An investor call - now a core part of any publicly traded company's financial disclosure policy - should be informative, interesting, and open to everyone.
"Be prepared" shouldn't just be the motto of the Boy Scouts. Companies doing investment calls should hail it as gospel.
Quarterly investment calls have become more common among public companies during the past few years, with the dawn of webcasting and the demand for more corporate accountability to shareholders in the wake of high-profile scandals, such as with Enron and WorldCom.
Firms don't have to do investor calls, but as many as nine in 10 now do, according to a survey from the National Investor Relations Institute (NIRI). With this public responsibility arriving every three months, a company needs to seize the advantage - or pay the price of looking defensive, unprofitable, and, worst of all, confused about its future.
"What we really came in to do was to help [clients] look at their investor calls as a presentation, as an opportunity rather than a duty," says Kristi Hedges, principal of SheaHedges Group, a business communications firm based in McLean, VA. "So it's basically about taking hold of the opportunity, making it a priority, and helping them get together a meaningful presentation for their investors and for the analysts, rather than looking at it as, 'Oh, it's my quarterly duty to have to put this together.'"
Investor calls have increased in frequency over the past 15 years, and became an IR mainstay by 2000. In October of that year, the Securities and Exchange Commission introduced Regulation Fair Disclosure (Reg FD), which mandated that companies releasing information to professional analysts release that same information to the public. Couple this mandate with advances in webcasting technology, and suddenly companies had an obligation, as well as a way to come live to their shareholders and professional analysts.
In the early days, investor calls were conference calls, and they were sometimes clumsy, often arcane, and they could be rigged for poor attendance. A 1998 NIRI study found that just 29% of individual investors were allowed to listen in, and only 14% of listeners, on average, came from the media.
"Someone - I'm not sure who that somebody was - had the great idea of doing conference calls that were, at that time, literally 15 people calling in and listening to the CEO and the CFO talk for 30 minutes," says Kirk Brewer, managing director of Burson-Marsteller in Dallas, decrying the highly exclusive nature of old-style investor calls.
Clearly realizing that such selective disclosure was irresponsible, top management at large firms powered the rise of investor calls.
"[Companies] basically acknowledged that conference calls were very powerful tools," Brewer says, "and that the professional investment community had an unfair advantage over individual investors and others because they had basically a private conversation with management four times a year."
Increasing the audience for the calls required investigation into the techniques of what makes for a well-received, informative call - and what turns investors and analysts into yawning cynics about a company's finances.
Advertising is key to a good turnout for investor calls, experts say. Silence on the other end of the line is the last thing a company wants when voluntarily hosting an investor call. Company websites and press releases can trumpet the time for a call and announce how investors and analysts can participate. Most firms are choosing webcasting - real-time streaming of audio, with the occasionally accompanying video or slide show.
Webcasting is much cheaper than conference calling, says Chris Hodges, principal of Chicago-based business communications firm Ashton Partners. "If it's not an 800 number," he says, "the company's footing the bill."
By the time steady advertising has drawn investors, analysts, and executives to a call, the heavy lifting of preparation should be done, experts agree.
But preparing the content is also a vital part of the process.
"If they approach it like, 'We don't want to say anything that the lawyers won't let us say, we don't want to open ourselves for liability, the less said the better,'" Brewer says, "then it becomes a painful process, both for the company and for the people who are listening in on the call."
Companies should start by making a script and sticking to it. One to two pages for each speaker is the norm, says Hedges of SheaHedges Group. These remarks give the company a chance to set the tone and the goals of the call.
And the tone and the goals should be relaxed.
"Rather than reading the script for the first time when you're actually on the call," Hedges says, "do it ahead of time so it sounds conversational, so it doesn't sound rehearsed."
But don't get carried away. "That's the double issue there," Hedges adds, "where you don't want it to sound rehearsed, but you don't want it to sound unrehearsed. You want it to sound casual and conversational and certainly energetic."
After remarks by company leaders, the script should have ample room for a Q&A session - where no questions should come as a shock.
Companies should welcome everyone when it comes to the Q&A. If they've researched the buzz among analysts about their company, executives have nothing to worry about; they can handle even the toughest grilling. But if they haven't done their homework, they risk sounding defensive, almost combative, and the call can quickly descend into several pregnant pauses between questions and answers.
"Do the research in terms of what the analysts were asking, what kind of questions they were asking the competition about," Hedges says. "And not only have answers ready, but figure out who is going to answer those types of questions."
Planning for the Q&A is all the more important if a company has recently undergone a crisis - or is in the dicey throes of one.
"Companies should address sticky questions beforehand," Hodges explains. "The biggest tool any company can use is preparation."
Once the Q&A is over, the call should be over. The call's transcript can then be archived on the company website with a legal disclaimer noting the time sensitivity of the information. Experts' opinions vary over how long a transcript should be archived, but approximately one month is generally a solid offering. The danger in keeping the transcript up for too long, says Brewer, is "if a historical development or something happens, there's the potential for liability if you leave that old information up there."
With the call archived, the task is done - and a company has almost three months to prepare for the next one.
Do anticipate questions that analysts and investors will ask, and designate before the call who will answer them
Do advertise the investor call, such as through the company website or mailings to investors and analysts.
Do archive the call on the company website
Don't read mechanically from the script during the call
Don't sound defensive when asked a difficult question
Don't archive your call for too long, as information disclosed during it may become a liability if your company changes