More on Blogging and Investor Relations

There are over 2,200 stocks listed on the NYSE and over 3,000 stocks listed on NASDAQ and guess how many have blogs for their investor relations areas?  The answer is one – Dell Shares is the only corporate investor relations blog that I have been able to find.  I think that the fact there is only one blog in this area (you can find blogs in other areas, be it CEOs, sales or product teams, etc) is indicative of the mindset most corporations have about investor relations.  In most organizations, IR is trapped in a box of regulations and legal liability. Moving outside the box requires more time, effort and political capital than it’s worth.  For example, in one organization where I previously worked, it took a year of lobbying to get the concept of quarterly earnings conference calls approved.  Once approved, the scripts for the calls were reviewed by the CEO, COO, CFO, Controller, General Counsel, securities law counsel, outside securities law counsel, Treasurer, internal auditor, external auditors and at least 6 other people.  Needless to say, by the time the final document was ready, it was pretty bland mush.  Try thinking about how blogs translate into this type of environment and you see why most companies don’t even try.  Blogs are supposed to be quick, spontaneous and resonate with the voice of the writer.  Good luck to that under the foregoing scenario.

Evidently Dell takes seriously its image as a technology provider and is out in front on this development.  I’ve spent some time over the past few days looking at their blog and I think they do some things well.  First, they are timely and responsive.  They seem to write about developments quickly and respond to comments rapidly.  According to a statement made by a Dell spokesman at the 2008 NIRI conference, their position is that in establishing a blog they did not need to change their disclosure policy or get prior approval of each posting from their legal department.  Rather, their view is that the blog is merely another extension of what they do everyday in investor relations, either on the telephone or in person.  They are aware of the things that can and cannot be said and in writing on the blog simply adhere to the same guidelines as they would in other channels of communication.

The communications person in me cheers this attitude.  Phrases such as “IR workers of the world unite!  You have nothing to lose but your lawyers!” run through my brain.  Of course, having practiced law for ten years, the other half of my brain says “Yeah, but if you screw up with an analyst on a phone call you always have the chance to call him back and correct yourself, or, if you’ve inadvertently given them non-public information, to ask him to treat what you’ve said as confidential.  When it’s on the world wide web, it goes out to the whole world and you’ve created a written record of your mistake.”  I guess all technological advances come with attendant risks. 

Secondly, I think Dell is bringing more information to a wider audience.  They refer to this as a democratizing of investor information and I certainly think they are moving in the right direction.  They have made video clips available on the blog with members of management discussing some of their more obscure business initiatives (what the heck is virtualization anyway?).  All of this helps to gets information, which before was available only to large institutional investors out to a wider audience. This is one of the major benefits of the web.  Business school professors refer to this as disintermediation.  To put it plainly, you get your information direct from the source, and not filtered through others.  I applaud them in their efforts to date to get information out to a wider group of investors.

Naturally, in my self-appointed role of investor relations critic at large, there are several things that I think they might be able to do better.  First, in reading the blog, I didn’t get a real sense of Dell as an organization.  I think that Dell has a tremendous opportunity through its blog, to put a human face on a highly complex organization.  Thus far, the posts to the blog have been governed by the issue du jure without any effort that I can make out to explain the organization as a whole, which I think would be helpful to the average investor visiting the blog.  Turns out there is a good introduction to Dell on the Investor Relations web site in the form of an interactive letter to shareholders from Michael Dell, but it required navigating back to the Dell home page and three further clicks to get to the letter.  It seems strange to me that there is no direct link between Dell Shares and the IR web site, as there is a link going the other way. 

Related to this I think that Dell has an opportunity to save themselves a great deal of repetition and time by creating a series of explanatory blogs about the areas of their business that generate the most questions from investors.  I see the beginnings of some of this with the video clips with interviews of business segment managers, but as they are a very large and complex organization, more can be done. 

Next, as you might expect, everyone is relentlessly on message in their posts.  I can understand why this is, but it can make for some bland reading.  If I were an equity analyst, the blog is not where I’d go to try and find any nuggets of information, although it would be required reading.  Maybe it would help if someone would exhibit a sense of humor once in a while. 

To a certain extent, I’m picking nit with all of this.  Dell deserves a lot of credit for establishing their blog.  In tech-speak, they have achieved first mover status.  While I believe that good things will accrue to them as a result, as with many things in investor relations, it may be hard to measure, and probably only in retrospect.

Blogging and Investor Relations

Blogging seems to be on the minds of many practitioners of investor relations lately.  In the course of the last month, I’ve been on a Webinar on the topic, quoted in an investor relations newsletter, authored an article that will appear in an upcoming issue of NIRI’s IR Update and attended a breakout session on the topic at the NIRI 2008 annual conference.  In addition, blogging was specifically mentioned by John White, the Director of the Division of Corporate Finance of the SEC during his remarks at the opening session of the NIRI 2008 conference.

As one of the few people that are actually blogging about investor relations, all of this is grist for my mill, and I thought I would share a couple of thoughts about where I think all of this is heading.  I start with two premises: first, corporate IR bloggers are at an inherent disadvantage to individual bloggers such as myself, and two, there can be a useful, but limited role for corporate IR blogging in the future. 

First the disadvantages:  1.) Regulatory.  The aforementioned John White of the SEC in his address to NIRI members was quite specific in stating that anything corporations put on their blogs for viewing by the public is subject to the anti-fraud provisions of the securities laws, namely Rule 10b-5.  While this is not new news (he was just reiterating a previously stated position of the Commission), it certainly will prove to be an overhang to the development of blogs that provide meaningful information.  Most investor relations officers that I know are reluctant to answer analyst questions in email format for fear of creating a paper trail, so putting their thoughts in a blog on a public web site with the overhang of antifraud liability is almost beyond the pale.  Why would you do one more thing to create a public record that can be used against you when things go wrong?  

2.) Corporate.  Most corporations function collectively, with information and corporate positions passing through multiple layers of approvals, from the corporate communications department to the general counsel and numerous people in between.  This process means that every phrase is pondered, considered and revised.  The process also means that almost all of the individual’s voice is smoothed away, opinions are eliminated and certainly all of the humor is drained away.  The result is the bland pabulum served up in most corporate press releases - it’s just not very interesting stuff.  Blogging, on the other hand, is a solitary and somewhat spontaneous pursuit.  It is designed to express the individual’s view of events, unfiltered by the editing process (this can be good or bad, depending on who’s writing).  When I get an idea for a blog post, I sit down, write it and post it within a matter of hours.  Nobody reviews it, and my opinions, of which there are many, (hopefully) make the resulting article more interesting. 

3. Bureaucratic  When I sat in on the session on blogging at the NIRI conference, I was struck by the nature of the questions that attendees had.  The questions were not, “What sort of information do you include in your blog?” or “How do you make your blog interesting?” but rather, “Did you have to modify your disclosure policy to allow you to set up a blog?” and “What sort of approvals do you have to get before you post to your blog?”  This type of thinking is very prevalent in corporate America and especially in investor relations, where regulation and legal liability permeate everything.  Things have to be done by the book, with a system for everything.  It also means that for many companies, establishing and writing on a blog are not worth the hassle, unless and until they are dragged, kicking and screaming, into the blogosphere.  On the other hand, in the age of the internet, everyone with access to the web has his own printing press.  Individuals are much more nimble about what they can say, and how quickly it gets said.  It stands the whole system on its head, and size becomes a disadvantage for corporations, which simply cannot react as quickly as the collective individuals on the web.

With all of these disadvantages, where can corporate IR blogs be useful?  First, as restatements of the obvious.  In spite of what it sounds like, this is a useful function.  Much time in investor relations is taken up with answering obvious questions: industry position, product offering, company values and other important, but common matters.  With the decline in annual reports, the web site will increasingly become the source for this type of information.  Investor relations officers should take a proactive stance in writing about such matters.  Or, you can go brain dead and repeat the answers verbally 300 times per year. 

Secondly, as a reporting function.  Not everyone can make it to your analyst day or has the time to listen to 6 hours of webcasts.  Someone who can succinctly write about what you are presenting to the street can help you reach a larger audience.  This can be particularly helpful in reaching smaller money management shops and individual investors.  With the shrinking of the sell side, investor relation departments need to think of alternative ways to reach more of the buy side and also individual investors, and this is one potential way.

Finally, and probably more controversially, investor relations blogs should track and disclose the types of questions they are receiving from investors.  Almost every company has aspects of its operations that investors do not understand particularly well.  This can arise for a variety of reasons, but usually because the accounting in the area is complex or convoluted (think deferred taxes or pension accounting) or the company is doing something new and unusual.  If investors are constantly asking questions about the area, that in itself is important information.  To the company it’s important because it tells them they are not doing a good job on disclosure.  To investors it’s important because it gives them an idea about what other people on the street are thinking. 

 

I would write more, but my editor says its time for lunch…