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April 22, 2009 Forum Report:

Views of Responsibility for Investor Communications

(Comments of Leonard Rosenthal)


See responsive comments:

Jon Lukomnik, April 22, 2009


The comments below have been presented also on the Say on Pay 2009 clearinghouse project web site, where you may find directly posted responses.

See also



Forum Report

Views of Responsibility for Investor Communications

Copied below are comments of Leonard Rosenthal, a Professor of Finance at Bentley University who is recognized for his research that relates securities valuation to corporate governance and information access variables, responding to the views presented by Stephen Davis and Jon Lukomnik in their recent column:

Professor Rosenthal's comments continue an exchange of views started a year ago in response to a paper co-authored by Dr. Davis addressing responsibilities for investor communications relating to corporate governance issues.  For a report with links to the paper and responsive comments, see

As you'll recall from reviewing the Forum's June 2008 report of initial responses, this debate about communication responsibilities was what stimulated the initiation of our current Forum program addressing "Say on Pay."  The essential objective of this program has been to develop effective communication processes as a foundation for informed corporate and investor decisions.  We will welcome your further comments on how to do this.


GL – April 22, 2009


Gary Lutin

Lutin & Company

575 Madison Avenue, 10th Floor

New York, New York 10022

Tel: 212-605-0335




Comments of

Leonard Rosenthal

April 21, 2009



Comments on “Create Meaningful, Effective Say-on-Pay Plans,” by Stephen Davis and Jon Lukomnik, Compliance Week, April 14, 2009

My initial reaction to this column is that the authors are doing a good job of explaining how say on pay should work. Examples appear in their introduction when they use expressions such as “please help us restore some rationality,” “we believed say on pay would increase communication among… leading to more nuanced communications,” and Section 2 view of an effective communication process is spot on. It is wonderful to see that the authors have embraced such a constructive approach to say on pay.

This positive view came to a screeching halt in Section 4, when the authors assert their view that the very professionals on whom both the company and investors rely for two way communications – investor relations professionals – have little or no ability to do so on say on pay. This undermines their own points.

Dr. Davis and Mr. Lukomnik seem to believe that corporate governance professionals are the only ones with the specialized knowledge to communicate with investors on the subject. The authors say that Investor Relations Officers (IROs) are only “best acclimated to dealing with analysts who want to know, for trading purposes, what will happen next quarter.” Are they not aware that it is the IROs who regularly communicate with investors/potential investors on all the subjects that inform investment decisions – earnings, dividends, strategy, new executive hires, acquisitions, etc., – and indeed, corporate governance? Do they really believe that the only job of IROs is to provide quarterly information for enhanced trading opportunities, when in fact their role is to effectively manage communications so as to build a stable base of long-term investors?

Given the obvious importance of corporate governance to the success of a public firm, it is hardly surprising that IROs consider corporate governance to be a subject of importance to investors and a cornerstone of their body of knowledge. Since executive compensation has become such a hot-button issue, IROs have recognized the necessity of talking with their major investors and others about this and have relayed these observations back to their boards and senior management. It is then clearly their responsibility to explain to their investors what their firm is doing with regard to this important subject.

In summary, communication on corporate governance, and say on pay in particular, is not best served by creating a new profession to deal with it as if were something unrelated to all other issues that affect investor decision making. It is far more effective to make communications about corporate governance a top priority for those who investors already rely on for all other corporate information – investor relations professionals.

(Note: As a professor of finance at Bentley University, and as a member who has participated in programs with the National Investor Relations Institute, I want to state for the record that the views expressed above are mine alone and not those of these organizations with which I am associated.)


Leonard Rosenthal, Ph.D.

Professor of Finance

Bentley University

Waltham, MA 02452




This Forum program is open, free of charge, to anyone concerned with investor interests relating to shareholder advisory voting on executive compensation, referred to by activists as "Say on Pay." As stated in the posted Conditions of Participation, the Forum's purpose is to provide decision-makers with access to information and a free exchange of views on the issues presented in the program's Forum Summary. Each participant is expected to make independent use of information obtained through the Forum, subject to the privacy rights of other participants.  It is a Forum rule that participants will not be identified or quoted without their explicit permission.

The organization of this Forum program was supported by Sibson Consulting to address issues relevant to broad public interests in marketplace practices, rather than investor decisions relating to only a single company. The Forum may therefore invite program support of several companies that can provide both expertise and examples of performance leadership relating to the issues being addressed.

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The information provided to Forum participants is intended for their private reference, and permission has not been granted for the republishing of any copyrighted material. The material presented on this web site is the responsibility of Gary Lutin, as chairman of the Shareholder Forum.