle with the application of pressure, but keen to spot the author's guilty buttons and successful in spurring him into frenzied effort.

One wants to emphasize that in the strict interpretation of the word, this is less a history than it is a narrative of circumstances, events, people and ideas, much of it drawn from memory by less than half a dozen early entrants into the realm of Investor Relations. Readers should know that memories have weak spots, and any two or three people may have different memories of the same events. Even so, putting these several recollections together with the available letters, handwritten memos, minutes of meetings and published reports — in the press and by NIRI — has generated what the author believes to be a sufficiently authentic story to merit belief.

One whose memory has been buttressed by copious research is Glenn Saxon. Without his earlier work on the history of investor relations itself, this later attempt to tell the story of NIRI would not have been possible. Years ago, Saxon alerted the author to the words of Benjamin Graham that provide the intellectual and moral foundation for investor relations. In his later research, he quoted them at length, with proper dates and pages duly noted! Similarly, when you read about Adolph Berle and Gardner Means, thank Saxon for reviving a dim college memory of a freshman course in economics more decades ago than the author will admit.

The information about the American Management Association's early involvement in investor relations is drawn from the Saxon papers. Even more important is the wealth of data concerning the how, when and why of General Electric Co.'s pioneering creation of the first investor relations department. One has confidence in getting one's information from the horse's mouth Saxon was there at the Creation!

Similarly with the Brookings Institution's work on shareholder demographics, on the New York Stock Exchange's programs to encourage individual investing, on the role of Lewis Gilbert in fostering shareholder democracy, and many other parts of this story. All of the senior investor relations professionals remember these events and personalities, but hardly any have taken the time to cement them in place, in writing, as Saxon has done. Also rare is the vision to see what needs to be known in order to understand these facts of history. For this, Heraldic artists might have scrolled his legend: Scholar rampant on a field of dreams. Let us all say his praise accordingly.

In order to gain confidence in one's own uneven and sometimes very sketchy records, it has been an enormous help to spend long hours on the telephone with Bill Chatlos and John Gearhart, in particular, and with Dick Brodrick. In the writer's mind, Brodrick is the person who, more than any other single individual, provided the prod and thrust that gathered together a half dozen investor relations executives to meet for lunch and contemplate forming a more structured organization. That was in the period 1963-1966, a mere thirty years ago!

Bill Chatlos and John Gearhart both have displayed mnemonic mastery to be marveled at. Their ability to dredge up not only arcane details but whole scenes from this antique play put the author in a state of awe.

How does one thank people whose assistance came in the form of notes scribbled on an early roster of NIRI's predecessor, the Investor Relations Association, or one's own penciled notations of a telephone conversation concerning the agenda for a meeting? There are many of these, along with letters from men now gone from this world but still present in their artifacts. To these unsung angels, let praises ring.

Nor may we overlook the staff of NIRI in Washington who have supplied important facts but, even more important, have suffered in a most cheerful way through the pain of putting this work in type. And then putting up with seemingly endless little changes.

To Kris Floyd, Sue Nunn, Linda Kelleher, and Beth Carty: you cannot be thanked enough. In the last days of author's agony, Beth had the chore of pulling it all together, so special awards of gratitude are hers.

To the reader, one also expresses thanks. A play without a stage? An act without an audience? How sharper than a serpents tooth! You are thanked profusely for the courage to tunnel through.

One of Wall street's famous men of the 1960's wrote a fine market letter, not only because it was good information and wise advice, but because it was immensely readable. The author is indebted to him for the challenge that, The first obligation of a writer is to be interesting! Speaking now in the first person, I do very much hope that I have fulfilled this obligation.

Looking about at today's volatile, globalized markets, derivative disasters in Singapore and Southern California, the mutual fund mania and other speculative phenomena, one can't help being warned Plus ca change, Plus c'est la meme chose.

DeWitt C. Morrill

Southbury CT
May 22, 1995


Chapter I


The story of the National Investor Relations Institute's (NIRI) creation would be simpler for all if the Institute had sprung full-grown like Athena from the brow of Jove.

Organizations, however, have a perverse way of developing like people: Slowly, unpredictably, from a few seminal ideas or sensed needs that take their own time to become clearly defined.

So it was with NIRI and with its predecessor, the Investor Relations Association (IRA). The ideas from which they germinated went through a period of gestation, then evolved in seemingly unconnected ways until, as if by magic, Motivation met Opportunity and the deed was done.

We need to begin in 1953 when the Chairman of General Electric Co. (GE), Mr. Ralph Cordiner, made the first systematic effort to formalize a corporation's relationship with its shareholders.

Under his urging, a new department was created and the term investor relations was coined. The first in-depth research was undertaken into who the shareholders were, what they perceived their needs to be and how best to communicate with them — and for them to communicate with management.

This was, indeed, real pioneering. It set the pattern for the profession of investor relations for years to come. To this day, it provides both the intellectual and ethical foundations that are essential to this activity.

Mr. Cordiner was not acting in a vacuum. He was responding, early and most perceptively, to a growing challenge: The sea-change then taking place in the ways wealth was being created and deployed.

The manner in which GE approached this tidal shift was typically well organized and thorough. More on this later. First, it is necessary to grasp the scope of these emerging trends, for they created a challenging new environment for corporate management, for investors and for the financial community. Together, they also provided the driving forces for the creation of NIRI and of investor relations at large.


The Gathering Boom


Economics provided the primary thrust. As World War II was winding down at the end of 1945, many high-placed forecasters were prophesying a repetition of the post-war depression that hit the early l920s. Events seemed to be tracking this dismal view when, after a brief burst of activity, the economy slumped sharply in 1949. The slump, however, proved only to be a brief inventory correction. By the start of 1950, recession was ending and America set forth on one of the longest economic expansions in history, lasting 20 years.

The Korean War broke out in June of that year and caused many dislocations, including a reversion to price controls. But it did little to damage the powerful uptrend then in place, fueled by the huge personal savings piled up during the World War II (WWII) years.

Millions of returning veterans were entering the work force. Within months the famous baby boom began and continued into the mid-l960s. Wealth started to be created on a large scale and deep down in the social fabric.

Business was booming. Capital investment surged as companies pressed to rebuild, replace and expand capital equipment and facilities ignored during the Depression and WWII. New, often WWII-born, technologies were coming into play. Electric and telephone utilities needed vast sums of capital to expand their networks and add new capacity. New pipelines, houses, autos and a broad array of consumer goods were finding ready, growing markets. For a dozen years, America accounted for up to 85 percent of the entire world economy, to which it was contributing huge amounts for the Marshall Plan and for aid to other areas of the world.

Fiscal and monetary policy were benevolent, too. At Eisenhower's inauguration in 1952, interest rates on long-term government bonds stood at 2 percent. The Federal budget soon ran a surplus! There was no inflation. Financial markets were stunned when, later that year, Treasury Secretary Humphrey issued long bonds at 5 percent! The so-called Humpty-Dumpties. Dividend rates on electric utility stocks immediately jumped to 6 percent — higher for less credit-worthy companies.

With low interest rates on bonds and no inflation, the logical choice for investment was the stock market. There, one's money stood a fair chance of growing in value and would pay a higher return. By now, the public appetite was whetted, and it continued to grow, urged on by the realization that the country was well-launched on a long period of sustainable economic growth.


Good-bye To Gloom


The decades to come were not merely fun and games in a soaring economy. The forces that made these bountiful trends possible were rooted in very serious personal histories.

Most of the returning warriors from Europe and Asia had matured beyond their years. Both the duration of the war and the complexity of its fighting machinery provided an intense learning experience.

Creation of the G-I Bill enabled thousands, if not millions of veterans, to return to college, or enter it, or continue training programs begun under various military education programs. The result was a huge leap in the educational level of the young people entering a job market crying out to be supplied.

[Congress, displaying its customary wisdom, was so preoccupied with peacetime politics after WWII that it almost torpedoed the G-I. Bill. A Congressman was awakened from his sleep in a Georgia town and hustle back to Washington by the Bill's backers to cast the one decisive vote by which it passed. Deja vie? The wartime draft was renewed at the end of its first year by one vote — three weeks before Pearl Harbor!]

Most of these veterans had been born in the 1920s and grew up during the Great Depression (1929-1940). Recovery of sorts had begun in 1939. The onset of wars overseas and the need for American production provided some additional lift. The real boost did not come until the United States started spending massively on its own military production in 1941-42.

So the lasting memory for most was one of poverty, near-poverty or very straitened circumstances even among the better-heeled citizens of that era. One could not forget that as late as 1938, over 25 percent of the population was unemployed.

The motivation was intense and pervasive to climb out of this dismal past, to realize hopes one had not dared to contemplate a decade earlier. The dominant themes were dedication to work, learn and prosper, strengthened by the natural optimism of youth.

Cynics are quick to remind us that stock markets thrive on fear and greed. The analogs here are escape from fear of economic insecurity and a greedy hunger for a more affluent life.


The Wings of More


A Cleveland investment advisor once said, The stock market flies on wings of money! And so it did. The public, for the first time, began to get into the market. True, individuals had played the market in the 1920s, but nothing to match the numbers and trading volume of the 1950s and '60s.

Where the markets of the pre-Depression era were financed largely by credit (no margin requirements!), sad memories and new laws governing securities markets stirred post-WWII investors to favor cash.

It is not surprising that this confluence of forces found expression in rising stock prices. Corporate earnings rose strongly — but price-earnings multiples expanded even more. The circumstances were made-to-order for successful investing, no matter how speculative it was inherently. The rising tide was lifting all boats.

There were Bear movements along the way, to be sure. But the long-term trend remained sturdily intact. Its effects on individuals' investment behavior is expressed statistically in the results of a study commissioned by G. Keith Funston, Chairman of the New York Stock Exchange and conducted by Lewis H. Kimmel and the Brookings Institution.

Published early in 1952, this study found there were 4.5 million family units owning common stocks. They held 6.49 million shares in total and constituted 4.2 percent of the total population.

Within only 13 more years, the shareholder number had soared almost five-fold to 20.1 million — one in six adults or 15 percent of the total population, exceeding the combined populations of New York, Los Angeles, Chicago and Philadelphia.

Daily Big Board trading volume, which had been less than one million in the previous two decades, climbed to about two million in 1952 but was soon to climb past nine million in 1965 and higher in the next few years — so high as to clog the back-office operations of Wall Street and bring on early New York Stock Exchange (NYSE) closings to handle the paperwork.

While the number of individual shareholders was multiplying furiously, the institutions were still quiescent. A 1954 study by the National Bureau of Economic Research showed that in 1949 these financial intermediaries held 23.6 percent of the total amount of shares outstanding. This was a sizable increase from 14.2 percent before the Crash of 1929, and 7.9 percent in 1900. But it pales to insignificance against the massive holdings of institutions today.

In dollar value, the 1949 total came to only $131.6 billion. Today it is pushing toward $3 trillion. The primary reason for the change is the advent of pension funds — which were instrumental in raising the total for 1949 — when they were just beginning to appear among corporation balance sheets. The afterburner for their subsequent acceleration was the passage of the Employee Retirement Income Security Act (ERISA) in the early 1970s mandating these funds and governing their investment standards.

For our purposes, the small size and relative inactivity of institutional investors in the period 1950-1970 stands in sharp contrast to the rapid growth and rising activism of individual owners. It is they who fostered investor relations at its outset.


Prosperous Paradox


As their numbers grew, corporate America was tussling with a difficult paradox. In previous years it had not been required to pay attention to individual shareholders, particularly small ones. Their stockholders had been, for the most part, wealthy individuals and few in number, perhaps a million or so. These were the customers of investment banking and brokerage partnerships, of banks, trust departments, investment counselors, with whom they commanded attention and cultivation.

These affluent shareholders did not complain. They rarely attended an annual meeting. If they did not like the way the company was run, they — or their emissaries — sold the stock. But now corporations suddenly found their transfer sheets swelling daily with new shareholders owning small amounts of stock —100 or 200 shares, often less than 100. A strange new experience and no traditions or precedents to guide them.

The first and most obvious feature of these new holders was their potential as purchasers of company products. Major companies like General Foods, Proctor & Gamble, General Motors (GM) and Chrysler, Exxon and Mobil, American Telephone, Gillette and a host of others, particularly those in consumer product industries, seized on this captive market.

In 1950, the Ford Motor Co. made a large public offering of its common shares. It required its underwriters to focus their sales efforts on buyers of 200 shares or less, and provided extra incentives for them to do so. Their goal was to create a new pool of customers for Ford cars and trucks — and to put themselves on an equal footing with GM and Chrysler1, who were long since taking full advantage of their shareholder base to boost sales.

Occupants of the executive suites were quick to see, too, that all of this demand for stocks was helping to push prices up and up. This helped immensely to finance growth, enhance empires. Perhaps just as important, it was especially helpful in making options or other share-based compensation pay off.

But all was not entirely rosy. The new shareholders saw themselves as owners and wanted to be heard. Though many were quite unsophisticated about business and stocks, they actually attended annual meetings and asked questions (often ridiculous ones in the eyes of management). The gadflies had been born right under management's nose!


Savers' Surprise


At the outset of the Bull Market, a large chunk of the new money going into stocks came from those WWII-time savers who had had little to spend their war industry wages on. These were not youths fresh from the field of battle, but many who had suffered through the Depression and the cataclysmic closing of the banks in 1932. They were determined to keep a close eye on the funds they had entrusted to management and the stock market, neither of which they really trusted.

They soon had their champion, in the form of Lewis D. Gilbert. An affluent bachelor, son of the Gilbert Toy Co. founders (electric trains and other well-regarded products). Lewis was rebuffed several times when in the early part of this era he had attended annual meetings and attempted to get management to answer questions about such hallowed things, for example, as their compensation, or how many relatives had been placed on the board of directors.

The late, great Benjamin Graham paid him honors in the 1951 edition of Security Analysis.

In recent years, considerable attention has been given to the matter of relations between shareholders and managements. . . On the one hand, management has felt it desirable to cultivate the good will of stockholders. For this purpose, many have engaged public relations counsel, or similarly styled agencies who issue press releases. . . and advise on the preparation of annual reports and proxy material. On the other side, agencies have sprung up to represent stockholders. The most widely publicized have been identified with a few colorful figures who take a prominent part in numerous annual meetings.

In a footnote at the bottom of this page (663) the author(s) continue:

The best known of these has been Lewis D. Gilbert. For an excellent statement of his views, see his article Management and the Public Stockholder in the July 1950, issue of The Harvard Business Review.

In 1956, Gilbert published his Dividends and Democracy (American Research Council). In it America's Number One Stockholder discussed his crusade for corporate democracy and his efforts to get leading corporations to pay more attention to the interests of individual shareholders. In the words of Glenn Saxon, one of NIRI's founders and its first president: Gilbert has suffered far more criticism than he deserves, and this book is even today helpful reading for anyone interested in the investor relations field.


Making the Best of It


As shareholder democracy poked its inquisitive head into the boardroom, management found itself without any experience in dealing with it, no traditions and no precedents that suited the circumstances.

Clearly, this new force was challenging management's authority, not to mention threatening its perks. Despite the gadflies, it did not give up easily on the idea that it, and it alone, ran the show. That is the way it always had been in the current management's experience. They were accustomed to a long history of captive boards. They were not at all sure the small shareholder needed to be taken seriously. Their thinking tended to favor the idea that if they needed money, they could rely on their long past associations with banks, investment bankers and insurance companies. They were not convinced that small shareholders would ever be organized into a serious pressure group. Their hope was that they could bring these people under their control, or that, better yet, they would simply wear themselves out and go away.

Meanwhile, the shareholders were a problem that had to be dealt with. The question was how to turn the problem into an opportunity — how, in essence, to give the small shareholder the sense that he or she was being taken seriously without, of course, really having to do that.

Managements were generally annoyed, frequently just bewildered, and very unclear as to what path would be the right one for themselves and their careers, for the corporation and, yes, even for the shareholders.


.. Enter the Clowns..


As the pressure built to communicate with this large and growing audience of putative owners, managements turned to the experts in mass communication — their public relations departments (in the larger and more seasoned companies) or outside counsel for most. Internal staffs were relatively few in number in the early 1950s.

The large, well-managed companies had become familiar with public relations during the anti-business period of the 1930s. They were generally well-equipped to deal with this new addition to the list of public constituencies they needed to tend.

But many companies were undergoing radical change, often in the form of mergers and acquisitions, with new businesses and new executive personnel appearing on the scene. In these fluid situations, public relations often fell to the person nearest at hand — an administrative officer, a personnel chief, the senior lawyer or corporate secretary. Many managers didn't really know what it was or what to do with it. They found solace in turning the work over to outside agencies.


A Word Is Born


Companies that chose to deal with shareholders internally had adopted the term shareholder relations as that part of their public relations departments assigned this responsibility. This new office was responsible for preparing annual and quarterly reports and, sometimes, financial news releases — although that often fell to the press relations part of the department. Shareholder relations would become involved in the annual meeting, but usually this was managed by the corporate secretary and the legal staff, with the aid of outside proxy solicitors.

One must acknowledge that there were many great names in the public relations counseling field — names like Hill & Knowlton, Carl Byoir, Ivy Lee, Earl Newsome, Selvage & Lee, Edward Bernays, Pendleton Dudley, Farley Manning and many others. Their role with their clients — usually large, blue-chip companies — was often as much strategic counseling as it was day-to-day public relations. Many smaller firms in the field focused primarily on press relations — there being very little yet in the way of electronic media except radio.

The upsurge in shareholders also created a large new demand for the services of proxy solicitors, notably Georgeson & Co. and D.F. King. Georgeson was an outgrowth of a Wall Street investment firm and understood the Street mentality well. In addition, it initiated an advisory service on shareholder relations, headed by William E. Chatlos, who wrote a monthly letter called TRENDS in Shareowner Relations. Georgeson could, and did, conduct press relations for some of its clients, as did the two principal Wall Street advertising agencies, Doremus & Co. and Albert Frank-Guenther Law.

The public relations functions based in Wall Street firms generally knew the mind-set of the Street, how information flowed and how sensitive it could be. This was not generally true of agencies that devoted most of their public relations effort to general subjects. Managements, however, seldom saw or knew of the subtle distinctions and tended in their minds to house all public relations under one tent.


...Let them eat cake...


In concrete terms, shareholder relations became transformed into publicity, promotion and pageants.

The annual report suddenly blossomed as a 48-page, glossy sales brochure for the company's products. The financials were there, mandatorially, but the sell was in the sizzle, not the steak.


    • The annual meeting became a huge, gala free-for-all. A large eastern railroad put together a special train for stockholders and carried them first class to a company-owned hotel in the southern Appalachians for the meeting.


    • An international telecommunications company held a large gathering under two large tents in central New Jersey. A bountiful lunch was served, and there were several open bars. Members of the press were delivered in limousines from New York and returned the same way. Products were richly displayed. The chairman, himself a noted gourmet and bon vivant, addressed the gathering. Reactions were enthusiastic — but absolutely nothing of substance was done.


Companies made gifts or gift boxes of products available to shareholders, sometimes free. Liquor companies also provided their products under advantageous purchase arrangements.

If less elaborate meetings were held, they were still often situated at good hotels, often providing a light breakfast and coffee or a buffet lunch — and products, if appropriate. Slide shows and other product demonstrations were frequently provided.

This very sketchy list is intended to describe the atmosphere, not criticize or poke fun at management. It certainly is not complete. The burden of it is that management tried to give the shareholders a nice warm feeling at the least, keep them happy and calm, avoid any difficult confrontations, and, too often, avoid telling them anything that wasn't legally required to get the vote taken and the meeting ended. Perhaps it could be compared more to entertaining a blind date than developing a relationship.


Media Messengers


In the same vein, great attention was focused on the press. In the early 1950s there were three large newspapers in New York City with financial coverage in some depth: The New York Times, the Herald-Tribune and the World Telegram & Sun. The tabloid Daily News used small business news capsules and a column by Bill Doyle that answered investor questions The Wall Street Journal, of course, was a broad-based business and financial publication. The Journal of Commerce was a specialized paper, but ran financial news and some statistics unique to itself.

There was no television coverage of financial news. There was very little on radio. If you wanted to get a message out to investors, you had to use the press, or the growing number of analysts briefs being published by Wall Street brokers like Merrill Lynch and Bache, both of which had news wires to their many offices. Market letters proliferated, and some of the authors, like Walter Gutman, became famous enough to have the New Yorker magazine describe him as the Proust of Wall Street.

The press has always been used by someone — attempts to do so have been legion and from time's beginning. This was certainly true in the 1950s. In one example, a one-time bootlegger from southern New Jersey persuaded a Wall Street Journal reporter that he had formed a genuine committee to oppose a merger being sought by Textron and its legendary chairman, Royal Little. A visit to the man's office in New Jersey revealed the truth.

During an attempt to win a proxy battle for control of American Motors, Louis Wolfson, chairman of an engineering company that he had taken over in a raid, persuaded one of the most senior members of the New York Times financial news staff that he was truly going to proceed with the offer and that he would win. In fact, Wolfson was selling out his position as he talked, and the New York Times story helped him clear out the tag ends.

The reporter was put in an almost impossible position with his editors, but forgiven. Wolfson went to jail, for this and other egregious violations of securities laws.


Fleeing the Feds


A man named Leopold Silverstein raided and won control of Fairbanks Morse, a splendid manufacturer of diesel and other industrial engines. He proceeded to plunder it, keeping up a barrage of positive news releases. He fled the country with his millions, as did one Edward Gilbert.

Eddie Gilbert won control of a high quality lumber and flooring company in New York called E. L. Bruce. He also plundered it under the shadow of repeated, glowing press releases. His exercise would have made a fine movie called First Flight to Brazil. Persuaded by his family and his lawyer, Ray Cohn, Gilbert later returned to face the court for his embezzlement. Meanwhile the shareholders had been defrauded, the press had been skillfully used by him and his public relations counsel, and the word public relations became increasingly a pejorative in Wall Street.

The last example of this sort of chicanery involves the behavior of Tex McCrary. Married to a beautiful model ,Jinx Falkenberg, he and wife were a very successful pair of breakfast talk show hosts on a major New York radio station.

Perceiving no conflicts of interest, Tex also opened up a public relations firm. He began issuing releases for clients of doubtful lineage. Details are lost in the mists of memory but could be resurrected from the New York Times, morgue. Eventually McCrary's welcome in the newsrooms wore thin as his credibility dissipated.

The principal significance is that financial communication was receiving a very bad name at the hands of what purported to be the public relations business.


A Wobbly Structure


It is also evident, as Cordiner had seen so clearly, that the manner in which a great many corporations were dealing with shareholders was structurally unsound. If delegated to public relations the skills were not there. If delegated to outside public relations counsel, not only were skills lacking but the outsider had difficulty keeping well enough informed. If given to finance, the numbers were there but the communication skills were lacking. Corporate secretaries were experienced in managing the shareholder list, but not the shareholders. Legal counsel saw everything as a potential court case.

No consideration was present in these organizations for the needs of the security analyst, whose role also was new and just becoming large enough to command stature in Wall Street, let alone the executive suite.

Perhaps the worst flaw in management's approach to shareholders was that it was a reaction, not an action, more a matter of heading the Indians off at the pass than finding a way to deal with them constructively. A flaw Mr. Cordiner had most particularly anticipated.

Further, the shareholder was seen more as a nuisance than as someone who was providing capital and ignoring the first tenet of finance that access to capital and optimum cost are essential to survival, not to mention growth.

It missed the point that large numbers of shareholders making active markets in the stock provide liquidity, itself a vital consideration in the price of the company's securities.

Finally, this approach turned the responsibility for shareholder relations over to personnel who, however gifted in writing press releases, speeches, annual reports, presentations to customers or putting on trade shows had little or no understanding of finance or of financial markets.


Analysts' Dilemma


They tended strongly to see their job as creating sales messages, with little comprehension as to how negatively selling would be received by professionally trained investment analysts. These taciturn denizens of Wall Street instinctively reacted in horror at the very idea of being sold anything, let alone stocks.

They could not be immune, however, to the idea that the secretary presented to them might, in fact, represent a genuine money-making opportunity, or that others, less skeptical, might bite on it.

Security analysts, then, were caught in a Catch 22. Their role in the brokerage firm was to help the brokers sell stocks. Although this was temperamentally distasteful to many, and clutching their objectivity with white knuckles, they could not ignore a new idea just because it was presented to them by a public relations agent or executive in the company. If it were sound, and they missed it, their bosses and their customers would be upset. The only available way through the woods was to be cautious and keep an escape hatch handy.

Thus, saying under their breath saying we don't like you and don't trust you, the analysts still admitted the public relations types to the financial party.

Information is the life-blood of the markets. Wherever it came from, and whether surgically clean or not, it had to be taken into consideration. The scene was thus set for the public relations practitioner to claim credibility, whether authentic or not. Some were. Many were not.


The Greening of Analysts


For more than 20 years, security analysts have been taken for granted as an integral part of the communications flow from corporations to investors and from the Wall Street to management. In the early 1950s, this was not yet the case.

The first Analysts Society had been founded in New York barely a decade earlier, with 20 original members. By 1945, this number had climbed to 700, and it grew even faster thereafter. Business school MBA's began flocking to Wall Street because there was excellent money to be made.

So, along with the newness of the individual investor phenomenon, there was also a rapid change taking place in the way stocks were being evaluated and marketed. People in brokerage firms who for years had been labeled unflatteringly as statisticians were now metamorphosing into research analysts.

As with the new breed of shareholder, there was no established process by which corporations communicated with analysts. The job fell to a financial person — not necessarily the chief financial officer or even to the shareholder relations person. It was delegated well down the scale in part because senior management did not know who these people were, nor what they did, nor why they were in any way important to them.

When exposed to analysts, it was uncomfortable to find they asked serious questions, often questions that management had not asked itself, or for various reasons did not want to answer. The more recently put together the company was, or the more political its executive atmosphere, the less likely top management was to want to talk to the analysts. So the task was delegated far enough down to keep them at bay. Many senior people regarded them secretly as pests or worse.

Where analysts did, indeed, gain respect was when they were associated with an underwriting. In this connection there was not only the desire of management to put the best foot forward, but also the need to pass the due diligence screening required by law. Underwritings were not that frequent. The market played every day, and the analysts danced to its tune, with or without management's sincere help.

Managements in these formative years were inclined to brush off the analysts. In a vague sort of way, analysts fell into the same category as small shareholders — not seen as carrying any real weight, and making life uncomfortable. Eventually the creation of the investor relations function served to vault analysts into a much higher status in management's eyes. The investor relations position was itself an acknowledgment of their importance, while also providing them with better access to more reliable information.


Prophets of Profits


Coinciding with the burgeoning demand for financial public relations, the New York Stock Exchange launched an all-out campaign to get individual Americans to buy stocks. The ringing title to this effort was People's Capitalism. (A very fine phrase it was, too. Respected experts reported from Moscow that no phrase in the Western political vocabulary so scared the astute ideologists of the Kremlin.)

With this label went a slogan: Own Your Share of American Business. Given such blessings from the Holy Grail of Capitalism, the American public went hell-bent to market the stock market.

The question had long ago been asked of Wall Streeters "Where are the customers' yachts?" So it is not out of line to observe that with all those lambs stampeding down that narrow canyon there were many canny shepherds waiting with shears to clip a bag full of wool.

True shepherds wear humble clothing and carry crooks. The newly minted financial public relations shepherds were dressed by Madison Avenue and carried attache cases, possibly filled with press releases.

Punctilious attention to financial details was not one of their strong suits. The story was. They were skilled in using the media, and the brokerage community, to propagate stories about their clients best calculated to arouse investor attention. Often they did not really understand more than the bare rudiments of what they were trying to sell.

As early as 1950, the earnings-per-share magic had already seized both Wall Street and the public. Over-optimistic earnings outlooks were the standard fare. Not real predictions, generally, but very strong hints. A word dropped in a hushed voice to a journalist about the probability of a dividend increase, or a new product, or one company likely to get together with another, unnamed one. A new oil or mineral discovery was sure-fire cannon for these troops even when it didn't go off! The Wall Street rumor mill was as eager as ever for some new tidbit to feed its ravenous maw. And control over inside information was very lax, at least until 1963.


Enter Investor Relations


We have dealt here with the purveyors of financial information, in the form of public relations and of Wall Street operatives. The media did its best to avoid becoming an unwitting party to the game, but, as indicated earlier, that was not always certain. Most, if not all, editors — certainly The Wall Street Journal and Dow-Jones, the New York Times and AP as examples — refused to print any story received from a public relations person until it had been checked directly with the source — and a credible executive at the source.

The trend to producing, peddling and promoting half-truths and untruths, even if cloaked in hedged language, was increasing at an accelerating rate — a sort of monkey see, monkey do syndrome.

The tenor of the times was wide open, with ebullient optimism and a ready willingness to wink at behavior that worked. At the same time, there were many serious investors out there who were in the line of fire and likely to be hurt. If enough of them were, the clear and present danger was a loss of credibility by Wall Street, by corporations and by the business system itself. A reversion to the anti-capitalist attitudes of the early 1930s was not impossible.

By 1953, at least for Mr. Cordiner, the powerful forces that were forcing out the old and bringing in the new were well limned. Old attitudes toward the stockholder were being worn down, against strong resistance. A new form of equity evaluation was gaining credence. The function of financial public relations was establishing itself in places where it had not existed before, in corporations and in public relations agencies, even in advertising agencies.

The era of The Hucksters and The Hidden Persuaders was beginning, to name but two books that reported on it. The Man in the Gray Flannel Suit was also in the cast of characters. A lively play and movie was hugely successful on Broadway in 1955-56 titled The Solid Gold Cadillac. The heroine (played deliciously by Judy Holiday) took up the sword against a cold-hearted management and won her case at the annual meeting. The Cadillac she received was the management's act of surrender.

These were the turbulent times into which investor relations was born. Its challenge: To find ways to communicate responsibly with investors, with the Wall Street firms who served them and with the financial press. Equally challenging was the need to find effective ways to convey back to management the needs, interests, attitudes and concerns of the people who buy stock, and of the people who guide them in their decision making.

Where public relations departments and agencies were treating the annual report as a glossy sales booklet, the annual meeting as a jovial family party of bread and circuses, investor relations was beset by an awareness that shares of stock are capital and that their obligation was to assure the company the best access to it at the most reasonable cost — keeping well in mind that there were (and are) serious penalties for misleading or misrepresenting.


Understanding the Goal


None of these statements is meant to picture all public relations activities as inherently nefarious, nor their practitioners as either fools or knaves. The purpose is to draw a meaningful distinction between what is financial and hence acutely economic and what is founded in products, people and personality. Also, the financial information is not the be-all and end-all. Understanding of it is! Hence, investor relations requires in effect, educating an audience in Wall Street of generally high intelligence and knowledge of finance. People who will study with care and exercise judgment before they make buy and sell decisions, not rush to their typewriters to get out a story that will be in tomorrow's papers and on the wires and then gone leaving the damage done.

It is difficult and time consuming for a corporate executive to learn enough about his or her own company to be a useful conduit to Wall Street. It is difficult to imagine a public relations counselor being able to take that much time for any one client, or a person trained in writing and press relations to grasp the financial content of the communication needed.

It is equally difficult to imagine a truly financial person, with accounting and arithmetic skills, being comfortable at a typewriter preparing a presentation for a financial audience, with several speeches and a variety of slides or moving pictures or videotape.

The plain fact is, of course, that both sets of skills are needed — and were needed at the outset — for the successful performance of investor relations.

Many of the restraints that apply to investor relations — legal and ethical — also apply to public relations. But for the latter, they are more difficult to quantify. There was, especially in these early days, more room for smoke and mirrors, fudge and wiggle.


Eager Know Nots


For people who, as a group, generally did not really understand the dynamics of financial information, many became involved, knowingly or inadvertently, in writing or saying things that could only be described as promotion, or more bluntly, touting stocks. They frequently had no idea how the market would react to their news.

One incident illustrates the point. A company had developed — or was in the process of perfecting — a new type of aviation fuel. A member of the public relations department issued a news release — on his own, without consulting any superiors — based on discussions with a research scientist. The story said the fuel would power an aircraft at subsonic speed entirely around the globe without refueling. Headlines trumpeted the invention in bold type the next day.

Of course, it was not so. The product was not ready for production. It had ingredients that were highly toxic and probably could not have been used anywhere near a populated area. The public relations man had interpreted the scientist and had not dug deeply enough into the story to understand all of its aspects.

The company's stocks leapt about 10 points at the opening on the following day. At which happy moment, and it seems purely by coincidence, the chairman unloaded a big block of stock, without knowing what had driven the price up so sharply. Stocks of other companies engaged in producing the raw materials also soared.

The irony is that no disclaimer was issued. The public relations man kept his job. There was no Securities and Exchange Commission (SEC) investigation. The excitement slowly died as there was no follow up. It turned out, again by coincidence, that the story had been hugely helpful to the military strategists in Washington who were game-planning the Cold War!

While this seems to have been an honest mistake, it points up the proclivity for promotion that characterized the public relations profession when it donned financial robes. And heightens the evidence that a different approach was needed.

Chapter II

To keep the time line more or less intact, it is helpful to begin with GE in 1953 — the first formal investor relations function. Concurrently, shareowner (or shareholder) relations positions were being established in many large companies, and some not so large. By whatever name it was called, the function of relating to shareholders and, less intensely, to security analysts, was beginning to take shape.The little seed from which the giant, NIRI, grew was the Investor Relations Association. The men who founded it chose to call it an association rather than a society because they did not want the initials in any way to be confused with the Internal Revenue Service. Better to be Irish IRA iredentists than Washington Wolves!

In March 1953, the American Management Association (AMA) had issued one of the first useful studies on the subject titled: A Company Guide to Effective Stockholder Relations. The introduction was by G. Keith Funston, chairman, New York Stock Exchange. The preface was written by Donald C. Cook, chairman of the SEC. Emory Cleaves, vice president of Celanese Corporation, authored an excellent article, Essentials of a Balanced Program. A group of security analysts penned another: The Analyst and His (sic!) Needs.

General Electric, as one of the country's oldest and largest companies, had long practiced the exportation of its management and organizational ideas to the business community as a public service. Mr. Cordiner held to that pattern by encouraging the company's new investor relations executives to share GE's approach to the field.

A large step upward was taken in 1958 with a major AMA conference on investor relations. More than 100 corporate executives attended, including the writer. Topics covered ranged from the need for investor relations, what we know and don't know about shareholders and proxy solicitation to what analysts want to know, programs for analyst groups and the importance of professional investor relations. In contrast, PRSA had held 10 workshops since 1954, and not one of them was on shareholder relations.

Based on the success of this meeting, AMA continued a 10-year program of meetings including large conferences featuring well-known speakers, each covering an aspect of investor relations and chaired by two or more expert leaders. Held in various parts of the country, these programs averaged over 500 attendees per year. Most of them from middle and upper middle management, and in a broad range of companies.

A Clear and Present Danger

As the AMA program was getting under way, a book was published in 1959 that carried a message very contrary to the ideas underlying investor relations. Authored by Adolph Berle, a Yale law professor and one-time member of the New Deal administration in Washington, Berle was anti-business and made no bones of it.

His title conveys the gentleness of his thought: Power Without Property. A sequel to his earlier book, The Modern Corporation and Private Property3, the new book resumed the attack on the uncontrolled exercise of economic power by big corporations, which he believed should be replaced by big government.

The publication of this book at this time is significant in that it re-emphasized the need of corporations to find a constructive accommodation with its shareholders. It placed investor relations in the center of a struggle over the shape of the American business system — an ideological tug-of-war that is still in progress despite the growing popularity around the world of a free enterprise capitalism.

For investor relations practitioners who hunger for a higher sense of purpose in their business life, this is one candidate. There is still abundant opportunity, and need, to support, encourage, promote and promulgate policies that stimulate pursuit of the old values of work, learn and save.

The early recruits into investor relations felt these motives were important, and sought to further their spread by becoming better acquainted with other like-minded people entering the field.

New Focus on the Shareholder

Two events occurred in 1963 to hasten this process. The AMA published The Company and its Owners, with chapters contributed by all of the GE men, other investor relations people and by two security analysts.

Almost at the same time, Wayne State University in Detroit, under the leadership of Bruce deSpelder, professor of management, joined with the National Association of Investment Clubs (NAIC) and its president, Tom O'Hara, to sponsor the Investment Philosophy and Investment Education Conference.

Held on May 3 and 4, 1963, this conference was a landmark event, bringing together both company executives and investment professionals to explore trends and needs. By being held under the banner of Wayne State and on its campus, it had the added benefit of giving academic recognition to the field. It also advanced the development of the NAIC's Investment Education Institute.

The conference was so successful that Wayne State repeated it the following year under the title: Significant Developments in Investor Relations. Lewis Gilbert attended, and many of the fledgling investor relations people came to know him for the first time as an individual and not a problem child. George Nicholson, founder of NAIC and a wise investor of long experience, also attended. The informal surroundings were very conducive to the flow of ideas.

In the following year, a quiet little book was published by two professors at the University of Indiana. Called The Silent Partners — Institutional Investors and Corporate Control,4 it foretold the emergence of the great pension portfolios and their huge impact on corporations. Alas, at the time, it was not taken seriously.

Another AMA seminar on investor relations was held in June 1965, with its presiding chairman Glenn Saxon, manager-investor relations services at GE. This took place in New York and was attended by a number of the investor relations people who had, by now, come to know one another at these events over the past few years.

Topics on Saxon's agenda were: shareowner relations (principally the annual meeting and correspondence), professional investor relations (contacts with analysts), investor publications (annual, quarterly reports), investor relations research and management (testing effectiveness of communications, shareholder demographics and attitudes, industry needs for new capital and other topics), advice and counsel to executive management (factoring shareholder considerations into executive decisions).

These topics were patterned after the original GE study that established its investor relations department. Some 10 years had passed since the early entrants into the unknown land of investor relations had started exploring their way about it. They had become recognized as knowledgeable and were increasingly in demand as speakers and panelists on the subject.

Wayne State and the Investment Education Institute provided another splendid opportunity for them to perform this function in June 1966 when they put together the Third Annual Conference on Investor Relations. This gathering was held at Haven Hill Lodge, a recreational park situated about 25 miles northwest of Detroit. The property had once belonged to the Ford family./p>

Pause for a Replay

At this point it is necessary to step back a moment and revisit GE in 1953. Mr. Cordiner had appointed Lowell E. Pettit, who had been in an advertising function at an electronics radio department in Syracuse, to head up a study and a possible department to manage the company's shareowner relations.

Mr. Pettit then hired Glenn Saxon, who had been an economist at the City Bank Letter on Economic Conditions, to conduct the study. A third man, Norman Hinton, an experienced writer and management consultant completed the team.

From this trio emerged a report that Mr. Cordiner lauded as the best business study I have seen. He then authorized its implementation in establishing the Investor Relations Services Department.

In time the department expanded to cover each of the five principal categories of this relationship. Among the people who staffed it were most of those who later became founders of the Investor Relations Association: Glenn Saxon, John Gearhart, Peter Converse, Dick Brodrick, and Fred Robinson. In the years between 1954 and 1966, all but Fred departed GE for positions in other companies.

One cannot help seeing a parallel between Cordiner's encouragement of his staff to spread the word and an earlier figure in Biblical history. If one still has a taste for humor.

Now, back to Haven Hill and the conference.

The attendees were only about 25 in number. On the agenda as speakers were: Dick Brodrick, TWA; Bill Chatlos, Georgeson & Co.; Crosby Kelly, Litton Industries; Dick Morrill, Indian Head Mills; Bob Savage, ITT, and Glenn Saxon, who was now a consultant and had, earlier that year, written an article for the Harvard Business Review entitled Annual Headache: The Annual Meeting.

The Conference Planning Committee for this forum included the additional names of Jeff Bradley, a financial officer at TRW; Carl Claussen, of American Natural Gas, Detroit; Peter Converse, Sperry-Rand Corp.; John Gearhart, RCA; Ken Horton, AT&T; Bob Johnson, Savage's successor in investor relations at Chrysler; Eldridge Scott, Detroit Edison and Roland W. Williams of Ford Motor Co. In addition, Tom O'Hara and Ken Janke of the NAIC were involved in the planning and attended the conference. There were perhaps another five or ten participants, if memory serves.

Count Down to Launch

This was an exceptionally timely gathering. Most of the participants had come to know one another fairly well. In the preceding two or three years those who worked in New York City had met periodically under the urging, primarily, of Dick Brodrick, who had started meeting with Glenn Saxon for lunch, and added one or two others from time to time — Gearhart, Converse, Savage, Morrill — mostly the same men who were at Haven Hill Lodge.

Beginning in 1964, Dick Brodrick began calling old friends from GE and a few others he had met. In May 1963, Brodrick had left GE to go to the PaineWebber. He moved to TWA, where he became the airline's first director of financial public relations. Some of the luncheon meetings were held at restaurants, others at the Wings Club, with Brodrick as the sponsor, or at the Overseas Press Club, under Morrill's sponsorship.

In the Fall of 1965 a more serious gathering was hosted by Saxon and Gearhart at the Harvard Club, the purpose being to sound out potential members about forming a professional organization. A number of people were brought by some of the invited guests who were deemed not to have had sufficient experience in dealing with security analysts to constitute appropriate members. The idea of an organization was placed in abeyance for several months, but the meetings over lunch, or sometimes dinner, continued.

When the Haven Hill Conference brought everyone together in pleasant, very informal circumstances for several days of full-bore engagement in investor relations topics, a fire seems to have been lighted.

Lift Off

The conference ran from June 22 through June 24. On July 7 another meeting was arranged at the Harvard Club to carry the momentum forward, and a formal organization was created, becoming the Investor Relations Association. There were 11 people present, of whom five became the organizers. These were Brodrick, Converse, Morrill, Savage and Saxon. John Hammell of General Telephone & Electronics, attended but shortly after experienced a severe injury that put him out of action for the larger part of a year. Gearhart and Chatlos were unable to attend.

Others in attendance included Gale Hirschy of American Telephone & Telegraph, and John McCall of Irving Trust; Victor Liston of ITT; and Marjorie Cruthers, an associate of Glenn's; Tom Cariota, a manager of the Merrill Lynch proxy department; and Fred Robinson, who was in charge of GE's shareholder magazine.

As soon as summer ended, another meeting was set up for either the Harvard Club or The Wings — records are unclear. A notice calling it is intact, noting that the cost of the lunch would be $9.00! The safe assumption is that it did not actually occur.

On October 11, however, an Executive Committee Meeting was held, and a list of proposed objectives was circulated.

Investor Relations Association Proposed Objectives

1. To act as a clearing house of information about the modern practice of investor relations.

2. To work towards improved standards of performance in this business area.

3. To stimulate and encourage work and investigation into:

  • share ownership
  • institutional investing
  • individual investing
  • capital needs of the economy
  • effective communication

4. To become recognized and active as a group working in the long-term interests of the investor, of broader share ownership and of better relationships between companies and investors and potential investors.

5. To be actively willing to stand up and be counted on significant matters of investor interest.

On December 14, 1966, a proposed Constitution was circulated for discussion at the next meeting. On January 6, 1967, the Constitution was adopted. The formalities had been completed. By this time, Jeff Bradley and Bill Chatlos had become Founders and Fred Robinson was inducted as a Charter member.

The first president elected to serve until the annual meeting was Bill Chatlos. Chatlos was a counselor, not a corporate executive, although there was a strong, and conscious, determination among the founders that the membership should be limited to corporate managers. Chatlos, however, was one of the pioneer publicists through his editorship of TRENDS... which showed his considerable writing skills. He was well known to the members, well liked and respected for the tough mindedness that this group thought needed to be a characteristic of professionals.

As an illustration, many public relations counselors in that period refused to let their clients speak to analysts. They evidently reasoned that once such contacts had been established, the analysts would by-pass them and go straight to the source. That would clearly not be good for a business built on being the sole conduit to Wall Street.

Bill Chatlos, in early 1952, was the first counselor to stand flatly against this practice, and say publicly, that neither he nor Georgeson would deal directly with analysts as spokesmen for their clients. Many in the firm were surprised when the clientele grew instead of shrinking!

Bill's involvement in proxy solicitation put him in the thick of many merger and takeover battles, so he had a direct and intense understanding of the investment banking as well as the brokerage side of Wall Street.

His status as an outside rather than corporate person also made a statement to other organizations that there was a willingness by the IRA to establish relationships with public relations groups, financial executives, corporate secretaries and others engaged in the conduct of investor or shareholder relations.

Chatlos was also able to act as an interim chief, until the size and composition of the group could be more complete. Postponing that election for ten months averted any chance of clashing egos derailing the train before it left the station.

The choice of investor rather than shareholder relations was also designed to demonstrate a broader ambit for the group, as suggested in the proposed Objectives.

The other officers of the new IRA were John Gearhart, Peter Converse and Dick Morrill. By the first of February 1967, the membership totaled nine, as indicated in the following roster.

J. F. Bradley, Jr.
Assistant Vice President of Finance
TRW, Inc.
23555 Euclid Avenue
Cleveland, Ohio 44117

DeWitt C. Morrill
Director, Public Relations
Indian Head Inc.
111 West 40 Street
New York, New York 10018

Richard Brodrick
Director Financial Public Relations
Trans World Airlines, Inc.
605 Third Avenue
New York, New York

Fred Robinson
Consultant - Share Owner Relations
General Electric Company
570 Lexington Avenue
New York, New York 10022

William E. Chatlos
Georgeson & Co.
52 Wall Street
New York, New York

Robert Savage
Director Investor Relations
Int'l Telephone & Telegraph Corp.
320 Park Avenue
New York, New York

Peter Converse
Director of Corporate Information
Sperry Rand Corporation
1290 Avenue of the Americas
New York, New York

Glenn Saxon
Booke & Co., Inc.
15 William Street
New York, New York

John Gearhart
Manager Investor Relations
Radio Corporation or America
30 Rockefeller Plaza
New York, New York 10020

A limit of 30 members had been established on the basis that the purpose of the meetings was for useful discussion and exchange of ideas and experience. It was estimated that an average of 20 would be present at most meetings, and this was close to the ideal size. Fellowship is also an important element in any organization. The organizers wanted to continue and enhance the personal and professional relationships that had been developing. Too large a group would prevent that and raise the problem of breaking into smaller segments.

Experience Credibility

Membership qualifications also stressed that a candidate must have had 10 years of experience as the principal point of contact in his or her company for security analysts and portfolio managers. That is, he or she had to have had time in the hot seat and have had the opportunity to become fully conversant with the language of Wall Street and the needs and idiosyncrasies of its research people.

Although several of the early members had originally worked in public relations departments, and some were still responsible for that aspect of their companies' communications, the forcible differentiation from other forms of public relations was conscious and deliberate. It was desired to leave no doubt in anyone's mind that the members of IRA were not publicists but had the integrity and confidence of their management to represent the company directly to the financial community.

Within the next 12 months, membership expanded with the admission of 11 more investor relations executives: Matt Kane, Standard Oil of New Jersey; Crosby Kelly, the legendary head of communications at Litton industries who had just started his own counseling firm in New York; Harold (Hap) Riggs, AT&T; John Kelsey, W.R. Grace; Charles Chapin, Textron; Bill Brackman, Gillette; and Jack Hammel, GTE, now restored to duty.

The purpose in listing these names is to illustrate the kinds of companies that were represented by executives who, for the most part, were either directors or vice presidents or, in Matt Kane's case, assistant secretaries of their companies. Their stature also demonstrated the need for experience as a qualification. Positions of that order were not reached quickly.

This display of rank would be nothing but hubris if it were not that men of this caliber were sufficiently concerned about broadening the reach of investor relations, and raising its standing in the corporate and public worlds, to set about soon founding NIRI.

In May 1968, John Gearhart became the second president of the IRA, and began immediately gathering support for enlarging the scope of the organization, either directly or indirectly.

Expansion Enhancer

At this stage of its development, the IRA met in the summer months, except August. On July 22, the New York Stock Exchange handed the members a strong case for proceeding with expansion when it issued its Expanded Policy on Disclosure.

In part, this Policy was a long-delayed reaction to the famous Texas Gulf Sulphur Case in which directors were found guilty of having made advantageous purchases of stock for themselves and their families on the basis of advance knowledge that company geologists had discovered the largest copper mine ever found in North America — way up in Timmins, Ontario. The find was in November 1963, but announcement was delayed until April 12, 1964, and then a further clarification on April 16. The second release indicated the ore body to be bigger than the first. Meanwhile, the geologists, were buying calls in a big way while they continued proving the claim.

A legal battle began almost immediately, but did not get to a court decision until 1965, which reawakened memories to which the New York Stock Exchange Policy was partly addressed.

There had been another insider trading scandal in June of 1966 involving a breakthrough in the Chinese Wall at Merrill Lynch, where investment banking information found its way to the investment management arm.

The Expanded Policy set forth the Big Board's admonitions against this sort of activity. The wording got into situations that would be likely to arise in circumstances like the Texas Gulf discovery, or where merger negotiations are in progress. It advised, in essence, that as soon as any outside party has the information, it must be made public to all through a press announcement.

Commenting on discussions with security analysts, the Exchange opened Pandora's Box when it said A company should not give information to one inquirer that it would not give to another. Nor should it reveal information it would not willingly give to the press for publication.

The kinds of information included in this broad sweep were such things as advance earnings, dividend, stock split, merger or tender information. . . to analysts or anyone else.

Media Mayhem

In this the Exchange authors displayed their massive ignorance of the manner in which companies talk to analysts. But it also set off fire alarm bells in the media, which descended in droves on investor relations people wanting to know if managements were now going to clam up absolutely and not tell analysts anything. A logical inference from the carefully hedged language of the Exchange, whose lawyers clearly wanted to place it on a pedestal one inch short of the top-most angel in heaven.

IRA members replied to these many calls by saying, in essence, that the Policy was an uninformed and superficial interpretation of the Court and SEC intentions — arising from Texas Gulf, Merrill Lynch, Glen Alden and Bar-Chris litigation. Members felt that the kind of conclusions being parroted by the press would affect court thinking in the future and let the newspapers make law.

What also became clear was that the relative unsophistication in the corporate world with respect to talking with analysts was a problem for everyone in investor relations. It needed to be addressed by some means of education through an organization with a much larger membership than the IRA. Otherwise, it was feared, the lawyers would be in command, and no one would say anything.

A whole chapter could be devoted to the Exchange's policy on disclosure. As could one on the Texas Gulf case. There were many laudable features to the Exchange's statement, which put both Wall Street and listed companies on notice that inside information was not to be used by the few to fleece the many. Legal interpretations, however, were not as crystal clear as the wording implied. What was inside? What was material? Is telling an analyst something in response to his question giving him substantive information that must be made public?

The SEC itself had accepted the concept that an analyst uses information to build a mosaic from which he or she draws his conclusions about the company. And that if an individual shareholder could ask the same questions, he or she should be given the same information. It recognized that the analyst can and must ask more penetrating questions and must be allowed to earn the benefit of his or her own ingenuity. Further, that the analyst in the final stretch is working for the investor — doing what the investor could not do for himself.

In the Texas Gulf case, a great deal turned on whether the directors and officers had used inside information. Was the geology proved? Did they know absolutely that the find was as big as it turned out to be? Did they act before the news was made public? The defense claimed, for some of the defendants, at least, that the news had already appeared on Dow-Jones before their clients acted. To this the courts replied that they moved too quickly, before the information had had time to be assimilated by the public.

These were landmark cases governing the use of inside information to buy stocks. There were also several celebrated cases involving insider sales in advance of bad news. Two that come to mind are National Student Marketing and Equity Funding. The latter was a clear case of fraud, and led to lengthy legal battles between the SEC and Ray Dirks, the analyst who had blown the whistle. Ironically, Dirks said he had tried several times to alert both the SEC and the California state securities regulators, but no one would bother to listen. It was long and costly, nonetheless.

Level Fields, Lofty Fantasies

Both of these cases took place in the mid-1970s, well after the formation of NIRI, but serve to demonstrate that the need to establish ethical standards of behavior in communicating financial information was still quite urgent. Fraud is fraud, of course, and the truly larcenous are not deterred by rules. But it is essential for the investor to believe that the playing field is level. That was a high priority for the IRA and for NIRI — and still is.

It is also important to understand the psychological environment of the mid-1960s. The economy had been charging ahead for 15 years. The Bull market seemed invincible. Public involvement in the market was widespread. A general euphoria existed, despite the rapid heating of the Vietnam War.

It was an era of tips. You could get advice from the taxi driver, the waiter, the barber, the shoe shine man who came through the office to keep the gloss intact. Cocktail parties, subway trains and airport clubs all sported a lively conversation about the market. People on a wide scale had reached the point where they believed that all trees grow to the sky, and the market will always go up.

It was also an era of story stocks. The boom in technology had spawned dozens of overnight millionaires. New, scientific inventions in electronics, drugs, photography and many other industries produced venture capital speculators and public offerings of companies that frequently had no actual production, nor any earnings. Some sold at infinite price earnings multiples and discounted the hereafter twice.

The mystique of science was not the only dazzler. Fried chicken and hoola hoops, Barbie dolls and motel chains Ð had their day in the limelight, too. And it was an era of frenzied merger and acquisition activity with the conglomerates in the lead. John Westergaard looked at Litton and Textron and City Investing and Indian Head and heralded the birth of the Free Form Corporation in his Equity Research publication.

That was late the in cycle — 1968-69 — as it happened, and the sound investors soon heard was not the Herald's trumpet but the swan's song.

But not just then. Investors were not yet discouraged. It was said that one could draw a crowd to hear a stock pitch by merely holding one's finger in the air at the corner of Fifth Avenue and 42nd Street.

Perhaps an overly colorful description of the mood of the day, but it was fundamentally true even in less flamboyant surroundings. It meant that normally conservative people had slipped the moorings on their fantasy balloons. They had become easy targets for pitchmen — whether from Wall Street boiler shops or Madison Avenue word factories. The sun shone full on anyone who could come up with a plausible story, and the financial relations/public relations business was booming.

Obscure Oxymorons

That terminology was a common practice that also disturbed investor relations people deeply. In their minds, if it was public relations, it was not financial. If it was truly financial communication, then it was not public relations, at least not in the pejorative sense — meaning to persuade, manipulate, put a good face on the not-so-good facts, to promote not inform. In the investor relations view, financial public relations was a glaring oxymoron. Public relations did not mean getting to the hard core of the story, and too often it did not mean integrity either.

What was equally troubling was that most of the financial practitioners had no real grounding in finance or the markets — and we have already waltzed through the short, happy public relations career of the radio talk show host as an example of the underside of this business. If you know little about accounting, finance, economics or the market mechanism, it is a little bit risky peddling market sensitive information into an environment you don't understand. Rather like the boy pouring gasoline on the flames thinking it's water.

The objective of this behavior was one thing only, as presented in this quotation from the Harvard Business Review: The name of the game, let's face it, is to get the stock price up! Under this rubric, it is no surprise that many who pursued this goal felt anything that worked was all right.

Old Wisdom

A far cry indeed from the wisdom of Benjamin Graham and David L. Dodd who wrote in the 1951 edition of Security Analysis:

Management May Properly Take Some Interest In The Market Price Of The Shares ..... The most obvious indication of an unsatisfactory state of affairs is a market price which is persistently lower than the stockholder's investment or the indicated minimum value of the business as judged in some other reasonable way. When the price is consistently too low, it is proper for the stockholders to raise questions as to why this is so and what can be done to remedy the situation. FAIR PRICE AN ESSENTIAL TO PROPER MARKETABILITY. [Managements have avoided this issue using the time honored principle that market prices are no concern of theirs.] It is true, of course, that a company's officers are not responsible for the fluctuations in the price of its securities. But this is very far from saying market prices should never be a matter of concern to the management. This idea is not only basically wrong, but it has the added vice of being thoroughly hypocritical. It is wrong because the marketability of securities is one of the chief qualities considered in their purchase. But marketability must presuppose not only a place where they can be sold, but also an opportunity to sell them at a fair price. It is fully as important to the stockholders that they be able to obtain a fair price for their shares as it is that dividends, earnings and assets be conserved or increased. IT FOLLOWS THAT THE RESPONSIBILITY OF MANAGEMENTS TO ACT IN THE INTEREST OF THEIR SHAREHOLDERS INCLUDES THE OBLIGATION TO PREVENT — IN SO FAR AS THEY ARE ABLE TO DO SO BY PROPER CORPORATE MEASURES — THE ESTABLISHMENT OF EITHER ABSURDLY HIGH OR UNDULY LOW PRICES FOR THEIR SECURITIES.

This last sentence is the clarion call to arms for investor relations — the intellectual, moral and philosophical foundation of the profession: An obligation on corporations to do what they properly can to achieve and maintain a fair price for their securities.

This is a far cry from the slang slogan, get the price up! Graham and Dodd are also saying, keep it from going too far down. They are squarely with J.P. Morgan in acknowledging that the stock market will fluctuate. But they amplify their admonition with this word to boards of directors:

Not as a startling innovation but as a common sense recognition of things as they are, we recommend that directors be held to the duty of observing the market price of their securities and of using all proper efforts to correct patent discrepancies, in the same way they would endeavor to remedy any other corporate condition inimical to the stockholders' interest.

Of Mice and Myth

Here we have in juxtaposition the rather wild and woolly behavior of stock promoters, in and out of companies, and of Wall Street. After all, no one ever claimed sainthood for brokers, on the one hand, operating in an atmosphere where the will to believe7 has overtaken common sense; and on the other hand an awareness among at least a few corporation executives that this nonsense can lead to rather scary results.

Those in investor relations who adhered to Graham & Dodd principles worried about the growing potential for large numbers of people to be misled, if not actually defrauded, by false or misleading information peddled irresponsibly by merchants of myth who had no conception of what they were doing and not much concern for the consequences.

The fly-by-nights would disappear like the morning mist if real trouble broke out. The corporations would have to take the heat if large numbers of public stockholders rose up in anger and demanded through their political representatives radical reform of the system — reforms like the New Deal, for example, or even more restrictive government involvement.

Those worries have been mentioned before and may seem too distant to be real in today's high-tech, high speed, rapidly democratizing world. Earthquakes and tornadoes are not every day occurrences, either.

The IRA started as a small group of people who could share experiences and develop together ideas on how to do the job better. They were in uncharted ground and making up the practice as they went. In barely two years of existence, however, events had moved so fast, and the scale of investor or shareholder relations had expanded so rapidly, it was becoming clear that a broader based organization was needed. Who would supply it?

Seeking Partners

During the period leading up to the formation of the IRA — 1960-66 — several of those involved in the AMA programs and the Wayne State conferences began to discuss whether they should affiliate with one of the existing groups in the field of corporate communications — The Public Relations Society of America (PRSA), for example, or the American Society of Corporate Secretaries. Quite a few of those who were active in investor relations were also members of one or both of these groups.

Many had appeared as speakers or panelists at meetings of both groups in a number of cities, so approaches were made, particularly to PRSA. Several points of dispute arose:

  • What to call the field? Investor relations was preferred by those active in the field, but PRSA wanted to stay with financial public relations or financial relations.
    • What sort of rules or standards of ethical conduct would be needed? Investor relations people felt the need for more precise rules more vigorously upheld. PRSA thought its rules and their enforcement adequate.


  • What sort of training or experience was needed? The investor relations people felt the need for more specific skills.

New Wine New Bottle

Of more philosophical interest, there was extended discussion of whether shareholders were just another specialized public or, in fact, had a special status as part of (rather than outside) a corporation.

Even after the formation of the IRA, these discussions continued periodically, but never resulted in conclusions satisfactory to the IRA members. Thus, in 1968, the group gave up on reaching out to PRSA or any other large and already established organization to foster the expansion of the investor relations practice.

From its first meeting in September 1968, John Gearhart began gathering support within IRA to launch a new and larger group — and the question arose as to whether IRA should expand, or start a new and separate organization.

As if answering a prayer, the general counsel of the SEC, Mr. Philip A. Loomis, addressed the Fall Conference of the Financial Analysts Federation in early October. His speech, Corporate Disclosure and Inside Information, was widely circulated among investor relations people and became the working guideline for analyst relations activity. It was, in effect, a Magna Carta for Investor Relations, in Saxon's words.

It set reasonable standards. This was especially valuable because it came from the SEC's General Counsel, and was thus acceptable to many corporate attorneys who up to now had been very restrictive.

Concurrently a book was published with the arresting title: Twenty Million Careless Capitalists. Authored by Carter Henderson and Albert Lasher, it provided a sobering insight into the ignorance of the vast majority of American stockholders about the companies in which they had invested. They described what was, in effect, a dormant time bomb, and reinforced in the minds of the IRA members the growing urgency of spreading the word about investor relations as she ought to be.

Gearhart's missionary zeal — and Glenn Saxon's conceptual support — did not sit well with some of the IRA members who feared it would lose its collegial qualities as a small group. An Executive Committee meeting was held in early November at which Bob Savage and Bill Brackman, in particular, argued that the IRA could do all that was necessary by educating one another on the various industries represented in the membership, by placing articles in opinion-molding publications like Institutional Investor or the Harvard Business Review, or opinion pieces for the New York Times or The Wall Street Journal. It was urged that members could build networks with other investor relations people in other companies, and continue to participate in conferences.

Gearhart and Saxon continued to push at that meeting and thenceforth, for recognition that if investor relations people wanted to have any influence on how the practice should be conducted, or on regulation or legislation, they must increase their number. Only numbers have political clout was their theme.

A suggestion was then made, perhaps by Chatlos, that the members consider a separate but related organization. Others agreed that a large organization was needed in order to develop clout, but that this should not divert the IRA from its original purpose to have a good, useful exchange among its members at meetings and with one another between times. Maybe we should be godparents, or sponsors, or a governing body, someone declared. The meeting concluded with complete agreement that the IRA needed to be larger than 11 or 12 people, and that each person should only develop a list of 10 names to be brought to the next full meeting.

Clout or Comfort

Further growth of the IRA was desirable, of course, but neither Gearhart nor Saxon was giving up the idea that a much larger, organization was needed that would be national in scope. Whether this conviction originated with Saxon or with Gearhart is difficult to say. Perhaps it occurred simultaneously in the two minds, as many inventions do. In either case, they agreed from the start to pursue it, with confidence that the need was strong enough to win sufficient support from their fellow IRA members.

Saxon, for diplomatic reasons, stood aside from the presidency of the IRA, even though he had been a very active participant in its formation. The IRA owes him its gratitude for putting aside any personal desires he may have had for recognition in order to avoid any suspicions that he, as one person, wished to be seen as its founder.

NIRI also is indebted to him for pursuing its formation and gaining IRA adherents through his cogent and forceful reasoning.

At the December 1968 meeting, Saxon distributed a proposal on forming a national organization. Three new members were added, and one replacement for a retiring member. Three additional candidates attended the meeting. The rolls were growing, as hoped.

During January through May 1969, John Gearhart persisted in keeping NIRI at the top of the agenda. On January 19, IRA members received a meeting notice enclosing a proposed constitution, with a set of questions to be answered and returned to him by January 21. The questions asked whether the member would 1) like to be a charter member of NIRI, 2) like to be a member of such a national organization, and 3) would not be interested.

The Secretary of IRA that year was Dick Morrill. In his files are two returned questionnaires, one from John Silver, who had recently joined City Investing as a vice president, saying he would like to be a charter member. The other, from Bob Savage, said he would like to be a member. Both were date-stamped as received on February 19. There were approximately 25 members in IRA at that time, but it is not clear how many had signed up to support the new organization at this point.

On February 13, a copy of the Final Constitution of The National Investor Relations Institute was signed by Glenn Saxon; John A. Gearhart; Richard P. Axten (Raytheon); Richard M. Brodrick; John Silver and Howard A. Bradley (Houdaille Industries); Dick Morrill signed on April 10. As a practical matter, this instrument dates the beginning of NIRI, but the path to its full realization was neither swift nor smooth.

What's in a Name

Between December 12, 1968 and January 15, 1969, a name had been selected for the new, national organization. If the name had been chosen earlier, the memoranda or meeting notices using it are not available at this writing. The first use of National Investor Relations Institute on a document is in John Gearhart's January 19 letter of transmittal and questionnaire.

Some of the IRA members recall that discussion took place in this period as to whether to call the organization an association, as initially suggested. Charles Kuehner, who had joined the IRA in November 1968 (replacing Hap Riggs, who was retiring from AT&T), had worked during his college years for Dr. George Gallup, the pioneer opinion research expert and founder of the American Institute of Public Opinion ("The Gallup Poll").

Kuehner persuaded the membership that anything and anyone could be an association, from the PTA to the Police Chiefs, and that the connotation was more one of fraternity than education. Institute gave distinction and standing, and was appropriate for an organization that would have as one of its central purposes educating and training executives just entering the investor relations field. The argument was compelling, and the credit for that part of the Institute's title goes to Kuehner.

As a sidebar of possible interest, the Association's (sic! ) meetings were being held at the Overseas Press Club, where Morrill was a member. Notes from the September 1968 meetings show a cost of $5.50 for the lunches and about $2.50 for the drinks.

Revving Up

Several months had passed since the Saxon proposal was submitted, with continuing discussion at IRA meetings. Nothing much was happening in the way of action.

In late April or early May, Alan Singer was in New York City and called on John Gearhart to see what progress was taking place on the national organization. Gearhart's office at RCA was in the same building as Saxon's. The two rode the elevator up a few floors and met with Saxon for an hour or so. It was agreed that something needed to be done, and promptly.

Saxon was immersed in his new duties as a vice president of Singer Company, which he had joined only a few months earlier. There was some questions whether he could devote the time or retain the interest in fostering what was to become NIRI. To reinforce him and add weight to the effort, it was agreed to put Alan Singer in charge of the task force, with such other help as he could obtain.

Singer had already demonstrated a gift for following through on whatever project was given to him. Gearhart tended to tackle nuts and bolts matters more enthusiastically than Saxon. Saxon provided and unusual skill in formulating and expressing the central ideas.

It can be fairly said that this triumvirate were the mind, heart and spirit that launched NIRI. Its formation gained perceptible momentum after this meeting.

Even before joining the IRA, Singer had worked to perfect its constitution and did the lion's share of the work on the NIRI constitution. He was the corporate secretary of Graphic Controls, in Buffalo, and gave his time and skill to both organizations unstintingly. He can't be given enough credit.

At the May 8 meeting, election of officers took place. Peter Converse, who had been vice president and in line to become president, had suffered an aneurysm while standing in the Committee Boat of the Riverside Yacht Club the previous summer. Rushed to the Greenwich Hospital, his life was saved, but he was not yet able to commit full-time to his work at Sperry Rand and requested to be passed over for the time being. In his place the secretary, Dick Morrill, was elected for the 1969-70 meeting year.

Morrill requested an expression of sentiment regarding the creation of the proposed National Investor Relations Institute. There was complete agreement, he wrote to the members on November 3, that we should move forward as promptly as possible. He also stated at the May meeting that I understand it to be my principal assignment to help bring this organization into being.

For that purpose, a Steering Committee was appointed, consisting of John Gearhart, Alan Singer, Glenn Saxon and Bill Chatlos. Assistance from any others was encouraged.

Helping to put a touch of urgency into the IRA deliberations at this point was information about another organization in New York City that was becoming involved in investor relations and presumably would be a competitor of the IRA and NIRI. Called the Financial Relations Society, its membership did not appear to be as tightly focused on working directly with analysts, and it was the consensus that it would not develop much past the Wall Street community. The guess proved right, later, but at the moments it was perceived warily.

Contrarian Questions

The Steering Committee set to work immediately. In June, however, Bob Savage contacted Morrill (who had worked with Savage many years earlier on the news staff of The Wall Street Journal) and expressed his growing disapproval of the role the IRA was starting to take in developing a larger organization. He noted that Matt Kane, at Exxon, shared his views and that Matt, for policy reasons at Exxon, could not belong to two organizations in the same field.

Savage questioned the need for another organization, thought the person the Steering Committee was considering to help set it up was not sufficiently qualified, and thought a newsletter was a nice idea but needs a staff to do it.

He raised a number of other doubts, including where's the (start-up) money going and who's going to handle it? And whether the real motive is simply to oppose or compete with certain journalists and public relations firms. While some of these objections seemed to Morrill to be a trifle petulant, and perhaps carrying a subliminal discontent with who was leading the charge, Bob had raised some issues that deserved airing.

Notes from that day also indicate a conversation with Fred Robinson at GE. He said he was generally in favor of NIRI, and asked whether it was intending to have two monthly meetings — IRA and NIRI — or would the IRA be the same as NIRI?

On June 20, an Executive Committee meeting was held at the Rockefeller City Luncheon Club with Morrill, Robinson, Saxon and Kane. It concluded that there was general agreement among the members to go ahead with NIRI, and decided to expand the search for an individual or organization skilled in setting up business associations.

Birth Date

The July 10, 1969 meeting of the Investor Relations Association must be regarded as the landmark or watershed event in the creation of NIRI. If the national organization can be said to have had a single date of birth, this is it.

The president's report to the IRA members follows.9 Of particular importance is that the process of separating the IRA from NIRI was begun in the decision (later voided) to make IRA the originating chapter rather than the centerpiece of the new organization.

RM. 3320
NEW YORK, NY 10020
(212) 947-3128


Richard M. Brodrick
Vice President
Matthew F. Kane
Fred N. Robinson


DeWitt C. Morrill
William E. Chatlos
H. Peter Converse
John A. Gearhart
Matthew F. Kane


At the July 10 meeting, which was attended by 13 of the Association's 28 members, there was an extended discussion about the proposed formation of the National Investor Relations Institute. At the end of this discussion, a motion was made by Alan Singer and seconded by Bob Savage, that the IRA become the originating chapter of the NIRI.

This action does not entail any financial commitment by the IRA, nor does it constitute an automatic enrollment of our individual members in the proposed NIRI. It represents a consensus of those present and a formalization of the action taken by the 22 members who signed the Constitution and Articles of Incorporation of the NIRI. The vote was unanimous.

We continue to adhere to the belief that an effective exchange of ideas and information requires that our group (IRA) remain relatively small and informal. Hence, the establishment of the NIRI will have no effect on the size and modus operandi of the IRA. While the IRA will be the originating chapter of the NIRI, membership in NIRI will be an individual matter so that those members of the IRA who do not feel that they can properly be members of the NIRI also, need not do so and need not sacrifice their IRA membership. You can be in either or both, as long as you put up the dough.

Glenn Saxon and Alan Singer were asked to send to all IRA members, at the earliest possible time, a brief description of the NIRI and its purposes, along with an invoice for dues of $100 for the first year. They were also requested to take the necessary steps to register the organization with the New York Secretary of State and develop a membership solicitation for the creation of the new organization.

The meeting agreed that the primary purpose of this new organization is to generate an improved volume and quality of information on investor relations, possibly through a newsletter or periodic meetings for the exchange of views and experiences. There was also general agreement that the Institute should plan and promulgate a meeting or seminar specifically under its own auspices at a prime location and at a time of year that will encourage a good attendance.

There was some discussion of the organization and staffing of the Institute and it was generally agreed that at the outset NIRI should proceed with the appointment of Ed Berkin, formerly of the American Management Association and now as Executive Secretary to work with Glenn Saxon and Alan Singer in the initial organization and promotion of the NIRI. For the benefit of those members who were not present, this question was reviewed at length and the conclusion reached is not irrevocable nor regarded as necessarily permanent. The key point is the need to get this organization in motion, and Mr. Berkin is willing to give us his help on the premise that at some future date it will become a profitable undertaking for him.

In accordance with the decision of the previous meeting that the Executive Committee should meet and make recommendations regarding the NIRI and its relationship to the IRA, your President provided the following report, which was the basis of the action taken at the meetings in June and July.

* * * *

The NIRI exists already on paper because of the signatures of the 22 members.

The Constitution and the signatures represent a consensus that an organization like this should be established.

Among the principal reasons are that similar organizations to the IRA are proliferating. One example is the recently formed Financial Relations Society in New York City. In addition, the Public Relations Society of America, the Financial Executives Institute and the Society of Corporate Secretaries all have an interest in this field and from time to time assert this interest, even though it does not represent their primary field of activity.

Secondly, there appears clearly to be a need for a central clearing house, rallying point and standard bearer to pull all of these interests together in one group, which will have as its primary objective the establishment and maintenance of high standards of conduct and more effective information programs in the field of investor relations than either the IRA or any of these several organizations can supply.

There was a general concurrence in the notion that the more widely expert knowledge is disseminated, the greater the stature of the function will be and the higher the standards of excellence and ethical behavior, all of which should be beneficial not only to the individuals carrying out this responsibility, but also to their companies, to the financial community and to investors generally.

It is also important to point out that NIRI does not propose to be an exclusive organization. It will welcome membership and participation by the PRSA, the Corporate Secretaries, the Financial Executives (FEI), and possibly the Financial Analysts Federation or local societies. Both PRSA and FEI have already been sounded out and have indicated their interest and willingness to participate.

Because of a late start and the extended discussion on this subject, the proposed topic of Annual Report costs and procedures was tabled and will be the topic of the next regularly scheduled meeting on September 11.

Dues notices will be mailed in August for payment in September. The current annual dues of $80 may have to be increased, but Matt Kane and I have not yet had an opportunity to work out a detailed budget. We will certainly try to avoid an increase, but we do not want to erode the present cash balance of about $1,000, as it has been the consensus of the membership that we should maintain the financial flexibility that this gives us.

Interjecting a personal note to all of you, in attendance or otherwise, have a pleasant summer and we will see you in September.


DeWitt C. Morrill




This report, not only sets forth many of the key ideas behind the formation of NIRI but concentrates on the how rather than the why. So it may be useful here to state — or repeat — the principles for which the organization was intended to stand, as set forth by Glenn Saxon, who saw the following needs:

  • To have some group act in the interest of shareowners as they seemed unlikely to organize in their own interests. As in the field of marketing, the modern management approach calls for considering the customer's interest as paramount (rather than the old way of trying to sell whatever the factory had a surplus right now). We felt a responsibility to this constituency.
  • For more, well-trained people in the field.
  • For avoiding the problems that touting and cutting ethical corners would create.
  • For resolving the debate over whether to allow counselors into NIRI by doing so in order to be able to set standards for the whole profession.

Much of the foregoing was reiterated soon— in March 1970, after NIRI was established — in a letter to The Wall Street Journal detailing the position of investor relations as to ethics and other matters.

The question of membership qualifications came up again at the August 8 meeting of NIRI, where the idea was floated that only people who held investor relations jobs in corporations could join. Saxon successfully argued against that for the reason given in his set of needs above.

Start-up Team

The appointment of Ed Berkin as executive secretary to help start NIRI was not a universal choice. It was felt that not enough searching had gone into this decision and the process should be broadened, during which time Berkin could serve on a temporary basis.

The Steering Committee then interviewed four other organizations in New York City and four more leads supplied by the American Society of Association Executives in Washington, D.C. From this screening process, the Committee selected James E. Bryan, Inc., which had the most impressive track record and was the most reasonably priced in relation to its experience.

On November 3, the president reported to the IRA members on the extended discussions at the October 9 meeting, which Bryan attended, and Bryan's proposal, dated September 26. Some of the high points were: Size of initial dues — $100, $150 or $200; whether the new organization could get off the ground in the six months envisioned; and the advisability of retaining an association executive based in Washington, D.C.

An initial dues figure of $200 was considered sufficient if at least 22 IRA members participated at the outset and in order not to have the whole project succumb for lack of adequate funding before it got started. It was emphasized that the funds would come from the members individually and not from IRA, which would remain independent.

The report added: Mr. Bryan is taking a calculated risk with those of us who believe in the establishment of this organization that he can generate enough interest and enough revenue to meet the financial objectives set forth in his proposal.

The report continued that the Washington, D.C. location did not seem to be an impediment, in the eyes of the Steering Committee and the Executive Committee, compared with obtaining thoroughly professional assistance. The members concurred in this, and the Committee directed Bryan to draw up the Articles of Incorporation, by-laws and an agenda for discussion at the November meeting of IRA.

Money always grabs attention, so it is interesting to review Bryan's proposed budget. It called for payment of his out-of-pocket expenses plus management fees, which were scheduled to begin at $500 for October and rise by $100 a month through March with $1,000 payable on April l and a new contract to be negotiated at that time. The fees totaled $4,500. This seemed manageable if the 22 members put up $200 each as contemplated. It did not allow for any additional assistance from dues obtained through the new members to be solicited.

Muffling Mutiny

A sense of movement was growing, and the excitement of rising expectations, when, on the day after the October 9 meeting Bob Savage put his strong objections in writing to Dick Morrill and tendered his resignation. A few days later, Bill Brackman wrote from Boston that he, too, was not in favor of proceeding and was thinking he might resign if the program went ahead. Charlie Chapin at Textron was just moving from investor relations to corporate development — i.e., merger analysis and planning — but he expressed his concern, coupled with a sense that he had not kept in close enough touch to have a definite opinion.

Morrill did not immediately respond to Savage's letter. He decided to let things cool a bit, and vetoed the resignation by not acknowledging it. Several weeks later, he talked with Savage on the phone as one close friend to another and told him he couldn't resign.

In the interest of historical accuracy, it needs to be said that some of the objections that Savage and Brackman expressed were legitimate. The IRA had been preoccupied with NIRI most of the year, rather than focusing on the expected interchange of ideas about investor relations. The proposal submitted by Jim Bryan was not given sufficient exposure to the membership in advance of the meeting — it was received at the end of September and circulated barely a week prior to the meeting. Both men found grounds to object to the estimates of cost and faulted other procedural matters to make their case a full one. Both accused the president of letting a few members push their pet proposal down the throats of the rest. And this may have been the real burning issue — who is leader and who is follower? Whether this was the thorny problem or not, it was never overtly brought out.

In rebuttal, the president observed that in July some 22 members had signed the draft constitution — 22 out of 28. There were only 13 members at the October 9 meeting (three Steering Committee members could not attend), but the approval previously given by the absent ones was taken for granted — perhaps a bit hastily.

When Morrill called Savage in early November, he mentioned these points lightly, but stressed with Savage that he was too much involved with IRA, and it with him, to have his resignation make sense. The notion that we can't get along without you evidently touched the warm nerves and eased any feelings he might have had about being overshadowed by anyone else.

Savage was, indeed, a pillar of investor relations, having held that position as a vice president of Chrysler for 11 years and quite recently having become a prot'g' of Harold Geneen at ITT, where he continued until retirement.

Savage had many qualities that endeared him to the membership — intelligence along with the street smarts of a New Yorker and a journalist; a great deal of experience in investor relations, built on a foundation of security analysis at Merrill Lynch; and above all an engaging personality — hearty, outgoing and humorous. His loss to the IRA would have been a professional and an emotional blow.

Although Savage had sent copies of his letter to two or three other members, Morrill neither raised it at meetings nor did anything to give it attention. Savage kept coming to meetings. The incident slipped away into the atmosphere.

NIRI Prevails

Savage did not become a member of NIRI until after he had retired from ITT quite a few years later and joined a counseling partnership, Kehoe, White and Savage — the continuation of a firm begun by Crosby Kelly in 1968.

Bill Brackman did not resign from the IRA, nor join NIRI until several years after it was flourishing. Bob Eisenhauer succeeded Charlie Chapin at Textron, joined the IRA and then joined NIRI.

An upheaval that held the potential not only to de-rail NIRI but disrupt the IRA had safely passed. Several members heaved grateful sighs of relief.

The central idea behind NIRI — to create a national organization with clout — was the driving force, regardless of whatever inner personal motives or irritations might have been at work. It prevailed in part because the time was right, in part because it was pursued by people with some genuine idealism, in part by old fashioned ambition, in part because of the drive to finish what's been started and its concomitant love of winning.

On October 15, Jim Bryan wrote to Messrs. Saxon, Gearhart, Morrill, Chatlos and Singer — the pro tem Board of Directors of NIRI — advising them that Articles of Incorporation had been drawn up by counsel, Philip Neal in consultation with himself; the by-laws had been re-drafted and were under review; and that both would be sent in time for discussion at a meeting to be held in New York in early November. At that time, he continued, the Articles should be executed and the by-laws approved (at least pro tem) and an agenda carried out, legally establishing NIRI.

Bryan also enclosed his proposal serving as executive director, a program for the establishment of the National Investor Relations Institute, a description of the permanent functions of NIRI headquarters staff, and a fee schedule as previously proposed.

A week later, Bryan circulated another set of papers drawn up by Philip Neal's firm, Miller & Chevalier, in which the Articles of Incorporation replaced the Constitution, the terms being seen as broad enough to cover all of the purposes and powers set for in the latter. Counsel also urged NIRI to seek income tax exemption under Section 501 (c) (6) as a business league. Bryan wrote that This classification permits us to avoid IRS objections to accumulation of reserve funds and permits greater freedom in attempting to influence legislation.

Reality Realized

On November 5, a meeting was held at the offices of Glenn Saxon at The Singer Company. The members of the pro tem Board of Directors signed and executed the Articles of Incorporation of the National Investor Relations Institute and In so doing ... designated themselves to comprise the Board of Directors (of the Institute).

A membership application form was adopted with some minor changes, and Article II- Membership was amended to read: 1. Regular Members. Any individual who is actively engaged in investor relations at the time of his application and has prime responsibility in his organization for investor relations shall be eligible to apply for Regular Membership.

The wording on Associate Members was changed slightly to designate them as individuals who did not have the prime responsibility for investor relations in their organization.

The section on the Board of Directors was amended to set the number at three to be elected at the annual meeting by majority vote, with the addition of the President, Vice President, Secretary, Treasurer and immediate Past President.

There were some other housekeeping details, including designation of the National Bank of Washington as the depository of funds, approval of a proposed letterhead, assignment of the task of developing a promotional letter (Chatlos and Saxon) and brochure.

Others were assigned to prepare a letter to IRA members, an invoice to go to IRA members, a formal application form to go with the general mailing and various lists and resources for preparing the initial mailing to prospective members.

Also on this to do list were preparation of a letter summarizing the origin of NIRI and identifying its officers, plus an agenda for the next meeting which included setting a date for the first Annual Meeting, plans for a chapter manual, designation of a Membership Committee and approval of membership procedures, and completing directory data for directors. Philip Neal was authorized to apply to the IRS for exempt status.

The new Board gave informal approval to the proposed administrative agreement with Jim Bryan, but requested a phrase be added Such total expense not to exceed realized income from dues.

Quickening Pace

The next meeting was set for 2 p.m. at the Overseas Press Club following the IRA meeting on November 13. Dick Morrill issued a letter to the membership on October 6th describing these actions and the following paragraph relating to dues:

5. Resolved that the annual dues will be $100, and that the founding members will be asked to pay two years' dues in advance to provide additional funds to launch an effective membership enrollment program. An invoice for this purpose is enclosed.

In his final paragraph Morrill urged IRA members who had earlier indicated their support to come forth with the funds, and also those who may not yet have had an opportunity to do so promptly so that we may put this idea to the test of action.

As can be seen in the frequency of these meetings, the pace was accelerating fast — in part to complete as much work as possible and get the membership solicitation program underway before Christmas.

Only eight days elapsed until the meeting on November 13. The items of principle interest were a decision to eliminate the category of Associate Member, and to provide that any Regular Member who shall apply before December 31, 1970, shall be a Charter Member.

This established three stages or classes of membership. Founding Members would be those who provided the initial $200 each of seed money; Charter Members, those who entered in the first year; and Regular Members who joined after December 31, 1971. The distinction between Founding and Charter is not readily apparent in the sound of the words, but that was the intent.

With the exception of these and a few other lesser changes, the by-laws were accepted. The sections on Chapter development were reviewed and given more discussion, but no changes were made. The Administrative Agreement was also reviewed and particular attention paid to inclusion of a statement that payments under this paragraph (6) are dependent upon the accumulation of sufficient funds from the membership dues anticipated to be received from Charter Members enrolled during the life of this agreement — or by such other agreement or (other sources...) as Directors may freely determine.

This was normal good business practice, but it was also helpful in reassuring some IRA members that they were not signing a blank check.

A few days later, on November 18, Bryan wrote that the Articles of Incorporation had been filed by counsel with the Recorder of Deeds, Corporation Division, Washington, D.C. NIRI also had a phone number with installation set for November 20, and a bank account had been opened.

NIRI had its church and its steeple; all it needed was the people — and the money.

Who paid Piper?

Records are aggravatingly sketchy on this early phase of the financing. In the recollection of Bill Chatlos, nine members of the IRA put up the first $200: These were apparently Messrs. Chatlos, Converse, Gearhart, Morrill, Saxon and Singer, among the IRA officers and Steering Committee members plus Dick Brodrick. In addition, Jeff Bradley at TRW and Truman Henley at 3M are remembered. Most, if not all of this money had been received in late November or early December, for a starting sum of $1,800.

Chatlos is fairly certain that the first contributions to the NIRI start-up fund came in July 1969, as soon as it had been decided at that month's IRA meeting to proceed. Checks were received from nine members, he believes, to create a working capital based for expenses incurred in development — and kept entirely separate from IRA funds.

This fits with Morrill's belief that his check was drawn while he was still with Indian Head, Inc., in New York City, which he left in late August to join Bangor Punts in Greenwich, CT.

Additional contributions were made later in the year, as Chatlos remembers it, by IRA members as they sensed that NIRI would indeed to be established. It is this Chatlos' sense of the sequence of events that the first nine contributors were the Founders who put up the capital and took the risk.

Before the year was out, and before any further efforts were made to seek memberships, the additional funds came in to make a total of approximately $3,000, so the late-comers have still been considered to be Founders as well.

While there is no check book to use as a reference, it is probable that these later contributors numbered six. That is derived circumstantially from Jim Bryan's statement in the minutes of the February 11 board meeting of NIRI: . . . there are 15 Charter (sic!) members enrolled prior to the present mailing, which was done in mid-January 1970.

John Gearhart was collecting the checks, and he is sure there were 22. Sherlock Holmes or Hercule Poirot might want to know precisely whether Bryan's Charter members meant Founders or new members enrolled by NIRI after January 1, 1970. Simplicity calls for leaving the matter open by calling 15 the best possible guess as to Founders.

There are almost certainly other members who should be included as founders. One says to them, if you should have been but aren't, pray make yourself known. There is a secret ring in the bottom of this box of Cracker-Jack! If you have been included, and weren't in the magic 22, have no fear. You will not be unmasked — or defrocked if that is a more pertinent term!

Off and Running

This is neither the Football Hall of Fame nor the Miss America Pageant. It is just that nearly everyone who has an affinity for NIRI would like to know who its Founders were. Every child wants to know its parents.

There is one faintly possible reason for the difficulty in tracing them. The rush of enrollments in early 1970 might, conceivably, have swamped the small office staff so that some names had not yet been added to the February-March list. This seems unlikely, because checks were included in the new members' envelopes.

Does it really matter whether the seed money was $3,000 or $3,200, or $3,400? Did we actually reach the $4,400 goal that the IRA sponsors had set for getting the program off the ground?

That is not relevant any more. The organizers' confidence in the prospects for this new, national organization were rewarded more quickly and more generously than anyone dared hope.

As of March 12, 1970 — barely two months after the first mailing to prospective new members — 110 members had signed up! They came from 25 states and a province of Canada. There were 23 more applications awaiting processing.

Dues actually received amounted to $9,500. Dues receivable were $3,500. A total income of $13,000 against which expenses amounted to $8,100. That left a net income of $4,890, or more than the highest goal for the founders' initial $200 contributions.

The true bottom line here was made up of vision, faith, determination, diplomacy and dogged hard work — not to mention a fair sprinkling of luck. Risk had brought a real reward.

Onward and Upward

NIRI was now solidly in Motion. Letters were being received from every quarter as the applications came in.

Congratulations on your initiative . . . . . .Your approach sounds like the sort of integrated effort necessary to bring these related services into proper perspective and to give them proper guidance for future development. We heartily welcome the formation of NIRI. . . . There is a need . . . The concept of such en organization is excellent. And so on at some length.

By this time, officers had been chosen, probably at the first Board Meeting in January, subject to ratification at the Annual Meeting. Glenn Saxon was named president — both Gearhart and Morrill had felt quite strongly that he had given NIRI its intellectual foundation and its character, not alone but certainly as the prime thinker. There was general agreement on their recommendation.

As executive vice president, the nominating committee had recommended John Gearhart; as vice presidents, Bill Chatlos and Dick Morrill; and as secretary-treasurer, Alan Singer. These officers, together with Dick Brodrick, Jeff Bradley and Truman Henley became the first Board of Directors.

Winning Public Attention

The Board now focused on its three immediate goals:

  • To win public attention for NIRI's principles and standards of performance.
  • To develop chapters as rapidly as possible.
  • To accelerate planning for the First Annual National Conference.

Each thrust was related to and supported the other. More of the desired kind of visibility would help build chapters. More chapters would build attendance at the Conference. A successful conference would prove to new members that NIRI could and would provide meaningful opportunities for professional development.

The new leaders were barely in office before The Wall Street Journal provided a loud warning shot across the bow. In the issue of March 13, 1970, it carried a front-page feature headed The Drum Beaters, written by Jonathan Laing in the Chicago bureau. The story documented incident after incident of malfeasance or misfeasance by financial public relations men.

The Pirate Peddlers

These are the folks, the story read, who spend their time courting those whose recommendations are most likely to move the stock market (i.e. analysts). They are not always scrupulous in their ways.

One case involved a Chicago public relations man and one-time radio adventure program writer, who was making lofty projections of his client's earnings potential and stock price, without mentioning that he was a shareholder in the company or that the earnings were going down, and then down some more.

Another involved a former analyst turned public relations man representing a client whose profits tended to bunch in the fourth calendar quarter. He had persuaded them to hold back the full amount at the initial announcement and flow them into the income statement during the year. This eliminated the need to show three quarters with losses, or sharply lower profits, and had the desired effect of raising the market price.

A prominent accounting professor, Abraham Briloff — a familiar name to readers of Barron's — was asked to comment. He told the Wall Street Journal this sort of accounting cosmetics . . . could make company financial reports less informative and lead to abuses.

Once you start shifting things around to please Wall Street, he continued, executive ingenuity can lead almost anywhere. This was in the early part of 1970, and already the SEC was beginning to sound warnings about managed earnings, a cause they ultimately took up in earnest.

A third case in the Wall Street Journal story concerned New York firms that . . . not only tell their clients whom to talk to but what to say and how to dress while saying it. One was quoted as advising its more youthful clients to dress in "mode" style because that's the kind of go-go image the Street buys these days. Steak — or Sizzle?

Still a fourth was cited several times in the article for run-ins with the SEC, one instance being the witholding of negative information from a press release even though the client had supplied it with the expectation of its use.

There were several more examples of the kind of behavior that NIRI's founders had long ago found objectionable and which they saw as threatening to bring a bad reputation down on all practitioners, the sound with the unsound.

Marine Antiphony

On April 3, Saxon transmitted to all NIRI members a letter from the NIRI Board to the Wall Street Journal's Editor. Written only six days after the Drum Beaters article appeared, it said NIRI was formed precisely because we know . . . of a fringe element of companies and public relations firms that act as if Ôboosting the price of the stock' is a legitimate activity. The letter then set forth principles in which NIRI believes.

This statement is still an excellent reference point for guidance on the practice of investor relations it was later incorporated in a Progress Report to members and prospective members, mailed on June 6. The essence was that Our job is to communicate — and let the market decide on the worth of the shares.

The second, and equally important point: Only a person who has reasonably full access to all pertinent information about the company, be it favorable or not, should participate in the process of working, one-on-one, with the investment analyst who follows the company.

At its April 20 meeting, according to Jim Bryan's minutes, the Board took note that the March 19 letter to the Wall Street Journal had not been printed. This indicated that NIRI would be well advised to take action on its own to make sure its members and prospective members received a more balanced presentation of the roles of investor relations.

During the course of the meeting, the 200th application was received in the mail. Some concern was expressed as to the number of applicants who were public relations counselors, and their proportion to the rest. it was decided that all such applications should be reviewed prior to action, and Messrs. Chatlos, Gearhart, Morrill and Saxon should take on that responsibility.

An Unexpected Ally

At this point, serendipity seems again to have entered the scene. A writer for Business Week had been in touch with Bryan and various members of the Board in connection with a story he was doing. On April 25, the magazine carried an article headlined: Chilling Touts with Cold Facts.

The three-column story carried a photo of John Gearhart and Glenn Saxon, captioned: Gearhart and Saxon aim to drive stock touting out of investor relations work. A few weeks later, Bryan sent reprints to all NIRI members with a letter which said, in part, NIRI's officers and directors feel that this article accurately portrays the basic objectives and unique mission of the Institute.

NIRI's rebuttal to the Journal article had been accomplished through the happy intervention of a third party. Even more fortunate, this sort of attention and respect did NIRI a great service.

One particularly important paragraph, at the end of the story, referred to the Texas-Gulf Sulphur case, which went to court in the spring of 1965 and was still fresh in the public mind. After it, said Business Week, many attorneys advised managements to say nothing as the best way of staying out of trouble.

Business Week continued: Saxon vehemently disagrees. I am convinced that over the next 10 years more liability is going to be hung on companies which don't communicate well enough than on those who are at least trying hard and overstep slightly on a minor technicality.

The responsibility of investor relations executives was sharply etched as standing in the path of excessive legal caution and in support of full, fair and timely disclosure.

The article was also a key start on a necessary process of differentiating NIRI from the gray mass of public relations or financial pubic relations practitioners. NIRI wanted not only to stand out from something, it wanted to stand for something.

Raising NIRI's Profile

Help is always welcome, but hard work is equally important. NIRI could not depend on others to tell its story. The April 20 Board Meeting reviewed the language and format of two publications to be prepared for distribution to members and prospective members.

One of these was a slender, one-page folder containing a general statement of NIRI's purpose, some more concrete amplification of it and an outline of NIRI's Development Program. This included seminars, a newsletter to be developed, a library, chapter development in all major business centers, and an annual national conference featuring major and timely presentations, prominent guest speakers workshop sessions . . . and other details.

On the second side of this leaflet were photos and brief biographies of the NIRI Directors.

Concurrently, work was going forward on preparation of a Progress Report to the membership to bring them up to date on what NIRI had accomplished in its first three or four months. Completion and an early mailing were given top priority.

Within a month — in June — the report was published. Saxon's introductory letter noted that NIRI now had more than 200 members in 27 states and a province of Canada. We have a nucleus (three or more members) of a chapter in 17 corporate management centers stretching from Boston to Los Angeles.

The Report contained a reprint of the Business Week article, a summary of the Wall Street Journal story, and a photo-montage of the front pages of newsletters that had accorded NIRI mention: The Wall Street Letter, public relations Reporter, Jack O'Dwyer's Newsletter, and the Corporate Communications Report (CCR). All these comments had been positive.

Progress Report noted that CCR's editor, Richard E. Blodgett, had interviewed Glenn Saxon and quoted him in a boxed insert titled The Wheat from the Chaff.

Our aim is to separate ourselves from the so-called financial public relations consultants, who operate on the fringe of stock touting, and who are fouling the nest. We want our organization to cover the people who are trying to do an honest, straightforward, knowledgeable job of investor relations.

Designed to attract new members, the Progress Report carried a summary of NIRI's membership qualifications, the responsibilities of its board of directors, chapter development procedures, dues ($100 a year!) and membership meeting requirements. It encouraged members to contribute books or articles to a new NIRI Library and described the program of development and membership services.

These included regional and national training seminars, publications news releases and other measures to promote recognition of the services rendered by investor relations executives, and improved communication by investor relations executives among corporate management, the investment community and corporate shareholders. All this in only 12 pages!

Growing Chapters

NIRI had 17 potential chapters in the nuclei Glenn Saxon identified in major management centers. Turning these nuclei into full-sized molecules was the second big challenge the Board had set.

The available minutes of Board meetings from April through December are insufficient to trace the chapter development progress in any detail. What is known, from sketchy records but still vivid memories, is that Charles L. Cohen, director of investor relations at Lear Siegler, turned his considerable energies loose on the problem.

There are letters from various chapter members in Boston, Chicago, Detroit and Los Angeles, where Cohen was based, to indicate that Charlie was like the whirling dervish of the desert lands during this year, calling on NIRI members in city after city to stimulate the formation of chapters.

Detroit and Boston received their Charters in November, but had been in business for several previous months. Charlie's missionary work was bearing fruit in early 1971, with Pittsburgh, Philadelphia, and Cleveland in advanced stages of formation. Members in Minneapolis-St. Paul had arranged for a visit from Cohen in May or June — by which time there were some 321 NIRI members in all.

Charlie and Neal Ball, corporate director of advertising and public relations at American Hospital Supply in Chicago, were co-chairmen of the Workshop Panel on Creation, Care and Feeding of NIRI Chapters at the First Annual National Conference in Washington, D.C. in November, 1970.

At that Conference, the Annual Meeting also elected Charlie to the Board of Directors, a position he had earned several times over. Glenn Saxon later described these efforts eloquently: One of the unsung heroes of NIRI is Charlie Cohen, who spent countless hours planting NIRI chapters across the country.

Planting seeds is one thing, and the national organization had done that well from the beginning. Making seeds grow into plants — or trees — takes lots of watering and careful tending. Charlie gave it the devotion one expects of a Luther Burbank.

In May of 1971, Neal Ball, who had headed the Chicago Chapter, resigned to become Deputy Press Secretary to President Nixon. Charlie stepped into the gap and helped reorganize the chapter leadership. Concurrently, he and his committee were nearing completion of a chapter organization manual and a model of chapter regulations. Both were introduced in the Spring of 1971.

Staying Flexible

Throughout 1970 and 1971, the composition of chapter membership as between corporate executives and counselors was a topic at every Board meeting of NIRI. The goal had been, from the beginning, to maintain a preponderance of corporation representatives— roughly 80 percent of the national total. The question whether to include a specific quota for counselor membership was debated, but always resolved in favor of simply keeping a close eye on the balance — a responsibility delegated to the Membership Committee with general board oversight.

The choice of a flexible approach as against a rigid rule proved the wiser course over time. In many cities, including many large ones, the headquarter offices of major corporations were not as numerous as in New York or Chicago. There were a great many more medium and small sized public companies in the city or the surrounding region. Many of these companies did not support, or see the need for, an internal investor relations function. Many did not have a public relations department, either. Yet they had needs for both capabilities.

Managements of these mid-cap and small cap companies reached out to counselors and public relations agencies for assistance in such matters as annual report preparation or business and financial news releases. Some relied on their advertising agencies.

The personnel in these external service organizations often had occasion to come into close contact with financial writers and investment analysts. Their responsibilities did not match exactly with those of investor relations directors who were the appointed spokesmen — or women — to analysts and portfolio managers (the latter not very numerous yet in the early 1970s)

Their clients, nonetheless, often needed guidance and help, as in accepting an invitation to appear before an analysts' society. The question would be not only whether to accept, or to seek, but what to say and who should say it — and who was going to prepare the presentations. Or how to respond to a request for information from the local newspaper or The Wall Street Journal or Associated Press.

Same Route, Different Paths

As a result, agencies and counselors were traveling the same route as internal communications people, though not always the same, precise path. They were interested in professional development. NIRI was established to meet that need, and, indeed, welcomed practitioners from outside the corporate walls if they met normal standards of competence and integrity.

In the smaller cities and outlying areas, counselors often were not only the best informed people available, frequently they were the only ones. And they tended to be more numerous relative to the total available candidates for membership than would be true in, say, New York City, where so many large companies were based.

Being independent businessmen, counselors sought to become known among potential clients, and also to be recognized for their abilities among both existing and hoped-for clients.

Their motivation was extremely helpful to NIRI. They were early members of the chapter organizations and often were the driving forces behind chapter activities. They brought a variety of backgrounds and of experience that often outmatched their corporate colleagues. They also brought fresh ideas.

All of these attributes were desirable in chapters. The national Board of Directors, and the membership committee, therefore, spent a great deal of time pouring over applications and doing as much background checking as they could make time for. The care and caution were built on often personal acquaintance with activities and styles of operation that had brought severe criticism, sometimes legal action, in too many cases involving outside financial public relations and counselors.

The result of all the soul-searching and labor was to enable chapters to develop a membership more heavily weighted toward the counseling field than the ideal 20 percent to 25 percent of the membership. On a few, rare occasions, there were mistakes. Some were resolved with a caution or a reprimand, one or two by the individual or firm withdrawing the application rather than risk the damage of rejection.

On balance, NIRI developed, and has maintained, a high standard of character and performance among its chapters, and has reason to be grateful for the careful approach its early leaders took.

Mounting the Matterhorn

Climbers, in the Alps or the Andes, are said to scale those peaks because they're there. The NIRI board of directors had been pointing toward its own lofty peak even before the organization was officially in business, starting toward the end of 1969.

What they had in their binoculars was an Annual National Conference that would set such a high standard as to mark NIRI as a leader in the newly forming field of investor Relations. A leader in providing education, both theoretical and practical, and in focusing attention on the function of the profession in the capital markets in the economy, and of course, in the corporate world.

It was recognized at the start that in order to do this, the conference would; have to feature speakers and panelists of the highest order, from the investment community, from academia, from the legislative and executive branches of the Government, and from regulatory bodies.

These were high ambitions, but not entertained for mere grandiosity's sake. It was recognized and strongly felt that NIRI needed to make a name for itself early in its existence. It had to do something to make itself stand out from the crowd, or risk slipping into that amorphous mass of groups that joiners join.

To bring this about, the conference had to show that NIRI's leaders knew their profession well, knew how to develop others in it, knew how to conduct the practical, utilitarian, how to side of it as well as how to expand their own and the members' intellectual horizons. Too many organizations, it was felt, become distracted by the nuts and bolts of their field and ignore the larger view. NIRI wanted to show the value of vision, of looking out into the future, and of anticipating trends rather than being run over by them.

One of the first targets given to Jim Bryan was lining up space for the Conference. This was begun in January 1970. At the April 20 Board meeting, approval was given to the choice of the Shoreham Hotel in Washington, D.C., and to the dates: November 4 through 7. Both selections followed intensive review of possible conflicts of dates and locations with other large organizations. The choice of Washington, D.C. was influenced in part by its relative ease of access from other parts of the country, and equally by the presence there of prominent government figures who were being eyed as speakers.

The board appointed Dick Morrill as general conference chairman, with Bill Chatlos and John Gearhart as co-chairmen of program development. Alan Singer was made chairman of official organizational activities at the meeting.

To name four busy men, all with full-time positions, to direct such an undertaking reveals the capacity of the NIRI Board for expecting more than the usual performance from its members. Perhaps also a streak of unchained optimism.

Need sometimes fosters hope. For NIRI, the need was to improve its financial position in order to fund the expansion of its educational programs. The conference was looked upon as a potential source of significant revenues and approached with that thought very much in mind.

Several themes were considered over the next several months. The one chosen — The Information Explosion — was particularly relevant to the visible upsurge in communications technology, and to the difficulties the Wall Street community was having in coping with the rapid build-up in trading volume. Not only had individuals become active market participants, but by 1970, institutions were weighing in with trades that in the eyes of the day were tremendous.

The investment firms themselves were staggering under old fashioned processing systems that could not keep up with the volume, and found themselves required to invest ever larger sums in modernizing their physical facilities. In 1967 and 1968, they had been thoroughly scared by the piling up of paperwork in their own back offices and at the transfer agents; with a resulting explosion of fails. This inability to deliver certificates to another broker to honor the trades climbed as high as half the investor relations trades in a given day. A few brokers were so far behind they could not catch up at all, and many went out of business as a result.

Regulatory procedures, in the Stock Exchange community and at the SEC, were backlogged as well, and regulators found the heightened activity increasingly difficult to track accurately.

The stock market, as Professor Lorie wrote, is only two things: Information and a place to trade it. Perhaps he was repeating a thought expressed much earlier by Bernard Baruch in his autobiography! But no one could doubt that an information explosion was taking place in the investment world as well as the corporate. Hence the title. It was clear from the start, that steps must be taken early to obtain the caliber of speakers the conference leaders hoped to attract. The more prominent the person, the farther in advance must he, or she, be reached. So in the perpetual confusion of planning the physical and mechanical side of the event, the co-chairmen focused constantly on lining up speakers.

Everyone on the Board pitched in, with ideas, and with efforts to work through friends in NIRI to come up with candidates and connections through whom they could be approached.

No figure was too important to be considered. This included the President of the United States. A letter on White House stationery was written to Jim Bryan on October 6, expressing sincere regret that heavy official demands of the President's fall calendar will make it impossible for him to be with you . . .

What is particularly fascinating about this brief note is that it was signed by Hugh W. Sloan, Jr. Staff Assistant to the President. The same Hugh Sloan who, a few years later, was the first to tell about the money involved in the Watergate break-in during one of the early interviews undertaken by Woodward and Berstein. That crisis was far from the minds of anyone connected with the Conference in October, 1970!

Dick Morrill called on his old connections at The Wall Street Journal to see whether he could induce the president of Dow-Jones to be a speaker, or, if not, to enlist his help in obtaining the editor, Warren Phillips, or a vibrant feature columnist on the editorial page, Vermont C. (from Connecticut!) Royster. As it happened, none of them could participate, and neither could Robert Bleiberg, editor of Barron's. An opening had been made, however, and Bob Bleiberg was to become a popular figure at future NIRI conferences.

In August, Bryan received another regret from Paul W. McCracken, then chairman of the Council of Economic Advisors (CEA). At almost the same time, an acceptance was received from Henry C. Wallich, a former member of the CEA but now a professor at Yale, Senior Consultant to the Secretary of the Treasury and a columnist for Newsweek.

A long list could be put together, if the records were readily available, of all the names of highly recognized people who had to turn the NIRI conference planners down. The ones who did not, however, make an equally distinguished list.

There were 21 in all, according to the final Program and Schedule distributed at the Conference. Rather than list them in full, it may be as helpful to pick a few from different topical segments of the two-day event.

On the first day, a symposium considered What Investment Research Can and Can't do in the 1970's. Members of this panel included Jon B. Lovelace, president of Capital Research in Los Angeles, and already a legend in the realm of investment management; William R. Grant, a former head of the New York Society of Security Analysts and a leading expert on the chemical industry, vice chairman of the board of Smith, Barney & Co.; and Philip Albrecht, vice president of Merrill Lynch.

In the afternoon of that day, The Analyst Profession of the Future was the subject of C. Reed Parker, research chief of Duff, Anderson & Clark in Chicago and president of the Financial Analysts Federation. Later that afternoon, two speakers addressed the Role of the Investor Relations Officer in . . .Corporate Responsibility.

The first speaker was a young man named Geoffrey Cowan, a wealthy Chicagoan and an avid critic of the business world who was associated with Ralph Nader. Rising in his turn to express quite contradictory views was Professor Henry Manne, a conservative economist from the University of Rochester. One recollects that Cowan would not remain in the room to discuss the subject with Manne, in the usual spirit of free debate.

On the following morning, the breakfast speaker was the Honorable Hamer Budge, Chairman of the Securities and Exchange Commission...he dwelt on The future for investor information and provided an insight into SEC thinking that was new to most of the audience. He also revealed his intention to resign,. which was not released publicly until the next day. Press reports gave NIRI more visibility because of its identity with a very important official.

Not only was Budge an important figure in Washington, D.C., and in Wall Street, but he was one of two SEC speakers at this Conference, which marked the first steps the Commission or its Staff had ever made to appear before an unofficial audience.

Immediately following him was Alan Levenson, who had been named Director of Corporation Finance in the Division of Corporation Finance of the SEC only a few months earlier. Levenson had appeared as a speaker at a Wayne State Conference in the early summer of 1968, but in the context of a University setting. Several of the NIRI Founders had attended that Conference and had become acquainted with Levenson through it. An academic setting was a far different place in the eyes of SEC staff from an audience composed of the people they regulate, and their lawyers.

So Levenson's appearance this day was a truly ground breaking event. He saw investor relations people in their familiar setting, was asked questions, answered them and discovered, to his own confessed surprise, that this was a world far different from what he had imagined corporate society to be. NIRI people also discovered, certainly to the surprise of some, that a Washington bureaucrat could be witty, quick minded and charming — no pointy ears or forked tail.

The dialog that subsequently built up between the Commission and its staff, on the one hand, and NIRI on the other has been one of the most constructive relationships in the organization's history. Not always moonlight and roses, but very helpful overall in gaining a hearing for a corporate point of view and helping NIRI members understand the purposes and restraints affecting the Commission.

One has only to recall Commissioner Pollack, also a NIRI conference speaker in later years, repeat his advice to practice full, fair and continuous disclosure to understand how SEC personnel have helped NIRI members keep communication flowing when others in their corporate organizations would have stopped it.

The First Annual Conference also included on its speaker list a leader in developing what was known then as the Third Market — Donald Weeden. This was five years before the famous (or infamous) May Day for Wall Street when, in 1975, negotiated rates came into being under SEC mandate. Weeden had been the leader in cutting rates, for which he was not outrageously welcome among his Wall Street peers.

Speakers representing the fields of securities law, economic analysis, and politics dotted the program as well. The effort to include meaningful exposure to a broad range of NIRI interests was largely fulfilled.

Making News

The Conference drew some 120 registrants, most of whom were NIRI members, out of a total membership of 230 — almost 50 percent. As they picked up their newspapers each day, they found the conference in the financial news columns.

On November 7, the New York Times and the Washington Post gave extensive coverage to parts of Commissioner Budge's talk. The Washington Post, quoting Dow-Jones News Service, reported Budge's announcement that the SEC was reviewing its proxy rules, particularly those governing shareholder proposals.

The New York Times carried a by-lined article by Eileen Shanahan on the same topic, and an additional remark by Budge that Analysts are not entitled to any more information than anyone else. A long and sometimes troubled period of discussions with the SEC was set off by this remark, and finally settled with its acceptance of a doctrine of differential disclosure some years later.

The Wall Street Journal carried similar articles. On November 10, Robert Metz of the New York Times, quoted at some length in his Market Place column the remarks of Professor Wallich.

On the following day, Metz devoted his entire column to NIRI, saying, in part that the Conference was an impressive undertaking for an organization less than a year old with fewer than 300 members. It was especially so for an organization that financed its first mailing with $2,400 representing two years' dues paid in advance by each of the dozen founders. But there was the National Investor Relations Institute running a conference for 146 of its members . . . with an impressive list of speakers.

Jack O'Dwyer, in his newsletter commented: Attendees at the first annual conference. . . gave it generally enthusiastic reviews.

US News & World Report on November 23 ran an extended story on Turmoil in the Securities Industry in which it referred anonymously to a meeting in Washington, D.C. in November and at a later point quoted Glenn Saxon as president of the National Investor Relations Institute.

In his Newsletter of December 2, O'Dwyer again gave attention to NIRI in a commentary on What PRSA Should Be Doing. He said, at the national level there is the new NIRI. Its first annual conference won high praise, and we think NIRI has the potential to be a prestigious and powerful national organization. It is trying hard to avoid the many mistakes PRSA has made.

Then he added: An important asset of NIRI is its Washington, D.C. headquarters — where PRSA doesn't even have an office.

Approximately three months after the Conference, the full Proceedings were published — some 270 pages. It was made available to members at the nominal cost of $5. One reader, an active Wall Streeter — and occasional contributor to Barron's, told several NIRI members he thought this was the best conceived and most comprehensive reference on investor relations he had ever seen.

Questionnaires were distributed, and some 80-odd were returned, scoring the program and providing opportunity to make suggestions for the next conference.

Among the comments: More workshops, debates, panels. Social functions — same or more. Add speakers at lunch. Add panels of analysts telling what they want from companies. Have NIRI members describe their programs and provide case histories on handling investor relations problems.

These suggestions and criticisms were worked into the next conference, and, of course, continue to be from one to another today.

Pell Mell Progress

NIRI came to the end of its first calendar year with a long list of accomplishments, many of which would have been achieved by any other new organization. The Board and officers drew their greatest satisfaction from knowing that the first Conference had fulfilled most of their expectations. It had put NIRI on the map. It had cemented long-term membership within its new flock. It had a promising future.

Christmas for the Board came a little early that year; on top of their own Matterhorn.




Historical Resources

For more insights on NIRI's rich history, please read this special IR Update edition that was published to celebrate NIRI's 25th anniversary

Here is an audio recording, "The Wit and Wisdom of NIRI Veterans," that was created for NIRI's 30th anniversary. 

The Spring 2019 edition of IR Update includes a feature article on NIRI's first 20 years

The Summer 2019 edition includes a feature article by former Board Chair Doug Wilburne on NIRI in the 1990s and 2000s.