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Investor Relations at The Pivot Point - IR Update Dec 2010

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NIRI-Chicago's 2010 Investor Relations Workshop - Challenge, Connect, Change - provided a forum for IR practioners to learn how to better meet the many challenges of the changing business and regulatory environment as well as connect with other IR professionals. This article summarizes key learnings from the keynote speech at this Workshop.

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Investor Relations at The Pivot Point - IR Update Dec 2010

  1. 1. s p o t l i g h t o n c h a p t e r s 22 D e c e M B e r 2 0 1 0 iR update F inancial regulatory reform and the ability to influence significant issues are just two factors that have increased the prominence and importance of investor relations today. “investor relations stands at a pivot point within the company with important con- nections to investors externally and with finance and corporate reporting, governance functions and media relations internally,” says Alan Beller, former director of the SEC’s Division of Corporation Finance and current partner at Cleary Gottlieb. “This broader set of relationships puts investor relations in a special place with special responsibilities requiring expertise in an increasingly broad range of subjects.” Beller made this case in his keynote speech—“What’s New at the SEC?”—at the Chicago chapter’s iR Workshop in September. This full-day event, which attracted 100 participants from across the Midwest, featured formal sessions on financial reform, earnings guidance/ disclosure and social media. The work- shop also included interactive, small- group discussions on current topics and what-if scenarios. Apply This Advice Focusing on three areas—enforce- ment, disclosure and financial reform— Beller provided some practical advice. He first addressed the SEC’s more aggressive enforcement efforts, citing the case against Citigroup over materi- ally misleading statements about its subprime assets exposure in 2007. This action included an administrative proceeding and an $80,000 fine against Citigroup’s former iRO for his role in drafting and approving the disclosures, which he should have known were materially mis- leading based on infor- mation available to him at that time. The lessons for iROs are: • Pay attention to what comes across your desk. Watch for red flags, and follow up. • Make independent, professional judg- ments about materiality. • Make the financial disclosure process a collaborative effort across the organization. • Include lawyers early, and involve them in judgments of materiality. Beller also discussed the emerging SEC focus on consistency across all investor communications, including periodic SEC filings, news releases, earnings scripts and investor presentations. in essence, the performance metrics that companies Investor Relations at the Pivot Point use internally to measure success and that are discussed in investor presentations should also be included in periodic fil- ings. Recent changes in compliance and disclosure interpretations make it easier to include non-GAAP financial measures in SEC filings. Dodd-Frank Implications Finally, reinforcing themes heard earlier in the workshop, Beller addressed the iR implications of the proxy access and executive compensation provisions of the Dodd-Frank Act. Relative to proxy access, he pointed out that the same factors that make companies a target for criticism— poor performance, accounting difficulties and hot-button governance issues— increase the likelihood of shareholders seeking proxy access. However, having sound board policies on governance, exper- tise and succession lessen the risk. Beller advised iROs to: • become governance and compensa- tion experts; • know their major institutional inves- tors, including the people who have voting authority over their shares; and • develop strategies for engaging in constructive dialogue with investors before issues arise. Contributed by Lisa Ciota, vice president-program- ming of the Chicago chapter and principal, Strategic & Investor Communications, Downers Grove, Illinois; lisa.ciota@gmail.com. Go to www.niri-chicago.org/workshop for an archived webcast and written summary of Alan Beller’s keynote presentation as well as a detailed recap of the IR Workshop. alan Beller pointed out that the same factors that make companies a target for criticism—poor performance, accounting difficulties and hot-button governance issues—increase the likelihood of shareholders seeking proxy access.

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