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Comments of Louis M. Thompson, Jr.

May 6, 2011

invited response to

March 22, 2011 Forum Report:

Inviting Comments on Board Advisor's Views of "Fifth Analyst Call"


Lou Thompson, whose comments are presented below, is founder & principal of Thompson Value Creation & Governance Strategies and serves as a member of the Ketchum PR Corporate Governance Advisory Committee and as a Fellow of the Governance & Accountability Institute. A former president of the National Investor Relations Institute ("NIRI"), he has served as member of the Forum's Program Panel guiding the "Say on Pay" program that defined communication requirements addressed in the current "E-Meetings" program.



Comments of

Louis M. Thompson, Jr.

May 6, 2011



The Fifth Analyst Call


By now, we know that two members of Occidental Petroleum’s board met with a select group of large investors in a so-called Fifth Analyst Call less than two days before the company reported its Q1 20ll earnings. Referring to it as an “analyst call” is a misnomer because it didn’t involve analysts at all but instead a small group of institutional investors representing combined assets of $2.2 trillion.

The group, organized by representatives of F&C Asset Management, T. Rowe Price and Railpen along with the advocacy group UN Principles for Responsible Investment, came up with the concept of holding a conference call between representatives of a major company’s board the investor group to discuss corporate governance issues raised in the company’s proxy statement such as executive pay and board structure. The concept was predicated on the notion that the discussion would deal only with issues raised in the proxy statement being a publicly released document.

Almost immediately, companies and law firms raised the concern that having a discussion with a select group of investors was an invitation to potential violations of Regulation Fair Disclosure. Yet, the group reached back to a speech by SEC Chairman Mary Schapiro before the National Association of Corporate Directors in which she said, “It is vital that shareholders and board members move beyond the minimum required communications and become truly engaged in the pursuit of high-quality governance. For boards and their companies, engagement means more than just disclosure. It means clear conversations with investors about how the company is governed – and why and how decisions are made.”

Chairman Shapiro’s comments gave little comfort to companies and their lawyers. Most feared that board members typically don’t know the company’s complete disclosure record of what’s been publicly released and what has not and they could easily slip into discussing new material information that has not been fully disclosed. For this reason alone, most companies spurned the idea of participating in a Fifth Analyst call. While the concept has merit, Reg FD became the barrier for all except OXY that decided to take the plunge.

To me, the solution to the Reg FD concerns would be to Webcast the call so that all who are interested can at least “listen in” to the discussion. As President & CEO of the National Investor Relations Institute at the time, I worked closely with the SEC staff to create a regulation that we could all live with – companyies, analysts, investors and the public – and I got the staff to consider a fully accessible Webcast or teleconference with proper notice to serve as a means for full and fair disclosure. (Initially, I faced resistance from members of the staff who said only half of adults in the U.S. had Internet access. I found a study that demonstrated that some 85 percent of individual investors had internet access and the corporate Web site was a primary means used in making their investment decisions.)

By Webcasting the Fifth Analyst Call or any similar type discussion between companies and selected investors would take a potential Reg FD violation out of the equation. It would also allow for a more rich discussion about governance issues going beyond what is published in the proxy statement that could benefit all investors, particularly those who vote their proxies. It also takes away the image that the company is communicating about governance with an exclusive club of major shareholders.

Clearly, companies need to go beyond the proxy as a means for communicating information about their governance processes and procedures. Many are doing this on their Web sites. Shareholders would also benefit if companies did a better job of discussing the board’s role in governance matters in the proxy itself. A fully accessible Webcast of a discussion between major investors pursuing board governance would be one more means in which participants and those listening in would gain a better understanding of issues important to all – and not only to a select group of participants.


Lou Thompson
Founder and principal

Thompson Value Creation & Governance Strategies
Orange, Virginia




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