Risk & Compliance

Investor Relations

No News Is Bad News
Joseph McCaffertyOctober 1, 2002

Regulatory reform from Congress and the stock exchanges has forced companies to undertake a raft of changes in their audit processes and corporate governance. But companies in varying states of compliance are struggling with what to communicate to Wall Street.

“Clearly the landscape has changed,” says Louis Thompson, CEO of the National Investor Relations Institute (NIRI). He says that some lawyers are telling firms to keep mum on what they are doing to satisfy new regulations until the Securities and Exchange Commission finalizes the rules. In fact, a recent survey by Shareholder Value magazine found that 57 percent of respondents have taken no action to secure investor confidence in their firms. That tactic, argues Thompson, is flawed. “Companies can no longer sit back and say, ‘Our finances are clean, we have nothing to worry about.’ They have to get out in front of investors,” he says.

That’s exactly what Diebold Inc. has been doing. Vice president of global communication and NIRI chairman Donald Eagon recently organized a road show to get senior management together with investors. The North Canton, Ohio-based maker of ATM machines spent most of the time discussing corporate-governance issues and the certification process. Eagon says that even companies that aren’t yet in compliance with new rules, such as the New York Stock Exchange’s independent board requirements, need to outline what they are doing to get there. “The Street isn’t going to wait; they want action,” he says.

Medtronic Inc. vice president of investor relations Rachael Scherer says that the Minneapolis-based medical-technology firm accelerated its certification date to August 8, instead of waiting until its September deadline, when the issue started getting so much attention. “It made a big difference,” she says.

Bob Goldstein, president of New York investor-relations firm The Equity Group Inc., says investors are interpreting silence to mean that something is wrong. “They are very conscious of everything that is–and is not–being said,” he warns. “Being quiet means that things aren’t good, and won’t be for awhile.”

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