PR NEWSWIRE has trotted out its Disclosure Advisory Board (DAB) to say that they do not see companies changing their disclosure practices any time soon in response to the US Securities and Exchange Commission’s (SEC) recent guidance for company websites.
They have issued a statement that basically calls for companies to continue to use the services of PR Newswire, and I guess other wire services as well, even if the SEC says there’s actually no requirement that they do so.
It is very important for PR Newswire to be able to lean on a group like the DAB, which has been funded by PR Newswire since June 2006. It gives the wire service the credibility it lacks given its vested interest in seeing companies continue to pay lavish sums for its services.
This point about getting support from a group of luminaries was underscored today rather disingenuously by Mark Hynes, Managing director of Global Investor Relations Services for PR Newswire. In a blog post, Hynes was at pains to point out that the comments in his post talking up the utility of wire services were not his own, but those of the DAB.
Here’s how he put it:
A ha! I hear you cry, you would say that wouldn’t you, with your affiliation with PR Newswire? Well, yes, except that I didn’t, the DAB did.
But hang on, who is on the DAB? Here’s a list of the 15 members, who together have 450 years of experience:
- John Bierbusse — Board Member, Sanderson Farms, and retired equity research analyst at A G Edwards
- John L. Kelly — Former co-head, industrial research team, Goldman Sachs
- William A. Relyea — Managing Director, Investment Bank research, Midtown Partners,
- Kurt Stocker — Member of the Board of Governers, FINRA, and chairman of the New York Stock Exchange Individual Investors Advisory Committee;
- Janet L. Fisher — Partner, Cleary Gottlieb Steen & Hamilton LLP
- Deborah Kelly — Partner, Genesis Inc.
- Mary Beth Kissane — President and founder, Corporate Perception Research
- Lou Thompson — partner, Genesis Inc., and managing director, Kalorama Partners, and former CEO, president and board member of the National Investor Relations Institute.
- Valerie C. Haertel — VP/director of investor relations, Medco Health Solutions, Inc
- Sam Levenson — SVP Investor Relations, Sony Corporation of America
- Diane Salucci — SVP, Bear Wagner Specialists LLC
- Martin Shea — EVP, investor relations, CBS Corporation
- Anna Sussman — Director, Investor Relations and Corporate Communications, Pharmion Corporation
- Jerry Hostetter – VP/director of public relations and investor relations, Smithfield Foods Inc
- Mark Hynes — Managing director of Global Investor Relations Services for PR Newswire
And here’s a nice photo of the group:
Yes, that is the same Mr. Heyns at the bottom of the list of DAB members, and I believe that’s him I circled in the photo. He is a member of the DAB. So, in fact, when Mr. Hynes says the DAB is saying something, he must surely include himself. Unless, of course, he does not agree with the rest of the group, which I very much doubt.
Interestingly, Mr. Hynes’ blog uses the words “transparency matters” in its URL. Now that’s something he and I definitely agree on.
Anyway, just a nitpicky point of order I thought I’d mention. For what it’s worth, I also think most companies should continue to use wire services, but only to distribute “notice-and-access” style releases (funny that the wires never mention this economical option).
Now, lest it be said that we at IR Web Report don’t give a fair shake to alternative points of view, here is the full statement from the DAB that I assume all members signed off on given that it has taken three weeks for them to publish it (the typos and grammatical errors are theirs not ours, and the funny line breaks are what you get copying and pasting from a PDF fixed those for you.):
Disclosure Advisory Board welcomes recent SEC guidance about company websites and believes news releases will continue to play important role in to achieve best practice investor communication.
The Disclosure Advisory Board welcomes the SEC’s guidance about use of company websites to meeting their corporate disclosure obligations. Since the widespread adoption of the Internet by investors, the means of disclosure have multiplied, providing investors with a wide choice in accessing a company’s news.
Public companies in the United States have, however, been challenged in determining the role of the company website in achieving compliance with disclosure obligations. The SEC and U.S. stock exchanges have in some cases required companies to use their websites to make certain disclosures (e.g., governance documents), but in other cases have been reluctant to sanction website postings as an appropriate channel (e.g., Regulation FD disclosure). The SEC’s willingness to provide additional guidance is thus a welcome development.
The Disclosure Advisory Board, which comprises representatives from large U.S. companies, as well as legal advisors, regulators, analysts and investor relations consultants, believes that most companies are unlikely to make significant immediate adjustments to their communications practices.
This is due in part to the SEC’s unwillingness to approve website posting categorically as a means of satisfying Regulation FD. In the SEC’s view, a website posting “may” be sufficient for those purposes, but that conclusion will depend on all the facts and circumstances. While at least one company – Sun Microsystems – reached that conclusion even prior to the SEC’s guidance based on a well thought-out set of procedures, many companies may not wish to lead the pack in this area absent greater regulatory certainty. Those companies will instead continue to retain the news release as the centerpiece (along with periodic reports) of their communication strategy. Others, particularly companies with a limited analyst following, will consider the news release to be the best way to command immediate attention from investors, analysts and journalists.
Companies interested in taking advantage of the guidance will also face a number of questions raised by the SEC, which may also inhibit reliance on the SEC’s guidance. For example, is the company’s website a “recognized channel of distribution” such that the company can conclude that posted information has been properly “disseminated” for compliance purposes? Companies must consider how their particular investor base typically accesses company information, which in some cases may well be via other channels, such as a financial trading terminal, through ticker based information on a search engine or through the newspapers, or indeed on the companies’ websites,
Even for widely followed companies whose websites may constitute a “recognized” channel, the SEC cautions that publication of “important” information on a website may need to be accompanied by additional steps to alert investors of upcoming postings. Of course, one of the means the SEC suggests in this regard is the news release.
The concern among companies that information posted on a company website may go unnoticed is not unfounded. As one example, the decline in retail voting following the implementation of the SEC’s “notice and access” proxy rules has been well documented. If increased use of website postings is accompanied by a decline in retail access to or interest in company news, that would not further the important goals of the U.S. disclosure regime. “Push” technologies, such as subscriptions to RSS feeds, are one way that companies can mitigate this concern but it is doubtful that these additional means will supplant the news release in the near term, at least key releases such as earnings announcements.
Since its establishment three years ago, the DAB has consistently promoted best practices in company communications. The board has advocated, for example that EPS guidance, if provided, be supplemented by fundamental analysis of key drivers of a company’s business, including non-financial drivers. At the same time, the board has favored increased disclosure by large investors about their positions to enhance the transparency of trading markets. All of these positions reflect a more basic proposition that transparency is rewarded by the market. Broadly accessible information is key to that proposition, and companies seeking to incorporate the SEC’s guidance into their communication programs will rightly want to ensure that all channels of information to investors are used effectively.
Issued by the Disclosure Advisory Board August 21st 2008
Update: After reading the statement from the DAB several times, I’m wondering what the point is? If they are right and no one is going to change their current practices, why is PR Newswire so intent to make that point? They could just ignore it if nothing is going to change.
My best guess is that many companies are beginning to hear from their legal counsel that they no longer need to issue earnings releases via wire services. They’re being told it is now enough to simply pre-announce in the conference call notice where and when investors can obtain the release on the company website. If that’s the case, then it’s actually better for PR Newswire to be promoting our notice-and-access model for the earnings release.
Dominic Jones (bio) created IR Web Report in 2001. He is a consultant to leading public companies and investor relations service providers worldwide. You can contact him via the contacts page.
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