IN ENRON trial testimony last week, the company’s disgraced former IRO Mark Koenig told of how his bosses, former chairman Ken Lay and former CEO Jeff Skilling, sought to keep a tough analyst away from earnings calls and investor meetings because he was critical of the company.
According to the Enron TrialWatch blog, the two accused asked him about no longer inviting Merrill Lynch analyst John Olson to analyst meetings where Enron would detail its quarterly or annual earnings.
“He was one of the few who went out on a limb in probing and had a negative opinion about the company,” the blog reports Koenig as saying, adding that Olson later blamed Lay for pressuring his bosses into firing him from Merrill Lynch.
Ironically, on the same day as this testimony is heard, IR Magazine runs an article “Guide to Icing Analysts” which suggests that such tactics are commonplace today. A few choice extracts:
The IR magazine-commissioned Investor Perception Study, US 2005 reveals that some 38 percent of American sell-side analysts say they have been shut out by a company after a downgrade. Europeans report an even higher rate of discrimination at 42 percent. One individual calls this ‘standard practice’ by all the companies he covers.
An August memo from Robert Colby, deputy director of the [SEC’s] division
of market regulation, discloses some of the more common ways companies punish analysts: not allowing them to ask questions on conference calls, limiting
access to senior management, not inviting them to participate in non-deal
roadshows, threatening to withdraw business from other areas of the analysts’
firm, ‘intimidation and humiliation’ on conference calls or in the media,
and threatening legal action.
Yet IROs openly talk about several methods of expressing their displeasure – or, as one puts it, ‘behavioral therapy for analysts’: reshuffling message slips, complaining to immediate superiors (or higher up), and indirect retaliation. This latter strategy is expressed by the adage, ‘It’s not what you do to an analyst – it’s what you do on behalf of his competition.’ As one investor relations professional with 30 years’ experience puts it, ‘You can ignore someone in many different ways.’