Communicating During Tough Times

11/17/1998 Overview On Tuesday, November 17, 1998, the National Investor Relations Institute (NIRI) Silicon Valley Chapter: Events: Chapter convened a panel of local executives and 80 investor relations professionals at the Fairmont Hotel in San Jose, Calif. The topic for the evening was, Communicating During Tough Times; however, the discussion turned more to the interplay of management and IR in managing expectations with the Street, during good times and bad. Following are the highlights of that discussion. Tim Cost, VP IR at Bristol-Myers Squibb, and Chairman of the NIRI National board of directors, moderated the panel, which included: Charles Berger, Chairman and CEO, AdForce, Inc., a web ad management company Kris Chellam, Chief Financial Officer, Xilinx, Inc., a semiconductor company, providing programmable logic solutions. John Dean, President and CEO, Silicon Valley Bancshares, an independent bank holding company Dr. Mihir Parikh, Chairman and CEO, Asyst Technologies, Inc., a provider of automated material handling systems to the semiconductor industry The Role of IR Management on the panel indicated that they spend only 10-15% of their time on IR. Nevertheless, they see it as a critical function and therefore rely heavily on a strong IR individual or team to keep them informed, handle day-to-day activities and consistently communicate the company's messages to the Street. All of the executives said that they communicated critical business information to IR on a real-time basis. However, there were times when they did not believe it was necessary to share business events with IR, for example, early discussions of personnel changes or business restructuring. In these cases they believed it would be premature to share this information with anyone outside of the executive staff group. Feedback from IR to management varied among the panelists, with some panelists receiving a daily email of competitive and market analysis from IR, and others requiring a baseline of information under normal conditions, and substantially more information during troubled times. Concerning IR and management communications, certain themes were repeated: The need for feedback will vary with the situation There should be a mechanism in place that assures a minimum level of daily feedback The IRO and senior management should always be adequately prepared to respond to the Street Managing Expectations All of the panelists felt that the responsibility for developing guidance falls solely to the CEO and CFO. Once guidance is set, they said, IR plays a key role in delivering the message to the Street. Panelists emphasized the following: Guidance should be updated during preparations for each quarterly analyst/investor conference call Conservatism is a safer path--no one has ever gone to jail for being conservative and meeting expectations, quipped Mr. Dean In giving guidance, IR spokespersons should continually emphasize the company's long-term goals and fundamental operating characteristics Guidance should be honest and an accurate portrayal of business prospects Ultimately, financial analysts will make estimate adjustments based on their own research and beliefs Dr. Parikh noted that the guidance process is a tough balancing act. If a company under-promises, then its stock may not be fully valued. However, over-promising can be disastrous. Communicating During Tough Times Addressing the original topic of the meeting, panelists gave the following advice about communicating the company's story during a crisis: IR must be kept informed, with a direct line of communication to the CEO and/or CFO Proactive, honest communications can help rebuild credibility Key shareholders must be a top communications priority during any mishap or crisis Timeliness and accuracy are essential in IR communications Fast response in a crisis is essential All company spokespersons must be continually prepared to deliver consistent, well thought out messages Of course, doing damage control is ineffective if a foundation of credibility is not present. When asked about what he and his IR team did well during tough times, Mr. Berger replied that they focused on relationship building to build confidence and trust. A basic tenet of IR, but one worth remembering. [ Top of Page  |  Return to Past Program Highlights ]