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Engaged employees report higher productivity.
(% productive most of the time)
Engaged: 57% Employees know what to do and want to do it.
Renegades: 11% Know what to do but do not want to do it.
Disengaged: 27% Don't know what to do and even if they did, wouldn't do it.
Enthusiasts: 5% Want to do their work, but do not know what to do.
Source: Sibson Consulting
Backdating Nibbles
The drawn-out saga of Hewlett-Packard's purchase of Mercury Interactive earlier this year seemed certain to dampen merger-and-acquisition activity, as potential buyers pulled back from targets possibly contaminated by backdating. But the deals market has not been obviously affected; 2006 remains on track to surpass every year since 2000 in total M&A volume. (See "The Year of Living Strategically.")
The prominence of the HP-Mercury deal created the false impression that the backdating scandal would have a chilling effect on mergers. It "led people to believe that there would be a lot of companies in M&A transactions that had been involved in backdating scandals," says Steven B. Stokdyk, a partner with law firm Latham & Watkins in Los Angeles.
That didn't happen, says H. Rodgin Cohen, chairman of law firm Sullivan & Cromwell, partly because the problem seems to be limited to companies in particular industries.
In most cases, companies that engaged in backdating did so in a manner that any competent due-diligence effort would uncover, Cohen adds. "Unless the books were cooked, it shouldn't be hard to find."
This is not to say that companies shouldn't worry about backdating in future deals. "Every few years a new issue comes along that boards and management get all worried about," says Mark L. Sirower, who leads the M&A strategy practice at PricewaterhouseCoopers. "Right now, it's backdating."
However, rumored class-action suits against MSystems and its acquirer, SanDisk, could be the first of many such lawsuits generated by the backdating scandal. If backdating turns out to be more widespread than it currently seems, feat of legal costs could put a brake on the M&A gravy train. —R.G.
Face Time
Investors are increasingly demanding corporate information from the horse's mouth—so much so that 40 percent of CFOs expect to spend more time on investor relations this year.
"Personal contact is a key differentiator," says Bill Bruno, senior vice president at Greenwich Associates, which recently queried public-company CFOs about their IR practices. As institutional investors continue to bypass Wall Street analysts because of Reg FD, he explains, management teams understand that face-to-face meetings are the best way to communicate "tone and confidence."
As a result, according to the research (part of Greenwich's annual U.S. Equity Analysts Research Study), CFOs can expect to increase the time they spend conducting one-on-ones and conference calls. Currently, about 60 percent of public-company CFOs spend the equivalent of 2 to 5 days a month on IR. One in 10 say they work on IR up to 10 days a month.
Paul Gifford, vice president of IR for Goodrich Corp., has found that meeting requests from buy-side analysts, as well as hedge funds, have increased "pretty dramatically." His solution is to supplement conference presentations with more plant tours, group meetings, and individual meetings with investors willing to come to the company's Charlotte, N.C., headquarters. "Companies have to get creative in order to meet the demand," agrees Maureen T. Wolff-Reid, president of Sharon Merrill Associates, an IR firm based in Boston. She has also seen an increase in such things as "investor days" (where groups of investors meet with management) and small dinners in New York with CEOs and CFOs.
Is there a downside to all this face time? "Only if it takes away from a CFO's other responsibilities," says Bruno. Ultimately, he adds, "a CFO must decide what will have the greatest impact on shareholder value." —Lori Calabro
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