By going after Wall Street firms, New York state Attorney General Eliot Spitzer was key to shaping the corporate landscape into a more transparent one. The joke is now part of the lore surrounding Eliot Spitzer. The self-proclaimed "people's lawyer" and 63rd attorney general of New York, stepped up to the mike at the November 2002 awards dinner of Institutional Investor magazine and said, "It is wonderful to be here this evening because I really want to put faces to all those e-mails."Get it? If so, you understand Spitzer's unique impact on Wall Street, corporate governance, and - to a certain extent - investor relations. One IR firm VP in Chicago, who asked not to be named, told PRWeek he could not recall any state attorney general having Spitzer's impact in the 20 years the VP has been in the business. IR pros are watching Spitzer as closely as analysts and investment bankers. Starting with his probe of Merrill Lynch in 2001 - one that turned on the internal e-mails of Merrill Lynch analysts - Spitzer's efforts have changed the nation's markets and financial analysis. Along the way, he has won fans and detractors. There is an intellectual argument that drives Spitzer's efforts, an argument that might not be readily understood by the people whose business he affects. "He's really beginning to lay out an intellectual framework for what he's doing," says Hank Boerner, managing director of PR agency Rowan & Blewitt. "It's not just targets of opportunity. He's saying, 'Look, the role of government is to be a facilitator to ensure that the markets run smooth and fair, and if it's ... transparent and so forth, we're going to have stronger markets and a stronger Wall Street, stronger corporations.'" In pursuing companies, Spitzer goes far beyond what other state attorneys general have seen as their role. "The [New York] attorney general's office has historically been seen as the governor's lawyer," says Sean L. Casey of Sawchuk, Brown Associates in Albany. "It was fiduciary and ministerial more than anything else. Clearly, with the Wall Street stuff, [Spitzer] has gone far beyond any of his predecessors, who traditionally would've left that to the feds." Effect on IR Most of Spitzer's hammer falls squarely on corporate governance and not corporate communications, according to experts. But IR might be tangentially affected when companies find themselves in a field being investigated by Spitzer. Last year, Spitzer's office inked a $1.4 billion settlement with 11 securities firms - including Wall Street giants like Citigroup and Credit Suisse First Boston - for putting out misleading stock analyses. The settlement demanded that the firms put up a wall to reduce the influence the bankers could have on the analysts' recommendations about stocks. The settlement aimed to change how analysis is done at securities firms. It involved research and the connection it can have to IPOs and other stocks. Underneath the settlement lay the challenge for IR professionals in working with analysts in this new, more transparent environment. Gone forever are the heady days of trusting analysts' research just because the stock is doing well. "There will certainly be a different dynamic between the IR officer and the analyst over time because the analyst is under the microscope," Boerner says. That's one reason the National Investor Relations Institute (NIRI) and the Association for Investment Management and Research have proposed ethical guidelines governing the relationship between public firms and the analysts who track them. (See previous PRWeek story here.) Even the many honest analysts will face greater scrutiny from IR officers and from the shareholders they serve. "If a company has not been targeted and your industry has not been targeted ... and you're doing the right thing and you have good fundamentals," Boerner says, "then obviously you don't have to worry about Spitzer. But if you're in an industry that he's targeting, like Wall Street firms, there's a possibility you could be smeared along with the 'wrongdoers' he's targeting." Both catalyst and product The origin of Spitzer's activity can be best understood in a historical context. He was elected attorney general in 1998 after working in private practice and, more important, in the New York City district attorney's office, where he eventually headed its Labor Racketeering Unit. There he developed a reputation for pursuing mob figures as energetically as he is now chasing Wall Street wrongdoers. Also in 1998, Arthur Levitt, then the SEC's chairman, gave a speech at New York University's business school condemning the "earnings game" in corporate reporting, "a game of winks and nods" between companies and analysts. "And, thus the seeds were sown for Regulation Fair Disclosure," Lou Thompson, president and CEO of NIRI, pointed out at a March NIRI regional conference. In 2000, Congress passed Regulation Fair Disclosure (Reg FD), and suddenly public firms had to tell everyone else what they had been telling only the professional investor communities. In 2001, Spitzer started his Merrill Lynch investigation, and, a year later, Sarbanes-Oxley became law, marking a seemingly irreversible era of more accountability in business. Spitzer, then, can be understood as both a catalyst and product of this era. He says he doesn't believe the federal government can regulate the markets and financial institutions like they're supposed to do. While his office did not return calls for comment, Spitzer has enunciated his intellectual argument several times in the past few years that he's risen to national - even international - prominence. In a 2002 speech to the New York City chapter of NIRI, a newly re-elected Spitzer told the IR professionals that he would continue to fill the void left by federal indifference. "We saw that no one was stepping in to do anything about this situation," Spitzer said. "We would have deferred to the SEC, if they wanted to do this." Spitzer's NIRI speech came before his investigations of mutual-fund firms. In September, he accused four of the biggest firms in the nation of illegal trading practices that cost investors billions. And once he targeted mutual funds, the accusations of political grandstanding started - the critics argued that Spitzer, then 43 and looking at a New York governor's office that would probably be vacant after 2006, was mugging for the cameras by going after the people who managed mutual funds owned by millions of voters. But those criticisms don't seem to phase him. "The proper role of government is as market facilitator," he wrote in a New Republic essay in March. "Government should act to ensure that markets run cleanly as well as smoothly." Spitzer's lasting effects on corporate governance are greater transparency and more forthright analysis that investors can probably trust more. Underneath these changes is an understanding of what it means to clean America's financial house the way Spitzer has. The understanding springs, says Boerner, from the values Spitzer espouses. "He says, 'We couldn't allow child labor or people to be paid 30 cents an hour,'" Boerner says. "[Spitzer says] that's why we have labor laws, and labor laws reflect the value of society. Common values of society should be captured in the enforcement of these laws." So Spitzer doesn't see his crusade as anti-business or anti-Wall Street. "He makes a compelling case that, when you think about it, is pretty much common sense," says Casey. "[It's] that if you're not being straightforward, up front, honest, you're hurting not only your investors, but you're hurting yourself in the long run. It costs you money, as well as those who've invested in you ... And he logically lays that all out in a way that the MBAs from Harvard get it and Ma and Pa Kettle who've got a few thousand socked away in the stock market somewhere understand it, as well."