Twitter Blog Funnel

I recently started a free Twitter IR blog aggregation service on Twitter that goes by the Twitter handle @IRThoughts. While the idea of aggregating blog feeds and posting them to Twitter is not new or unique, I decided to start my own for the simple reason that I can pick and choose the blogs that I like.

I have selected a diverse group of blogs focusing on matters that appeal to investor relations professionals. I am happy to take requests from people if there are any blogs that you would like me to add. I have chosen to follow blogs that present opinions and ideas in a professional manner and who are respectful of dissenting opinions. I will not be following any blogs whose authors fail to treat others with respect.

I launched @IRThoughts on Saturday and it already has 25 followers. The interesting thing is that 40% of these followers are not following me at my @meetthestreet handle (I would encourage you to do so).

I am excited to offer this service to my IR friends as a way to help keep them informed on the issues of the day. I am also excited to use this platform as a way to reach out to other IR professionals who I am not currently engaged with. For all of @IRThoughts' new followers, I would like to invite you to join #irchat which I host every Thursday at 1:00 PM EST. #irchat is a great engagement platform where IR related issues are discussed and debated.

Please let me know what yo think of @IRThoughts and please let me know if there are blogs that you would like me to add to the list.

Ethical Issues Related to IR Practices

Two issues have recently gained some momentum among IR professionals. Those issues include the pre recording of executive’s prepared comments for quarterly conference calls and the practice of the sell side paying for logistics associated with non deal road shows.

To my knowledge, this first issue began to take shape during a NIRI webinar entitled 2010: The Year of the Tiger for IR which was hosted by Maureen Wolff-Reid of Sharon Merrill Associates and originally aired on December 15^th, 2009. During the webinar, several senior level IROs discussed the idea of taping the prepared remarks, which was the first time I had heard about this practice.

Weeks later, in a LinkedIn discussion group, a member asked “Would you consider simply posting the prepared remarks for a quarterly report and allocate conference call time to just Q&A?” This discussion, which also had its roots in the above mentioned NIRI webinar, solicited many responses in the LinkedIn discussion group and was even mentioned by NIRI’s CEO Jeff Morgan in his blog.

This past Wednesday Rob Berick of Dix Eaton hosted a session at NIRI’s Introduction to Investor Relations Seminar in Santa Monica, where I questioned the idea of recording prepared remarks ahead of a conference call and playing them in lieu of live comments. A vibrant discussion followed and I was surprised to hear how common this practice is. It was determined at the conference that such a practice need not be disclosed since the information being shared publicly was being shared for the first time.

Given all of this interest in the subject, I decided to ask the same question during this week’s #irchat on Twitter. The debate began when Tim Wood of AlphaFound suggested that the practice was material and should be disclosed.

This issue was later picked up by Dominc Jones and the debate reignited. I understand the argument of disclosing the practice because it is a simple thing to do. Despite that, I still don’t think that it is necessary. The content of the message doesn’t change in a material way and therefore I am comfortable with the practice. I respect the opinions of those who feel passionately about the idea of disclosure but I stop well short of subscribing to the theory that the practice is unethical. I also think that it is a stretch to question the integrity of the executives who employ this practice while speculating about the integrity of the reported numbers as was suggested during the debate.

Another practice that seems to have generated some buzz is the sell side paying for management’s logistics for non deal road shows. The Investment Company Act of 1940 prohibits institutional investors from accepting outside gifts or compensation when operating on behalf of a mutual fund. The CFA code of ethics mandates that their members must not offer, solicit, or accept any gift, benefit, compensation, or consideration that reasonably could be expected to compromise their own or another’s independence and objectivity. These practices are strictly enforced on the buy side and travel related transgressions resulted in a high profile case where industry titan Fidelity Investments and iconic fund manager Peter Lynch paid civil penalties in 2008 to settle a case brought against them by the SEC.

Given the buy side’s strict rules against accepting gifts and travel from the sell side, I find it interesting that similar rules do not exist for issuers. Some of the participants on #irchat acknowledged the issue as a problem while others were comfortable with the practice. The BNY Global Trends in IR Survey polled 270 companies from 42 countries and found that 69% of the IROs surveyed believed that there is a conflict of interest when the sell side arranges non deal road shows of which 21% believed that there was a significant conflict of interest. Despite these findings, the survey went on to say that 73% of investor introductions are facilitated through the sell side. According to the NIRI webinar Best Practices in Non Deal Roadshows, 94% of roadshows are arranged by the sell side. One has to question the ethics of ignoring self admitted conflicts of interest simply because the sell side has agreed to pay for, and coordinate, logistics.

I was surprised to hear seasoned IROs urge new practitioners to “leverage the sell-side for logistics” at the recent NIRI seminar in Santa Monica, CA. While there is certainly nothing illegal about leveraging the sell-side for logistics, the ethical implications certainly warrant further discussion in my opinion. Since this practice is commonplace and perfectly legal, I am sure that it never made it to NIRI’s radar screen. Now that the issue is front and center, it will be interesting to see if NIRI looks into the issue, and if so what guidance they may offer members.