NEW YORK: The web of corporate deceit and investor distress that
took place at Enron has, according to Lou Thompson, president and CEO of
the National Investor Relations Institute, possible implications for
rank-and-file IR people.
"If analysts were raising questions as they say they were over the past
several years, saying Enron was a black box they had difficulty
understanding, and that had been communicated to the IR person, then
that IR person should have been raising those questions internally,"
Thompson told PRWeek. "In IR, you certainly have to be loyal to your
company, but you also have a role to act in the public interest."
As Enron continues to be investigated from all angles, and government
hearings - including by Senate Commerce Committee chair Sen. Byron
Dorgan (D-ND) - continue, IR practitioners have been watching the Enron
implosion with a professional eye toward their own futures. A senior IR
professional at a major firm wondered what might be the liability of an
IR person when corporate accounting is inaccurate. On the agency side,
most firms protect themselves by including an indemnity clause in
contracts. The clause states that information provided to the agency by
the client must be accurate.
But on the corporate side, things get murkier: An IR officer with a
senior title might be protected under a director's and officer's
insurance policy protecting executives in the case of a shareholder
Corey Cutler, SVP at Morgen-Walke Associates, doesn't claim to have any
answers, but he said he expects to see a heightened awareness of
transparency in corporate statements, as well as dynamic corporate
"It's going to make for more interesting shareholder meetings with
respect to individual investors voting on the approval of auditors,
particularly as it pertains to Andersen," said Cutler. "I think the
public is going to make its opinion known, and that the IR professional
is going to have to prepare more for what is typically a routine
Hollis Rafkin-Sax, GM of Edelman Financial, agreed with Cutler. She said
an increasing part of the IR officer's job will be to ensure a "plain
English" description of the company and its financial health. However,
she went a step further by saying that a good IR professional must
understand enough about business and accounting to ask the right
"I don't think the profession's responsibilities have changed since the
Enron debacle," said Rafkin-Sax. "But I do think the importance of our
mandate has been brought to light."
Also see pgs. 6, 7, and 8.