using communications to manage risk in a resetting economy
TRANSCRIPT
Using Communications to Manage Risk in a Resetting Economy
December 3, 2009
216.241.0405
www.dix-eaton.com
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About Us
• Integrated, full-service firm
• Twice named nation’s best mid-size firm
• Among largest employee-owned firms in U.S.
• Two-thirds of professionals over 10 years of experience
• Founded in 1952
• Specializing in IR & Crisis Communications
– Serve as outsourced IR department for many
– Member of Chartis CrisisResponse® network
• Long-term partners – still retained by two-thirds of existing 1990 clients
• Senior-management orientation, high-stakes/high-impact experience
216.241.0405
www.dix-eaton.com
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Diverse Client Base
216.241.0405
www.dix-eaton.com
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Dix & Eaton’s Investor Relations Practice
Client services include:
• Shareholder communications
• Investor targeting
• M&A/IPO communications
• Proxy contests/shareholder activism
• Bankruptcy communications
• Investor perception studies
• IR Web sites/digital strategies
• Annual reports
• IR training
• IR function development and assessment
• Employee education
216.241.0405
www.dix-eaton.com
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The Impact of Investor Relations
Effective IR programs are believed to contribute a
median premium of 10 percent of valuation, while
ineffective IR programs are thought to cost a median
discount of 15 percent to valuation.
- Rivel Research, 2007
216.241.0405
www.dix-eaton.com
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Investor Relations Trends to Watch in 2010
• The economic recovery
– Will companies with increasing revenues outnumber companies filing for Chapter 11 protection?
– What is the proper role of the Board in corporate risk management going forward?
• The impact of the ongoing political and legislation focus on risk oversight
– What constitutes a “red flag” and what constitutes “conscious disregard” will come under greater scrutiny
• The way companies raise capital
– Private placements, IPOs, 144A’s, credit facilities
216.241.0405
www.dix-eaton.com
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Investor Relations Trends to Watch in 2010
• The use of social media tools for IR purposes
– Disclosures v. dissemination
• The evolution of the proxy season
– From contests to campaigns
• Elimination of broker discretionary vote
• Executive compensation and “Say on pay”
• Proxy access
• The rise in activism
– No longer just the work of activist hedge funds
– No longer reserved for only large-cap companies
– Issues will range from governance to environment
216.241.0405
www.dix-eaton.com
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Thoughts on Preparing for Proxy Season 2010
• Recent changes have tipped the balance away from management to shareholders
– Undertake an annual governance audit of Board and corporate-wide policies/practices
– Seek regular feedback from institutional investors on corporate governance policies/issues
– Meet with institutional compliance officers early on to communicate management proposals/changes in policies and to address shareholder proposals
– Pay attention to and address governance trends before they manifest into a shareholder proposal
216.241.0405
www.dix-eaton.com
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The Trend in Activist Attacks
• Proposals intended to enhance shareholder value are increasingly about accountability
– Board presence
– Sale of company or assets
– New management team
– M&A bid
– Elimination of defense mechanisms
• Use aggressive actions – including sophisticated communications strategies – until a settlement is reached with the company or the proposal is contested through a proxy solicitation
– Going public with letters to the Board, progressive SEC filings, rumor mongering, press releases/story placements, promoting churn in the stock
216.241.0405
www.dix-eaton.com
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Thoughts on Preparing for an Activist Attack
• Establish a team of relevant outside advisors: legal counsel, IR counsel, proxy firm, financial advisor
• Develop a contingency communications plan
• Identify and be aware of triggering events
• Actively monitor shareholder base, accumulations, market intelligence
• Know and understand current shareholder perceptions, motivations
• Mobilize credible third-party testimonials
• Leverage credibility with investors, media, regulators, communities, employees
• Be willing to listen and negotiate prudently, when appropriate, to give the Board time to fully exercise its fiduciary responsibilities
216.241.0405
www.dix-eaton.com
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The Case for Crisis Communications
“During the next five years, 83 percent of
companies will face a crisis that will
negatively impact share price between 20
and 30 percent.”
- Oxford-Metrica
216.241.0405
www.dix-eaton.com
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Our View of Crisis Communications
Be at your best when times are their worst
• Effective crisis management will:
– Preserve customers
– Retain employees
– Minimize sales losses
– Reinforce stakeholder trust
– Reassure the community
– Positively influence media coverage
– Create powerful allies
– Shorten the duration of a crisis
216.241.0405
www.dix-eaton.com
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Our Approach to Crisis Communications
Why Communicate During a Crisis?
• If you don’t, someone else will
– Absent facts, rumor and speculation will fill the void
• Balance views of groups critical of the company or its activities
• Demonstrate organization’s concern for employees and community
• Key stakeholders receive information from the media
• Demonstrate the successes of the company’s response
• Building public support = less public pressure on regulatory agencies/elected officials to get tougher, demand more
• Help defuse conflict and lower total project cost
• Avoid the perception of a failed response
Help preserve your brand and reputation
216.241.0405
www.dix-eaton.com
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Representative Assignments
• Colgan Air – Crash of Flight 3407
• Delek U.S. – Refinery explosion
• Designer Shoe Warehouse – Credit card data theft
• Lincoln Electric – Class-action defense
• AkzoNobel/Glidden – Plant closure and lead paint litigation defense
• Kelly Services – CEO transition and incident management
• Energizer Battery – Toxic chemical spill
• Pinnacle Airlines – Breach of contract
• UnitedHealthcare – Hospital contract termination
• International Coal Group – Sago Mine accident
• Northwest Airlines – Mechanics strike and bankruptcy
216.241.0405
www.dix-eaton.com
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Crisis Trend to Watch in 2010
The impact of social media on crisis management
• Yesterday, crises were carried via traditional media, meaning breaking news reports had to be written and moved on a news wire by reputable journalists and camera trucks sent to the scene
• Today, social media can deliver news about a crisis by watching a live video feed uplinked from an employee or passerby's cell phone directly to CNN
• So what can you do to get ready? Here are a few tips:
– Evaluate your online presence
– Have a monitoring service on standby for an emergency
– Have a social media policy in place
– Make sure you can communicate swiftly
• Being prepared is no longer just about having a crisis manual on your shelf and trained spokespeople – it’s knowing how to react in real time
216.241.0405
www.dix-eaton.com
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Case Study: Domino’s Pizza
YOUTUBE
THE WALL STREET JOURNAL
216.241.0405
www.dix-eaton.com
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Speaker Information
• Rob Berick
Managing Director and Investor Relations practice leader
216.241.4611
• Matt Barkett
Managing Director and Crisis Communications practice leader
216.241.3073