Web Disclosure: The Ongoing IR Dilemma

Neil Hershberg, SVP of Global Media for Business Wire wrote an interesting op-ed in Bulldog Reporter’s IR Alert contending that web-based disclosure “still isn't ready for prime time.”

He cites a number of reasons why — one year after the SEC’s Interpretive Guidance Release — investor relations professionals are no further along when it comes to using Web 2.0 as a channel for the release of important information to investors.

Certainly, one key reason for the inertia was the horrendous financial meltdown, which began in 2007 and accelerated in 3008. In the face of chaos, Hershberg asserts, investors (and IR professionals) clung closely to what they believed to be “the global gold standard” of disclosure.

While I would agree that blogs, bulletin boards, Tweets and RSS feeds are no substitute for the traditional broad, simultaneous release of official information, they can undoubtedly be an extremely useful adjunct. As the aggregate number of analysts declines — and the number of investors using the social media rises — it’s good for the investor relations community to be prepared for an inevitable sea change in material disclosure.

A Global Crisis of Confidence in US Financial Markets

There’s a comprehensive and fascinating article in the January 3 issue of The New York Times that should be must-reading for all public relations (PR) and investor relations (IR) consultants who serve financial services companies, including private equity firms and commercial and investment banks. “The End of the Financial World as We Know It,” by Michael Lewis and David Einhorn, begins with a provocative statement: “Americans enter the New Year in a strange new role: financial lunatics. “

As proof of their thesis, authors cite “the strange story of Harry Markopolos,” a former investment officer who tried, for nine long years, starting in 1999, to explain to the SEC that Bernie Madoff, the man who engineered the biggest global Ponzi scheme ever, couldn’t be anything other than a fraud. In response, the SEC undertook a slapdash investigation of Madoff and pronounced him free of fraud.

The Madoff scandal is just one example of a systemic problem … and it’s not just a matter of insufficient oversight of the financial services industry.

According to Clusterstock, many of Madoff’s investors were well aware that his returns were impossibly good, so he had to be cheating. However, they never considered the possibility of a Ponzi scheme. They thought that the scam involved insider trading … and that’s precisely why they chose to invest with Madoff!

In many cases, the Wall Street swindler’s investors willfully chose to become complicit in their own defrauding by ignoring the old adage that “if it sounds too good to be true, it probably is. “

The Role of Blogging in Financial Communications

For PR and IR professionals interested in the role of blogging and the social media in financial services, private equity, and investment banking communications, check out the article by Davis D. Janowski in InvestmentNews that addresses the conflicting views of blogging held by financial advisors, the Financial Industry Regulatory Authority (FIRA) and the Securities and Exchange Commission (SEC).

Financial advisors see their blogs as “a harmless, inexpensive technology” that facilitates communication with their clients. FIRA views blogs as ads that require supervisory review. And the SEC contends that blogs should be treated as a company statement.

The bottom line? To avoid compliance problems, be aware of what you are saying in your blog. Keep your communications general and avoid mentioning specific transactions, products or equities by name. For more information, check out these links:

• Certified Financial Planner Board of Standards’ recently updated Standards of Professional Conduct
• “FINRA Provides Guidance Regarding the Review and Supervision of Electronic Communications”

• The SEC’s “Commission Guidance on the Use of Company Web Sites”

How to Sabotage a Meeting

A Simple Sabotage Field Manual — produced in 1944 by the U.S. Office of Strategic Services, the predecessor to the CIA — was recently featured on the popular blogspot Boing Boing.

Among the tactics recommended to saboteurs in the WWII-era manual are techniques for “general interference with organizations and conferences.” Sadly, many are standard operating procedure in some New York City PR and IR firms … though, happily, not at Makovsky + Company!

1. Insist on doing everything through “channels.” Never permit short-cuts to be taken in order to expedite decisions.
2. Make “speeches.” Talk as frequently as possible and at great length. Illustrate your “points” by long anecdotes and accounts of personal experiences. Never hesitate to make a few appropriate “patriotic” comments.
3. When possible, refer all matters to committees, for “further study and consideration.” Attempt to make the committees as large as possible — never less than five.
4. Bring up irrelevant issues as frequently as possible.
5. Haggle over precise wordings of communications, minutes, resolutions.
6. Refer back to matters decided upon at the last meeting and attempt to re-open the question of the advisability of that decision.
7. Advocate “caution.” Be “reasonable” and urge your fellow-conferees to be “reasonable” and avoid haste which might result in embarrassments or difficulties later on.
8. Be worried about the propriety of any decision — raise the question of whether such action as is contemplated lies within the jurisdiction of the group or whether it might conflict with the policy of some higher echelon.

It’s a cautionary tale for PR, IR, branding, financial communications and B2B marketing communications firms — and, indeed, for all consultants in the professional services space!

Microsoft + Yahoo: Another Perspective

There’s been lots of coverage in the mainstream media about Microsoft’s proposed acquisition of Yahoo. Those in favor say that the merger could strengthen both companies and create more shareholder value than each company could create on its own. Those against it say that Microsoft’s offer substantially underestimates Yahoo’s worth.

If you believe that the success of any merger depends to a significant extent on the willingness of employees to embrace it, then Microsoft has some problems ahead of it.

On his “Tech Your Universe” blog, Yahoo employee Nick writes, “I estimate that 1 in 10 Yahoos will refuse to work for Microsoft.” After giving three reasons why the idea of working for Microsoft is “awful,” Nick goes on to say, “I’d be embarrassed to admit that I worked for Microsoft, and having it on my resume would be detrimental to my career.”

Apparently he’s not alone in his sentiments.

This is a public relations battle that is likely to be fought in the boardroom, the courtroom and the vastness of cyberspace.