What We Can Learn
Real Marketplace-Tested Practices
for analysts covering quarterly earnings reports, which have evolved
over the past decade after the enactment of Reg. FD in an atmosphere
that emphasized fairness, have become a well-tested communications
process from which there is much to be learned for the conduct of
calls and annual meetings have a lot in common. In both, management
provides decision makers with pertinent investment information. In
both, investors have an opportunity to ask questions and observe
management's responses. And both commonly use a similar format of a
presentation followed by a Q-and-A session.
Because of the
large volume of conference calls – they are held by thousands of
companies four times a year – they have become a well-tested form of
the processes for providing fair access to investment information.
Importantly, for our purposes, the testing has emphasized fairness.
“The current practices of open analyst conference calls were developed
deliberately to avoid the disclosure abuses that contributed to the
corruption of securities markets we saw in the dot-com era ten years
ago, and are now widely accepted as fair to everyone concerned,” says
Peter Brennan, managing partner of Damel Investors LLC, whose
actions helped establish marketplace reforms and Reg FD.
So what can
conference calls teach us about what works, which practices are
commonly used, and which cutting-edge technologies are emerging on the
investor communications horizon?
First, let us
identify the main elements that most calls include and which have
become common enough to be considered conventional for quarterly
scheduling and access information for the open conference call is
publicly announced, usually on the company’s web site as well as by
press release. Timing is typically less than an hour after the planned
reporting of financial results for the completed quarterly period, but
some companies have been scheduling up to a day between reporting and
the call to allow more thorough investor consideration of the reports
and preparation of questions.
Telephone and/or internet access is open to all, allowing all
investors and analysts to observe, usually with audio, with or without
slides, and in some cases with video.
Nearly all calls start with recitations of legal statements, followed
by scripted management presentations about performance in the recently
Q-and-A session that provides for investor and analyst questions,
usually through a limited number of call-in lines. Variations include
submission via internet, with varying visibility of submissions.
Archived calls that are available for replay for defined periods.
Companies store their archived calls either with a service provider or
on their own site.
open access, the dominant technology is webcasting, which means the
event is broadcast over the internet, enabling anyone throughout the
world to observe the meeting. Both audio and video presentations can
be webcast, with audio alone being less expensive and prevalent in the
To add a visual
element, companies can accompany audio webcasts with slides, which
participants can watch by clicking using a mouse. A more advanced
visual presentation involves encoded slides, which enable the
presenter to control the order in which the slides are shown. Newer
technologies allow companies to insert pre-recorded segments into a
live presentation, or webcast a pre-recorded presentation as part of
the conference call.
The next level of
communication involves various forms of video streaming, which, like
plain audio, can be webcast for participants to view in real time or
in archived form by clicking a play button. With the cost of
videostreaming having steadily decreased in recent years, more and
more companies are using the technology. Depending on the
configuration, costs of video can now run as little as a couple of
thousand dollars more than an audio webcast. More advanced levels of
videostreaming include high definition video or video transmitted via
Video may well
become standard practice in coming years. Use of video has soared by
75% in Thomson Reuters’ webcasting business from 2008 to 2009, the
company says, and Shareholder.com, another conference call service
provider, expects companies that are trying to set themselves apart to
start using webcasts for all their events.
Both in audio and
video webcasts, companies can incorporate additional technologies
required for Q-and-A sessions, as well as for other two-way
communications such as surveys and polling. They can also use an
expanding array of tools to collect and analyze data on access
are considered by far the most important element of conference calls,
as they enable participants to ask management questions and observe
its responses. Most webcast conference calls provide a public one-way
communication accessible in listen-only or view-only mode to all
online observers. The questions are usually communicated separately
through phone lines, with the sound plugged into the webcast,
requiring a number of phone lines to accommodate the anticipated
volume of calls. Costs can be significant for a large number of open
phone lines. Internet alternatives to phone lines for voice
communication are possible, but not in common use. Written submissions
by internet are becoming more practical, and some companies testing of
processes to present submissions on live chat sections of webcast
and investor interests encouraging companies to archive their
presentations, most companies store their webcasts or arrange for the
webcast service provider to make archived replays available. There is
a growing appreciation of the value of allowing continuing investor
replays. “They elongate the life of the event,” says Michael Cotter,
global head of corporate communications at Thomson Reuters. For every
visitor on the live event, two or three visit the archived
presentation, he says.
several leading service providers, more and more companies are
experimenting with interactive capabilities such as opening discussion
boards before a meeting, or including polling during or after the
And as technology
continues to advance, some are entering social webcasting in full
force, something that ON24, a service provider that emphasizes leading
edge virtual event technologies, and Thomson Reuters have begun
offering. In addition, companies are paying more attention to
accessibility through mobile devices such as smart phones and tablets
that are increasingly popular with the investors and professionals
they need to reach. And of course, at a time that use of technology is
an important part of a corporate image, there is always a need to keep
up with rivals.