Experts mull the impact of Enron collapse on IR pros

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.

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