http://www.bulletproofblog.com The blog on crisis communications Thu, 11 Mar 2010 21:36:11 +0000 http://wordpress.org/?v=2.8.4 en hourly 1 http://www.bulletproofblog.com/2010/03/08/what%e2%80%99s-next-the-bulletproof-interview-%e2%80%93-todd-lang-on-the-2010-proxy-season/ http://www.bulletproofblog.com/2010/03/08/what%e2%80%99s-next-the-bulletproof-interview-%e2%80%93-todd-lang-on-the-2010-proxy-season/#comments Mon, 08 Mar 2010 14:01:22 +0000 Larry Smith http://www.bulletproofblog.com/?p=2259 Each week, Bulletproof Blog™ features exclusive interviews with thought leaders on issues of critical importance to companies and countries. This week, as corporations embark on a 2010 proxy season that promises to be as challenging as any recent in memory, we interview Todd Lang, a Senior Partner at the law firm of Weil, Gotshal & Manges LLP with more than 50 years of experience in matters of corporate governance.

Mr. Lang has served as chair of the Committee on Corporate Governance of the American Bar Association’s Business Law Section and has been extensively involved in the activities of the Section’s Committee on Federal Regulation of Securities. He also serves as Chairman of the Board of Advisors for the Center for the Study of Corporate Law at Yale Law School. A leading authority on how a torrent of investor and regulatory activity has affected the 2010 proxy season, Mr. Lang shared his thoughts on the matter with Bulletproof™:

What do you expect will be the most striking feature of the 2010 proxy season?
 
Todd Lang: Executive compensation and corporate governance are both front and center in terms of investor and regulatory attention. The role of the compensation committee is necessarily expanded because the corporation will need to focus on the relationship of risk to the compensation program and the use of clawbacks and other measures to minimize or recover compensation upon the occurrence of defined adverse events. The committee will need to use independent consultants and relate the compensation program to corporate strategy. The allocation of compensation between stock and cash and the deferral of payments have become an integral part of the structure of these arrangements.
 
The proxy rules have been amended to require enhanced disclosure as to compensation programs as well as such governance items as the qualification and experience of directors and nominees and the leadership structure of the corporation. While these are separate requirements, they are substantively intertwined as a governance matter.
 
All of this amounts to a significant amount of preparatory work by the corporation, including its board of directors and committees, and the development and implementation of policies that are consistent with disclosure on the particular subject matter. The quality of disclosure will be subject to close examination by the staff of the SEC.

Given all that the SEC has on its plate currently, is there more for the Commission to do with respect to shareholder access to proxies? If so, what would that entail?
 
Todd Lang: The SEC proxy access proposal consists of 250 pages and propounds over 500 questions. The subject matter is complex and highly controversial. Proxy access will, when adopted, apply to more than 10,000 publicly-held corporations.
 
It is time to reach a decision on access given the seven years it has been under discussion. Final rulemaking, which is anticipated for early spring, requires resolution of a number of issues, including:

• Providing a clear definition of purpose, which would serve as a guideline to the content of the rule;


• Providing a reasonable transition period during which corporations, through director or shareholder action, can establish or conform to the terms of the rule;


• Defining the extent to which shareholders have a choice, including an opt-out right;

Outlining the means by which the corporation, through its directors or shareholders, can adapt the access right to the corporation’s governing documents and arrangements and deal with future events and opportunities;

• Offering guidance on shareholder use of the corporation’s proxy materials, under the shareholder proposal rule, to propose an access bylaw assuming that the director election exclusion is eliminated or modified; and


• Defining the workability of the process, which involves – in part – the extent and nature of its prescriptive terms.

On adoption, proxy access will enter a new phase with significant activity by corporations, their shareholders and the SEC.

How do you expect that the investor/regulator anger that still exists toward Corporate America will play out during this proxy season?
 
Todd Lang: The past couple of years have been characterized by scandals, joblessness, foreclosures, and other events that have raised serious concerns and a lack of confidence in the management of many companies. While these problems are essentially systemic in nature, there has already been impact on the amount and terms of executive compensation, the rewarding of effectiveness for participating in activities which involve meaningful risk to the enterprise, and the enhanced proxy disclosure requirements with respect to corporate leadership, compensation, risk and other governance matters.
 
The very human premise is that while many people suffer, others receive excessive rewards for activities which involve untoward risks and insufficient business judgment.  Most corporations have started to adopt measures to deal with these issues, and the SEC and other regulators have prescribed enhanced disclosure and other means to deal with them. If the efforts to effect change from the past are real, credible to investors and the public alike, and carefully implemented in a transparent manner, confidence can be restored. This is a year of transition, but by next year, investors, regulators and others should be in a position to make the judgment as to the effectiveness of these measures.

Does proxy access necessarily constitute a “best practice?”  Should it be a matter of shareholder choice?
 
Todd Lang: It is not axiomatic that the shareholders of every corporation favor the federal adoption of a right of proxy access. There are other alternatives, such as reimbursement by the corporation of solicitation expenses. Some believe that access establishes the basis for divisive action on the board of directors which could impede its effective functioning. Others are not convinced that access would be used for non-control purposes and suggest that the SEC proposal establishes a means of “access creep” –meaning that over time, directors elected through access may be inclined to act together with major control and influence implications.
 
In order to create confidence in the use of the right of proxy access, its purpose needs to be defined so that clear parameters are established to prevent its misuse. Principally, the proxy access right could be exercised by long-term shareholders with no-control intent or effect who have a meaningful interest in the corporation. Further, the shareholders of one corporation may have a different view on access than the shareholders of another corporation and, therefore, an “opt-out” right could be adopted to enable shareholders of each corporation to make their own choice.  An alternative is to establish access by providing shareholders with the right to “opt-in.”

With the economy beginning to improve, would you forecast an increase or a decrease in proxy fights in the coming year?
 
Todd Lang: There is a great deal of initial activity which suggests that there may be a substantial number of proxy contests in the coming year. This is based on economic opportunity, the increased ability of shareholders to seek and obtain board representation, and the number of issues which may favor change. While a proxy access rule would not be operative for the current year, depending on its terms, it certainly will encourage this kind of activity and, particularly, an increased use of the short slate. For practical purposes, a proxy contest means an election where there are more nominees than director slots to be filled and, therefore, this does not necessarily involve control.

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Larry Smith is Senior Vice President of Levick Strategic Communications, the nation's top crisis communications firm, and a contributing author to Bulletproof Blog. Connect with Levick on Twitter: @Levick.]]> http://www.bulletproofblog.com/2010/03/08/what%e2%80%99s-next-the-bulletproof-interview-%e2%80%93-todd-lang-on-the-2010-proxy-season/feed/ 0 http://www.bulletproofblog.com/2010/03/01/what%e2%80%99s-next-the-bulletproof-interview-%e2%80%93-nadine-hack-on-the-implications-of-corporate-spending-on-political-campaigns/ http://www.bulletproofblog.com/2010/03/01/what%e2%80%99s-next-the-bulletproof-interview-%e2%80%93-nadine-hack-on-the-implications-of-corporate-spending-on-political-campaigns/#comments Mon, 01 Mar 2010 14:56:42 +0000 Larry Smith http://www.bulletproofblog.com/?p=2227 Each week, Bulletproof Blog™ features exclusive interviews with thought leaders on issues of critical importance to companies and countries. This week, in the wake of the landmark U.S. Supreme Court decision on campaign spending by companies and other organizations, we interview Nadine B. Hack, the President and CEO of beCause Global Consulting, an international consulting firm that specializes in creating complex, multi-sector strategic alliances in a globalized world; reputation management in a socially-conscious society; and developing strong presences in new regions or market segments.

Ms. Hack is internationally recognized for her expertise in strategic planning, creative problem solving, insightful policy analysis, and politically sensitive negotiations – and has just been invited to be an Executive-in-Residence on Responsible Leadership and Corporate Social Responsibility at IMD. A savvy political insider who understands the myriad reputational implications of corporate campaign spending, Ms. Hack shared her insights on the recent Supreme Court decision with Bulletproof™:

How do you see the U.S. Supreme Court’s ruling in Citizens United v. FEC impacting the tone of political advertising during the 2010 election cycle?

Nadine Hack: I see the Supreme Court’s ruling in this case having the greatest impact on the independent expenditure groups – which also are known as 527s – that tend to be extremely partisan: most famously, MoveOn.org, on the left and the Swift Boat Veterans for Truth on the right. As such, the vitriolic messaging we’ve heard in past campaigns is likely to become even more caustic in coming election cycles.

Corporations likely won’t directly support specific candidate and issues – but they will support the 527s. A strong indication of that hypothesis can found by checking the U.S. Chamber of Commerce website. While the chamber was a major supporter of the decision for Citizens United in its case against the FEC, you won’t find a single word written about that at www.uschamber.com. You have to go to the Citizens United website to find quotes from the Chamber’s leadership extolling the virtues of the decision.

Individual companies will keep their distance from political campaigns in much the same way. They’ll channel their dollars through intermediaries with similar political goals – and do so for very good reason. While polls show that Americans say they despise negative advertising, they also demonstrate that negative advertising has a tremendous impact on electoral attitudes.

What are the most significant reputational liabilities that companies must consider before jumping headlong into political debates?

Nadine Hack: I think there are two key answers to this question. First, companies need to be very careful about supporting or opposing a specific candidate or issue because their consumer base is comprised of people who hail from all sides of the political spectrum. Michael Jordan was once asked why he never came out in support of Democratic candidates. His answer was simple.  He had made a lot of money through Nike endorsements and said, “Republicans buy sneakers too.” To me, his response crystallizes the idea that the political diversity of a company’s consumer base – whether for its goods or services – makes it not wise for private sector organizations to get involved in politics.

Second, with so many Americans feeling an economic pinch right now, lavish spending on political campaigns has the potential to alienate audiences across the board. When Michael Bloomberg ran for his third term as Mayor of New York City, he was predicted to win by a landslide because, with $90 million, he outspent his opponent by 14 to 1. The election turned out to be closer than anyone imagined – and when looking at the exit polls, a major reason why was the anger voters felt over the amount of money spent on the campaign.

With such public anger over the disproportionate resources that wealthy individuals and corporations have at their fingertips – which is manifested in calls to curb executive compensation and impose strict financial regulation – big corporate spending on political campaigns has the potential to draw attention to a company for all the wrong reasons.

How can companies best mitigate the risks that accompany political activism?

Nadine Hack: The best way to mitigate those risks is to avoid entering the political fray for now. Unless the corporate messaging is incredibly thoughtful, well-modulated, and so strongly-balanced that it doesn’t alienate anyone, I just don’t see it working in this polarized political environment.

There’s been an evolution in how America views corporations that has been underway for 200 years. With this ruling, companies have now come closer than ever before to being awarded the same rights as individual citizens. With legislation seeking to reverse the Supreme Court’s decision already making its way through Congress, Corporate America doesn’t want to make it easier for legislators to strip these newly-created and highly-controversial rights to political free speech. Given the market and societal risks at play, companies are best advised to tread lightly in 2010.

Click here to receive the Bulletproof Interview in your inbox each week.

Larry Smith is Senior Vice President of Levick Strategic Communications, the nation's top crisis communications firm, and a contributing author to Bulletproof Blog. Connect with Levick on Twitter: @Levick.

]]> http://www.bulletproofblog.com/2010/03/01/what%e2%80%99s-next-the-bulletproof-interview-%e2%80%93-nadine-hack-on-the-implications-of-corporate-spending-on-political-campaigns/feed/ 0 http://www.bulletproofblog.com/2010/02/01/what%e2%80%99s-next-the-bulletproof-interview-%e2%80%93-glenn-tyranski-on-the-compliance-challenges-of-being-listed-on-the-new-york-stock-exchange/ http://www.bulletproofblog.com/2010/02/01/what%e2%80%99s-next-the-bulletproof-interview-%e2%80%93-glenn-tyranski-on-the-compliance-challenges-of-being-listed-on-the-new-york-stock-exchange/#comments Mon, 01 Feb 2010 15:03:35 +0000 Larry Smith http://www.bulletproofblog.com/?p=2017 Each week, Bulletproof Blog features exclusive interviews with thought leaders on issues of critical importance to companies and countries. This week, as public companies continue to deal with the effects of the global financial crisis, we interview Glenn Tyranski, Senior Vice President for Financial Compliance at the New York Stock Exchange (NYSE), who is responsible for the financial reviews of prospective and existing listed companies.

As an expert in the financial standards that NYSE listed companies must meet, Mr. Tyranski shared his insights on NYSE compliance with Bulletproof™:

Tell us about your role at the New York Stock Exchange. How does financial compliance and oversight impact companies listed on the exchange?

Glenn Tyranski: The NYSE has a series of standards that companies must maintain once they are listed. We have both financial standards and corporate governance standards.

We work with the senior executives of the companies, their outside advisors, and other regulatory bodies in performing our oversight responsibilities both in their initial listing on the NYSE and then their continued listing.

Companies value their NYSE listing and we recognize the power of that brand and the public's perception of what it means to be listed on the NYSE.  We serve investors by ensuring that only those companies qualified to list on the NYSE are first admitted and then only those in compliance or otherwise working through our compliance process remain listed.

When a company faces delisting from the NYSE, how do you evaluate a company’s ability to get back to minimum levels? Are there non-financial metrics that play into the exchange’s decision?

Glenn Tyranski: We have a series of quantitative continued listing standards that companies must maintain. These standards involve minimum share price, market capitalization, and, in certain cases, stockholders' equity and revenues depending on the original listing standard under which the company was first admitted.

Additionally, we have a series of qualitative assessments that are made based on information disclosed by companies in their periodic Securities and Exchange Commission (SEC) filings as well as in their news releases. These qualitative assessments include but are not limited to matters involving liquidity concerns, audit opinions, reduction in operating assets, bankruptcy or liquidation, abnormally low selling price, authoritative advice that a security is without value, unsatisfactory financial conditions, public policy concerns, disclosure deficiencies and governance matters.

We have the ability to monitor and screen the entire NYSE listed company base on a daily basis against quantitative metrics, and we are also sensitive to corporate disclosures of a qualitative nature. When companies reach certain financial levels, they are provided an early-warning notice describing what the standards are and how they operate if noncompliance is triggered in the future. We regularly dialogue with companies as a result of their corporate disclosures in order for us to properly assess the impact of the information released. While the NYSE can remove a company at any time when investor protection is a risk, for the most part, companies are provided a recovery period of anywhere from six months to 18 months to regain compliance.

Companies are asked to respond in writing and will often visit to present their recovery plans.  These recovery plans are often a mix of operational and strategic initiatives and involve budgeting, financing, capital raising, risk analyses, investor and shareholder communication plans, and possible acquisition and disposal activities.

Our involvement is often with the executives of the companies but will also involve board members and company advisors from the financial, legal, and investor relations departments.  Engaged board members along with the assistance of quality outside advisors, if necessary, will help shape a company's recovery efforts. Well crafted internal compliance oversight and risk assessment activities will also assist a company in restoring its NYSE compliance. The NYSE will work through the recovery plan with the company and if the plan is accepted by the NYSE, the company will be monitored closely against the milestones and goals outlined in its materials. If the company is able to accomplish its strategic and operational initiatives and see a restoration of their share price, market capitalization, or other measurements, then the company will be deemed to be back in compliance no later than the end of the prescribed plan period.

In your estimation, what were the top issues affecting public companies in 2009? Do you see these issues having the same impact in 2010?

Glenn Tyranski: Clearly, we have been living through challenging if not unprecedented times over the last 22 months. The NYSE's listed company community, while not immune to these difficult times, has remained steadfast. While we have experienced higher than historical rates of noncompliance during these turbulent times, the overall quality of the NYSE list continues to exceed that of other global markets. Early 2009 gave witness to dramatic decreases in share prices and the resultant market capitalization of many companies along with numerous going-concern issues often raised by distressed-debt situations and substantial write-offs and impairments. The professional care and due diligence performed by the NYSE's financial compliance staff assisted companies through these difficult periods while providing regulatory oversight to maintain the integrity of the NYSE's list.

As we begin 2010, we have continued to see the overall relative improvement in share price and market capitalization levels as compared to the depths of last March with a cautious and perhaps fragile confidence continuing to develop. While many challenges remain for companies to return to their previous positions in the capital markets, the NYSE recognizes the value of its brand to the companies themselves and to the investing public and remains vigilant in its oversight responsibilities.

Click here to receive the Bulletproof Interview in your inbox each week.

Larry Smith is Senior Vice President of Levick Strategic Communications, the nation's top crisis communications firm, and a contributing author to Bulletproof Blog. Connect with Levick on Twitter: @Levick.

]]> http://www.bulletproofblog.com/2010/02/01/what%e2%80%99s-next-the-bulletproof-interview-%e2%80%93-glenn-tyranski-on-the-compliance-challenges-of-being-listed-on-the-new-york-stock-exchange/feed/ 2 http://www.bulletproofblog.com/2009/12/21/what%e2%80%99s-next-the-bulletproof-interview-%e2%80%93-former-house-speaker-dennis-hastert-on-influencing-the-legislative-process/ http://www.bulletproofblog.com/2009/12/21/what%e2%80%99s-next-the-bulletproof-interview-%e2%80%93-former-house-speaker-dennis-hastert-on-influencing-the-legislative-process/#comments Mon, 21 Dec 2009 14:15:18 +0000 Larry Smith http://www.bulletproofblog.com/?p=1637 Each week, Bulletproof Blog features exclusive interviews with thought leaders on issues of critical importance to companies and countries. This week, we sit down with former Speaker of the House Dennis Hastert for his insights on how business leaders can best approach members of Congress when seeking to advance their legislative priorities.

Based on your experience in Congress, what are the most common misconceptions that businessmen and women have about politicians?

Speaker Hastert: When CEOs or company representatives come to Washington seeking legislative action, they sometimes feel as if they have to “wow” the member of Congress they are trying to persuade with their knowledge of politics or a particular issue. What you have to remember about politicians is that they are people just like anyone else. They appreciate straight talk. They appreciate people who can simply state their goals and why those objectives matter to the people the politician is in Washington to represent. Influencing Washington isn’t about how many degrees you have or how powerful you are. It’s about understanding how to talk to people and make them care about your issue as much as you do.

More often than not, a simple conversation over a cup of coffee is just as effective as a big elaborate dinner – if only because it demonstrates respect for the demands that a politician has on his or her time.

When business leaders come to Washington, what information should they be armed with? What arguments are most likely to sway legislative prerogatives?

Speaker Hastert: First of all you, you want to know who you’re talking to. Is the representative a Democrat or Republican? What committees does the representative sit on? What issues have sparked his or her interest in the past? These are the natural first steps because they help frame every other part of the conversation. For instance, if you’re speaking to a Democrat about your business interest, you may want to highlight how measure will create jobs. If it’s a Republican you’re speaking with, you might want to talk about how your issue promotes free enterprise. Most important, make sure you know what’s within the member’s power to accomplish.

Also, it doesn’t hurt to cultivate a relationship with a politician before you need anything. If the politician knows you before you need him or her, you’re not a stranger when you’re coming for help. The member already knows who you are, what you represent, and why your issue matters to the people back home.

As I said before, it’s all about relating to politicians as you would anyone else.

When you speak to business leaders, what do you tell them about navigating Washington today?

Speaker Hastert: In politics, knowledge is power. If you can educate a member about a certain aspect of an issue and offer the background that justifies your position, what you’re really doing is arming the member with the tools he or she will need to be your advocate as the legislative process moves forward.

It’s all about helping them help you.

Click here to receive the Bulletproof Interview in your inbox each week.

Larry Smith is Senior Vice President of Levick Strategic Communications, the nation's top crisis communications firm, and a contributing author to Bulletproof Blog. Connect with Levick on Twitter: @Levick.

]]> http://www.bulletproofblog.com/2009/12/21/what%e2%80%99s-next-the-bulletproof-interview-%e2%80%93-former-house-speaker-dennis-hastert-on-influencing-the-legislative-process/feed/ 0 http://www.bulletproofblog.com/2009/12/09/international-anti-corruption-day-interview-special-laura-laybourn-on-pricewaterhousecoopers-new-corporate-intelligence-services/ http://www.bulletproofblog.com/2009/12/09/international-anti-corruption-day-interview-special-laura-laybourn-on-pricewaterhousecoopers-new-corporate-intelligence-services/#comments Wed, 09 Dec 2009 17:45:36 +0000 Larry Smith http://www.bulletproofblog.com/?p=1541 Each week, Bulletproof Blog features exclusive interviews with thought leaders on issues of critical importance to companies and countries. This week, with the Foreign Corrupt Practices Act (FCPA) cases skyrocketing in the United States – and with anti-corruption regulatory enforcement being stepped up around the globe – we interview Laura Laybourn of PricewaterhouseCoopers' expanding Forensic Services practice where she focuses on Corporate Intelligence.

Ms. Laybourn has extensive experience in assessing and mitigating corruption risk in global business and investment operations for both private and public sector clients. In her capacity as a Director with PwC, she manages the Corporate Intelligence Group for PwC in the US.  Her role also includes oversight in the development of thought leadership and delivery of the firm's distinctive perspective in anti-corruption prevention, detection, controls, and risk mitigation through the PwC Anti-corruption Centre of Excellence. As a corporate risk specialist who has managed hundreds of international and domestic due diligence, investigations, and risk assessment engagements, she shared her insights with Bulletproof Blog™:

Tell us about PricewaterhouseCoopers’ Corporate Intelligence Group. Why was it formed? What does it do? Who is involved?

Laura Laybourn: PricewaterhouseCoopers has a long-standing practice of conducting forensic investigations and due diligence for clients in just about every industry sector. In fact, we have one of the largest forensic practices in the world. As a thought leader in anti-corruption, investigations, and due diligence procedures, PwC has established credibility with leading regulators in the U.S. and overseas. With dramatic increases in both regulation and regulatory activity taking place on a global scale, corporate leaders have an acute need for efficient mechanisms to gather facts and make decisions that reduce compliance and reputational risks in a number of areas.

International companies, for example, with a wide range of third-party relationships around the globe have a lot on the line to understand up front what risks are associated with forming and maintaining these relationships.  What are the business practices of the third-party? What is its reputational standing? Has the third-party been subject to regulatory actions? How will my company's reputation be affected by joining into the business relationship? Will my company be exposed to a regulatory violation attributable to the third-party's actions?  Basically, what am I inheriting in this third-party relationship?

These are just some of the questions that PwC’s Corporate Intelligence Group is designed to answer. We are distinctive in the marketplace – as we offer sound methodology for identifying risk, which in turn enables due diligence decisions to be much more defensible and reduces the need for our clients to continue to spend time and concern on what more needs to be done.  Rather than a templatized approach, our skilled staff makes continual judgments throughout the data collection process – and with subject matter specialist oversight, builds a report of meaningful analysis to isolate the potential risks that clients are most concerned about.

PwC has a global network of over 163,000 people in 151 countries. We also have Corporate Intelligence Centers of Excellence dispersed strategically in, for example, South and East Asia, Africa, and the UK.  PwC offers an industry leading capability and can provide analysis on timely and accurate information involving a wide range of corporate risks in virtually any area of the globe.

Why is it so important that companies conduct rigorous due diligence before any major transaction? What liabilities can arise if a company enters into deals without gathering as much intelligence as possible beforehand?

Laura Laybourn: In the most significant scenario, companies can be held criminally liable for the actions of their business partners. We’ve seen high profile cases brought against companies and individuals not because they were shown to have actual knowledge of a third-party’s malicious conduct, but because they failed to conduct the adequate due diligence that could have uncovered it. Companies are finding that they cannot avoid liability for third-party behavior by blinding themselves to the probable risks. The so called “Doctrine of Conscience Avoidance" makes a company liable by imputing knowledge of risks that would have been uncovered had the company conducted reasonable due diligence.

If problems do arise, being able to demonstrate that sound due diligence occurred before the deal can significantly decrease the penalties at play – both in the courtroom and the Court of Public Opinion. Due diligence is part of any sound compliance program, as noted  in U.S. sentencing guidelines and the many international anti-corruption standards promulgated around the globe including the World Economic Forum Partnering Against Corruption Initiative and Transparency International Business Principles--both of which PwC had involvement in formulating.

What’s next with regard to assessing market, territory, and third-party risk in business operations? Are there issues emerging on the horizon that risk managers need to be aware of?

Laura Laybourn: Standards to a large extent are being set within the industry and benchmarking is a particularly important exercise in order to keep one's practices in check.  While the bar for what is considered reasonable due diligence continues to rise, there are a number evolving risk-appropriate procedures that companies can be engaged in when vetting potential business partners.  PwC’s Corporate Intelligence Group is uniquely positioned to advise on customized and sound due diligence which appears to be and is achievable based on the challenges at hand, particularly for our clients managing a significant number of third-party relationships.

Additionally, we can help companies fold due diligence into an overall effective compliance program -- either from the ground up or strengthening components of one already in place.  Our professionals are engaged with standard-setting initiatives around the world. We know what’s changing on the regulatory landscape in real time and are positioned to help companies become more informed on the criminal, reputational, supply chain or brand liabilities involved with third-party strategies.

Click here to receive the Bulletproof Interview in your inbox each week

Larry Smith is Senior Vice President of Levick Strategic Communications, the nation's top crisis communications firm, and a contributing author to Bulletproof Blog. Connect with Levick on Twitter: @Levick.

]]> http://www.bulletproofblog.com/2009/12/09/international-anti-corruption-day-interview-special-laura-laybourn-on-pricewaterhousecoopers-new-corporate-intelligence-services/feed/ 0 http://www.bulletproofblog.com/2009/12/07/whats-next-the-bulletproof-interview-technorati-ceo-richard-jalichandra-on-the-state-of-the-blogosphere-in-2009/ http://www.bulletproofblog.com/2009/12/07/whats-next-the-bulletproof-interview-technorati-ceo-richard-jalichandra-on-the-state-of-the-blogosphere-in-2009/#comments Mon, 07 Dec 2009 04:02:58 +0000 Dallas Lawrence http://www.bulletproofblog.com/?p=1497 Each week, Bulletproof Blog features exclusive interviews with thought leaders on issues of critical importance to companies and countries. This week, with the industry-leading blog tracking service Technorati having just released its “State of the Blogosphere 2009” report, we interview Technorati CEO Richard Jalichandra on the evolving impacts that blogs have had on business in 2009 – and what we can expect moving forward in 2010 and beyond.

Technorati just released its “2009 State of the Blogosphere Report.” What surprised you most about how the blogosphere has evolved in the last year?

Richard Jalichandra: What struck me most this year was how much the serious bloggers are continuing to raise their game. Three quarters of bloggers said they blogged more this year. They also continue to be the earliest and most prolific users of other social media tools to support their blogs. The percentage of bloggers using Twitter grew from 40% last year to more than 80% this year – and their number one use of Twitter is to promote their blogs. More bloggers than ever are seeking to monetize their efforts: we saw a 68% increase in the blogs with ad tags over last year. And the lines between blogging and traditional media continue to blur: 40% of bloggers have worked within the traditional media and 27% still do. This is in contrast with 1% of the general population.

The blogosphere has become more and more mainstream. Do you believe that companies have come to fully understand the impact that blogs can have? Why or why not?

Richard Jalichandra: Most companies understand that bloggers can have a significant impact on perception of their brand, and on their revenue. When we do see a gap, this is what we see: there are companies who still view bloggers as hobbyists. Today, blogs are professionally run media businesses. They need the same level of attention as traditional media outlets, but a different strategy.

Recently, the Federal Trade Commission instituted new rules that require more disclosure from bloggers who work with brands for product reviews or advocacy. What do you think this will mean to the developing relationship between bloggers and brands?

Richard Jalichandra: It was a very arbitrary decision on the part of the FTC to place a focus on bloggers while completely neglecting other media, particularly print magazines where the most egregious and frequent instances occur. The vast majority of bloggers are already fully disclosing their relationships. The FTC seems to have created more confusion than anything else. It’s too early to tell if there will be a negative impact such as bloggers becoming reluctant to write reviews.

This year, more than any, has seen “online-first” crises. Domino’s, United Airlines, and Amazon.com have all felt the sting of social media. What should other companies learn from these examples?

Richard Jalichandra: You can add Ralph Lauren to that list. If you missed the story, their lawyers sent a cease and desist letter to a very well known blogger that had poked fun at one of their advertisements, and ended up drawing huge attention to the ad as well as to their response. They bungled the situation further, then finally ended up apologizing. We tell our clients all the time: don’t wait for a crisis to get started. Companies that have come through crises well have all addressed the issue head on, right away. But it’s more than talking back. First, give up any illusions that you can control the flow of information. Second, social media presents an unprecedented opportunity to know what people are saying about you, right now, as well as the opportunity to engage. Are you taking advantage of this? You should be. Third, are you just talking back or are you actually using the information you’ve received to drive change?

Many companies are looking for best practices for engaging the social media space. Can you share one or two examples of successful corporate engagements in 2009? What was it that made these specific approaches successful?

Richard Jalichandra: I think a great execution to look at is IBM’s Smarter Planet initiative. Instead of trying to force a conversation around IBM, they enabled a conversation around efficiency, infrastructure, healthcare, resources, and how we will collectively use technology to build a better world. They created content, assembled existing content, and distributed the entire conversation across the blogosphere. Technorati built conversation ads which featured rotating categories of blogosphere and IBM content. We also conducted blogger outreach to get more bloggers involved in writing about these important topics.

Besides the state of the blogosphere report, Technorati has been busy redesigning its homepage and implementing an entirely new authority ranking system. What motivated all these changes and what do they mean to the users – bloggers and blog readers – who rely on Technorati?

Richard Jalichandra: These changes add up to one simple thing: Technorati was founded to help people find blog content. The new Technorati does this better than before. We’ve overhauled Technorati Authority to better reflect the topical and fast changing nature of the blogosphere. For example, we are now looking at who’s linking to you over the past month, rather than the past six months. We’ve also introduced Topical Authority – making it easy to find the top blogs by content category. The overall site and our blog directory have been revamped, and we’ve added original content articles, giving bloggers a chance to reach a much larger audience than they do on their own blogs.

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Dallas Lawrence is Chair of the Social and Digital Media Practice at Levick Strategic Communications, the nation’s top crisis communications firm. He blogs on emerging digital media trends and best practices for social media engagement on BulletProofblog.com Connect with him on Twitter @dallaslawrence.

]]> http://www.bulletproofblog.com/2009/12/07/whats-next-the-bulletproof-interview-technorati-ceo-richard-jalichandra-on-the-state-of-the-blogosphere-in-2009/feed/ 0 http://www.bulletproofblog.com/2009/11/30/whats-next-the-bulletproof-interview-michael-pfarrer-on-corporate-reputation-and-celebrity/ http://www.bulletproofblog.com/2009/11/30/whats-next-the-bulletproof-interview-michael-pfarrer-on-corporate-reputation-and-celebrity/#comments Mon, 30 Nov 2009 13:59:46 +0000 Larry Smith http://www.bulletproofblog.com/?p=1435 Each week, Bulletproof Blog features exclusive interviews with thought leaders on issues of critical importance to companies and countries. This week, we interview University of Georgia Assistant Professor Mike Pfarrer, who – along with Tim Pollock of Pennsylvania State University and Violina Rindova of the University of Texas at Austin – just completed a groundbreaking study of how corporate “reputation” and “celebrity” affect investor decisions after positive and negative earnings surprises.

A leading expert on issues of corporate perception, Professor Pfarrer shared insights on the definition of “reputation” and “celebrity” as they relate to Corporate America; the benefits of each; how they can be earned; and how they can be most effectively leveraged with Bulletproof™:

How do you define reputation and celebrity as they pertain to Corporate America? Why are these assets important? How can they be earned and spent wisely?

Mike Pfarrer: Reputation and celebrity are both intangible assets. They create value for firms by stimulating social approval (or favorable collective perceptions) from multiple stakeholder groups. Both reputation and celebrity have positive effects on firm performance because they increase stakeholders' positive perceptions of, and associations with, the firm. There is a large body of research in strategy that has shown a positive relationship between reputation and firm performance. Celebrity is a new concept and our recent study (which is derived in part from the theories developed in a 2006 article entitled Celebrity Firms: The Social Construction of Market Popularity) of its effects on investor responses to earnings surprises is one of the first to provide empirical evidence of the positive performance effects of celebrity.

What our research shows is not only that these assets are important for performance, but that they are different in interesting ways. Reputation, as it pertains to corporations, is an asset that is built over time and is based on public recognition of the quality of a firm’s products, services, or activities. In contrast, celebrity is an asset that results from high levels of public attention and positive emotional resonance with stakeholders. Celebrity is developed when firms engage in bold, non-conforming actions and the media develops narratives that valorize their unusual strategies and cultures in ways that make them appealing and accessible to stakeholders. It is important to recognize that firm celebrity is not just media visibility. Simply being in the press, absent the generation of positive emotional resonance, is insufficient for the firm to accrue the benefits of celebrity.

It is also important to note that while celebrity can be developed more quickly than a high reputation, it is also harder to sustain over the long-term. Further, each asset is developed based on very different kinds of actions and behaviors. To take full advantage of this asset, celebrity firms should use the opportunities celebrity affords to develop the resources, market position, and opportunities that increase the likelihood that it will develop a strong reputation over time.

What’s the correlation between reputation and celebrity as it influences the behavior of investors (individual and institutional), analysts, credit rating agencies, and other marketplace participants?
 
Mike Pfarrer: Both reputation and celebrity generate positive social approval; thus, generally possessing high levels of either of these assets can benefit a company. However, we argue that the large emotional component of celebrity generates a different kind of social approval than the social approval generated by a history of high quality and strong performance. We studied the effects of possessing high reputation and celebrity on investor responses to material positive and negative earnings surprises, and found that both high reputation and celebrity firms experience significantly larger positive market reactions than firms that do not possess either asset when they experienced positive earnings surprises, and were not punished by the market at all when they experienced negative earnings surprises. However, we also found that celebrity firms experienced significantly larger positive responses than high-reputation firms to their positive surprises.

We would expect that analysts, credit rating agencies, and others would be affected in essentially the same way as investors. Although our research only focused on one type of surprise behavior – earnings surprises – and one kind of marketplace participant – investors – we would expect to see high levels of reputation and celebrity increase positive reactions to positive events such as announcements of new innovations and new product launches, and that they would serve as buffers in the face of negative events such as recalls, earnings restatements, and environmental compliance errors.

If you were a CEO, would you rather that your company be categorized as “high reputation” or “high celebrity?” What are the most direct benefits of each?

Mike Pfarrer: This is a tricky question. The strategies that lead to the development of reputation and celebrity can make it difficult to build the other. Thus, very few firms appear to possess both assets simultaneously. The challenge for managers is to understand the short- and long-term costs and benefits of each asset and to figure out which they can develop most readily given “where they are” relative to other firms and “where they want to be” in the future.

For example, although celebrity can be short-lived, it also appears to make a bigger impression among stakeholders amid positive events. Thus, firms that are new or those that are engaging in new, bold behaviors that deviate from industry norms might consider being proactive in garnering media attention and providing the media with the sorts of information that allow stakeholders to develop a positive, emotional connection with the firm. Once they have accomplished this, they may then begin to build a lasting, positive reputation based on the opportunities and resources their celebrity makes available.

Click here to receive the Bulletproof Interview in your inbox each week

Larry Smith is Senior Vice President of Levick Strategic Communications, the nation's top crisis communications firm, and a contributing author to Bulletproof Blog. Connect with Levick on Twitter: @Levick.

]]> http://www.bulletproofblog.com/2009/11/30/whats-next-the-bulletproof-interview-michael-pfarrer-on-corporate-reputation-and-celebrity/feed/ 0 http://www.bulletproofblog.com/2009/11/23/whats-next-the-bulletproof-interview-john-holcomb-on-the-most-significant-issues-facing-corporate-boards-today/ http://www.bulletproofblog.com/2009/11/23/whats-next-the-bulletproof-interview-john-holcomb-on-the-most-significant-issues-facing-corporate-boards-today/#comments Mon, 23 Nov 2009 14:25:34 +0000 Larry Smith http://www.bulletproofblog.com/?p=1393 Each week, Bulletproof Blog features exclusive interviews with thought leaders on issues of critical importance to companies and countries. This week, with boards of directors dealing with increased shareholder pressures on issues ranging from executive succession to executive compensation, we interview Dr. John Holcomb, a professor at the University of Denver’s Daniels College of Business.

A nationally recognized expert on issues of corporate governance, corporate responsibility, and crisis management, Dr. Holcomb shared his insights on how boards can best cope with a new era of shareholder accountability with Bulletproof™:

What are the keys to successful executive succession? Given that succession planning is clearly the board’s purview, to what extent does the board need to lead this effort? What should management’s role be?

John Holcomb: I believe the board should assume a much more active role in executive succession.  Ram Charan of Harvard Business School points out that board activity on executive succession probably represents 80 percent of the value that boards deliver, and yet they spend less time on that issue than on all others. The board needs to create an executive succession plan and take the lead in identifying future CEO candidates and meeting with them personally. It all too often defers to outside recruiters and search firms.

The board also needs to appreciate that cultivating CEO and leadership candidates internally can answer several problems. The board will have greater assurance that the candidates have been fully tested and that they have an in-depth knowledge of the company and its problems. The board can also avert the need to turn to a “star” outsider who may be much more expensive. In that respect, an effective executive succession plan can be a large part of the solution to the executive compensation issue. That is why shareholders are showing a much greater interest in the executive succession issue.

The board also needs to create a leadership development program that includes all executive ranks, ideally modeled on such leading programs as those at General Electric and Procter & Gamble, and then charge top management with implementing the program.

How can public companies best manage a new era of shareholder activism? If companies move proactively, does it offer them the opportunity to “recruit” shareholders as allies?

John Holcomb: Public companies need to reach out to institutional shareholders on a regular basis and especially to activists that might pose threats of proxy fights for control of the firm. Firms must always attempt to anticipate future shareholder demands and challenges through active monitoring and dialogues. Corporate boards cannot afford to simply delegate these functions to investor relations departments but must themselves proactively engage shareholders. In fact, knowledge of and connections to the institutional investor community should be a criteria in selecting at least some of the outside directors on the board.

Regarding shareholder resolutions, top management and boards can often successfully negotiate with outside sponsors, granting some concessions in return for withdrawal of a resolution. Even better, if companies and boards continually survey the evolving priorities of shareholder activists, the companies can adjust their policies in advance and thereby avoid being targeted by a resolution. By anticipating and adapting to shareholder priorities, corporations can avoid the expense and time of dealing with proxy fights and debates at annual meetings.

Of course, some shareholder gadflies will never be satisfied, and in those cases, firms must strongly defend their policies and positions to all shareholders to garner support.  As in many political battles, companies can often split the opposition and win support from more responsible shareholder critics while isolating those with the most extreme and unreasonable demands. By fostering sound and respectful relationships with shareholder activists over time, some of those shareholder groups might become ambassadors for the company, partnering with the firm to blunt legislative or regulatory pressures or even to train their sites on competitors of the firm. In that sense, a strong policy of shareholder relations can contribute significant benefits to competitive strategy. 

Given the role that the so-called “Pay Czar” has had with those companies that still have TARP funds, what trends/practices in executive compensation do you see other companies adopting now, before they might be forced to do so?

John Holcomb: Some of the “Pay Czar’s” initiatives make sense and are actually based on some “best practices” that have already been adopted by certain companies. To downplay cash in favor of stock or restricted stock – admittedly a debatable approach for some companies – does make sense for most. Basing compensation on longer term performance has virtually become a cliché and has been initiated by many firms. The pay czar may be cutting the issue too finely by defining the “long term” based on two- and four-year increments, though, and several firms have actually pushed the time horizon further into the future. That is just one example of how voluntary governance reforms, tailored to the needs of particular firms, are vastly preferable to uniform regulatory requirements imposed on all firms, regardless of their competitive or industry situations.

Compensation committees can also anticipate and deflect regulatory pressures by changing their performance metrics to include broader financial measures than stockholder return. The Pay Czar prefers return on investment as a far better measure. Valuation is a complicated issue, but some firms also include customer satisfaction and employee satisfaction criteria when determining pay for performance. 

There are other initiatives that compensation committees can adopt to anticipate and adapt to shareholder demands and regulatory pressures as well. Even though the evidence is divided on the effectiveness of “say on pay,” it may be inevitable, and firms like Aflac have already voluntarily adopted programs of shareholder advisory votes on executive compensation. 

Following on the heels of recent SEC rules, several firms have also devised “total tally sheets” in disclosing total pay packages to shareholders, allowing for more meaningful information disclosure. Companies might also abandon using the compensation of peer companies as benchmarks for their own compensation programs – an approach favored by pay consultants that only serves to continually ratchet up compensation for top management across all industries.

Board nominating and governance committees might also try to avoid any specter of cronyism on compensation committees by avoiding placing on comp committees CEOs  who have a stake in seeing overall compensation creep upward. Instead, boards might nominate real experts in compensation to that committee.

Finally, as mentioned earlier, a solid executive succession plan can contribute mightily to restraining excessive compensation by not having to overpay for an outsider. Boards should also exercise restraint in the amounts they allocate to golden parachute and severance payments, if authorized at all. They should also be aware of the internal and political backlash created by excessive pensions and perks.

Click here to receive The Bulletproof Interview in your inbox each week

Larry Smith is Senior Vice President of Levick Strategic Communications, the nation's top crisis communications firm, and a contributing author to Bulletproof Blog. Connect with Levick on Twitter: @Levick.

]]> http://www.bulletproofblog.com/2009/11/23/whats-next-the-bulletproof-interview-john-holcomb-on-the-most-significant-issues-facing-corporate-boards-today/feed/ 0 http://www.bulletproofblog.com/2009/11/16/whats-next-the-bulletproof-interview-david-leach-on-a-new-era-of-board-scrutiny/ http://www.bulletproofblog.com/2009/11/16/whats-next-the-bulletproof-interview-david-leach-on-a-new-era-of-board-scrutiny/#comments Mon, 16 Nov 2009 15:52:47 +0000 Larry Smith http://www.bulletproofblog.com/?p=1343 Each week, Bulletproof Blog features exclusive interviews with thought leaders on issues of critical importance to companies and countries. This week, as directors of public companies continue to grapple with emergent issues affecting board scrutiny and accountability, we interview David Leach of ECG, an expert in linking compensation and governance with overall corporate strategy.

Given the current state of corporate governance, what should boards of public companies be doing now to demonstrate that they are leading corporate reform, rather than being led by it?

David Leach: The most significant task before boards of public companies in today’s environment is restoring shareholder trust. This populist movement afoot in the marketplace can sometimes resemble a lynch mob – and as a result, many companies just want to keep a low profile and bury their heads in the sand. Much like a taxpayer that is reticent of saying or doing anything to displease the IRS for fear that the action might trigger an audit, they are afraid to step forward.

Right now, there are many public companies that are behaving like private companies – and that sends precisely the wrong message. Today, good corporate governance means transparency. The boards that effectively articulate the underlying reasons for a particular course of action are the ones adapting best to the new paradigm. On executive compensation, for example, boards don’t have to slash pay; they need only explain why competitive compensation is essential to attracting the best talent available.

Also, boards shouldn’t wait for the government to tell them to implement reforms that they know are coming anyway. Taking proactive, rather than reactive, steps to enhance shareholder protection is what leadership on this marquee issue is all about.

As changes to the proxy process impact how boards of public companies are elected, how can directors best adapt to the heightened shareholder accountability – and, potentially, liability – that these changes will bring?

David Leach: Board members need to be the voice of the shareholders. That means developing an intimate knowledge of basic business practices and being willing to call out executive leadership if they believe something is amiss, rather than simply accepting their decisions at face value.  Board members need to be more willing to accept their own shortcomings than they have been in the past. They are typically very adept business people, but that doesn’t mean they are perfect. Identifying their weak spots through routine performance appraisals, or self assessments, and then working to improve in certain areas will send the message to investors that they take their jobs seriously and aren’t above bettering themselves to ensure they’re representing shareholder interests effectively.

What’s next with regard to corporate governance? What are the emerging issues corporate directors will have to effectively navigate in 2010 and beyond?

David Leach: The big issue for corporate governance in 2010 is risk assessment.  The Securities and Exchange Commission is expected to publish final rules this fall requiring all public companies to conduct a risk assessment of all their incentive compensation plans to ensure that they do not promote excessive risk taking that could have a material effect on the business. By next spring, I believe that most public companies will be required to disclose the results of these assessments in the Compensation Discussion and Analysis section of their upcoming proxy statements.

In addition, due to the far-reaching effects of the financial crisis, all public companies are going to be under increased scrutiny for the actions of a few bad actors. As a result, we’re going to see new rules and regulations applied across numerous industry sectors. For instance, the additional reporting requirements that are in store for financial services companies will likely soon be required for all public companies. The important thing for directors to remember is that everyone’s been tarred with the same brush. Whether it’s fair or not, all companies are going to have reflect a new set of priorities moving forward.

To connect with Mr. Leach, e-mail him at dleach@ecgcorpgov.com.

Larry Smith is Senior Vice President of Levick Strategic Communications, the nation's top crisis communications firm, and a contributing author to Bulletproof Blog. Connect with Levick on Twitter: @Levick.]]> http://www.bulletproofblog.com/2009/11/16/whats-next-the-bulletproof-interview-david-leach-on-a-new-era-of-board-scrutiny/feed/ 1 http://www.bulletproofblog.com/2009/11/06/bulletproof-interview-special-former-speaker-of-the-house-newt-gingrich-on-the-pay-czar-healthcare-reform-and-the-marquee-business-issues-of-the-day/ http://www.bulletproofblog.com/2009/11/06/bulletproof-interview-special-former-speaker-of-the-house-newt-gingrich-on-the-pay-czar-healthcare-reform-and-the-marquee-business-issues-of-the-day/#comments Fri, 06 Nov 2009 14:25:42 +0000 Larry Smith http://www.bulletproofblog.com/?p=1226 exclusive interviews with thought leaders on issues of critical importance to companies and countries. In this Bulletproof Interview exclusive, former Speaker of the House Newt Gingrich shares his thoughts on the most significant issues arising at the crossroads of government and business today. From healthcare reform to the new federal pay czar, Speaker Gingrich has his finger on the pulse of the latest legislative and regulatory developments coming out of Washington, D.C. – and, today, he provides Bulletproof™ readers with a his insights on how what’s happening inside the Beltway is impacting businesses across the country.

What is your assessment of the new role of pay czar and how do you see it impacting the marketplace and the economic recovery as whole in the months to come?

Speaker Gingrich: The pay czar is a terrible idea and should be abolished on three grounds.

First, the concept of a White House czar without Senate confirmation is unconstitutional and the offices should be abolished on constitutional grounds. No one should have this level of power without legislative scrutiny.

Second, the idea of any one man being wise enough to know exactly the right salary and compensation for this many people in this many different companies is absurd. It is the sort of centralized control Hayek wrote about in The Road to Serfdom and that we warned the Soviets about.

Third, the destructive impact of a political appointee controlling compensation will drive away first class people and lead to Shanghai and London replacing New York as the center of finance.

In your estimation, what is going to happen with the public option on healthcare? Do you anticipate a reform package of some form passing this year?

Speaker Gingrich: The left is desperate to get to a bureaucratic government health plan – or the misnamed public option – as an interim step to a government takeover of healthcare. Such a plan is increasingly unpopular with the American people and faces substantial opposition among Democrats in the Senate. Health reform on the left is about bigger government, not about better health. The leadership of the socialist wing of the Democratic Party wants this so badly that its passage has to be considered a 50-50 possibility despite intense public opposition.

As someone with more than 1.1 million followers on Twitter, what advice would you give to those, both in the private sector and in the political public service sector, that might still be reticent to use online social media as a primary messaging platform?

Speaker Gingrich: Imagine a bank without telephones. Imagine a bank without Internet connectivity. Imagine a bank without ATMs. Social media is part of an ongoing evolution and every bank should learn how to use it effectively. You might check out my and Nancy Desmond’s book, The Art of Transformation for how to best plan for and manage this scale of change.

You have just spoken to the American Banking Association. What do you see next for the banking industry? Are there issues emerging on the horizon that all banks or financial industry leaders need to be aware of either from a regulatory or legislative stance?

Speaker Gingrich: There are three profound challenges to banking: How to aggregate modest resources for effective loans at the lowest possible cost to small businesses; how to build an effective, nationwide, multipurpose finance system with reasonable stability; and how to compete in a rapidly growing world market with powerful and growing competitors.]]> http://www.bulletproofblog.com/2009/11/06/bulletproof-interview-special-former-speaker-of-the-house-newt-gingrich-on-the-pay-czar-healthcare-reform-and-the-marquee-business-issues-of-the-day/feed/ 1