WASHINGTON: In the same week a survey by New York-based PR firm TowersGroup showed that 43% of active individual investors have less confidence in the post-Enron stock market, Lou Thompson, president and CEO of the National Investor Relations Institute (NIRI), gave suggestions to an SEC roundtable to remedy what he called the "Enron catalystin creating a crisis of investor confidence.
Blasting corporations that had made disclosure decisions based on legal liabilities instead of actually informing investors of company activities, Thompson said his mission would be to create a new environment of the highest ethical conduct in corporate America.
Backing up Thompson's view of Enron as a mechanism for change, 33% of respondents to the TowersGroup survey said investigation of Enron's collapse will make investment information more reliable.
"Trust will no longer be assumed,
said Alan Towers, president of TowersGroup, who called Enron the "Watergate of business."
"Companies will have to earn it with behavior, communications, and leaders who inspire confidence,
Among Thompson's suggestions for executives eager to inspire investor confidence, Thompson recommended that the SEC require that IR officers make investor reports to the corporate board.
"The company's IR officer should be required, just as the company's internal auditor is, to meet with an independent committee of the board to directly report the views of both institutional and individual shareholders,
Thompson also recommended to the SEC that when IR officers report numbers to investors, companies should derive those numbers through generally accepted accounting principles (GAAP), rather than through the current hodgepodge of GAAP and pro forma figures. He also said companies should broadly disclose off-balance-sheet business. Part of this disclosure, he said, would require companies to explain the business purpose behind their investments. Thompson also called on companies to be more aggressive in educating employees about the benefits and risks of owning their stock.
"One of our primary jobs in IR is to do the things that minimize risk for investors,
Thompson said, explaining that full and fair access to corporate information will help shareholders better understand the companies in which they invest.
Given the current environment, Thompson added, he asked all parties to "come together and think out of the box for ways we can all restore this loss in confidence."