Founded in 1969, NIRI is the professional association of corporate officers and investor relations consultants responsible for communication among corporate management, shareholders, securities analysts and other financial community constituents. The largest professional investor relations association in the world, NIRI’s more than 3,500 members represent 2,000 publicly held companies and $5.4 trillion in stock market capitalization.

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IR Weekly - January 24, 2012

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IR Weekly - January 24, 2012

President’s Note

IR & Board Team

One Dodd-Frank regulation the SEC will work towards completing in 2012 is a requirement for companies to disclose average compensation of employees compared to CEO compensation and stock price. Based upon the how the law is currently written, implementation will create many challenges for companies. NIRI recently joined more than 20 other organizations requesting the SEC exercise care and prudence as it considers the required rulemaking.

Here are a few other items that crossed my desk this past week:

• IR and Board Team Up! NIRI Board member Barbara Gasper of MasterCard along with the Chair of the company’s Audit Committee took time last week to be interviewed by This Week in the Boardroom to discuss the interaction and critical role IR plays in the boardroom.
• ISS and Executive Compensation. Check out the latest ISS white paper on executive compensation trends.
Last week another insider trading case came to light with accusations of trades that earned more than $50 million in illicit profits. While public information is not complete, it appears a rotational IR person from a publicly traded company may have been involved, although not charged with a crime. I bring this issue to your attention because IR departments may retain interns, have rotational employees or employ other temporary help. Given the sensitive information IR is exposed to, this case is an excellent reminder of the importance of ethics as the bedrock of any compliance and training program. NIRI members, for example, agree to abide by NIRI’s Code of Ethics and regularly benefit from related professional education through seminars, publications, conferences, etc.

Finally, we expect to invite a sample of NIRI corporate members to participate in a survey regarding annual shareholder meeting practices. Please take a few minutes to participate in this timely survey if you receive an invitation – this is our first look at annual meeting practices in quite a while and will establish a baseline for understanding future trends.

Until next week,

Jeff Morgan, FASAE, CAE
President & CEO
jmorgan@niri.org
www.twitter.com/jeffreydmorgan

Sponsored By:

Headlines

Annual Conference Update

Stay at One of the NIRI Hotels for Your Chance to Win Cool Prizes!

Professional Development

Governance Part II: Dealing with Activist Shareholders – February 7 at your location
Finance Essentials for Banking & Financial Services Industry – March 19 & 20 in New York, NY
The New Capital Markets – March 21 in New York, NY

Member Services

NIRI Career Center
NIRI Office Move

Industry Events

This Week in the Boardroom

Chapter News

Upcoming Chapter Events

The Buzz

"Stock Trading Is Lowest in U.S. Since 2008 After Fund Withdrawals, Job Cuts"
"Cameras May Open Up the Board Room to Hackers"
"Investors Submit Proposals at 40 Issuers Calling for Disclosure of Lobbying Dollars"
"SEC Approves NYSE Deal"
"Groups, Stressing Economic Impact, Ask SEC to Host Roundtable on Pay Ratio Rulemaking"
"With New Law, Profits Take a Back Seat"
"How Long Does the Average Share Holding Last? Just 22 Seconds"
"US Exchanges Seek to Extend 'Flash Crash' Safeguards to July 31"
"FASB Releases 2012 U.S. GAAP Taxonomy in XBRL"
"Note to CFOs: Give Investors Attention When It Comes to Investment Strategy"
"Talking Points: Say-On-Pay Best Practices in 2012"
"Private Meetings of Public Companies Thwart Disclosure Rules"
"Risk Factors: Time for a Tune-Up"

Sponsored By:

Annual Conference Update

Stay at One of the NIRI Hotels for Your Chance to Win Cool Prizes!

Great Expectations
Reserve within the NIRI hotel block and stay during Conference for your chance to win the new iPad, free nights at posh hotels, valuable gift cards, and other exceptional prizes. Drawing will occur Tuesday (6/6) at Conference.

Make your hotel reservations now!

Early Registration Now Open
The 2012 NIRI Annual Conference is June 3-6, 2012 in Seattle, WA!

Web Link | Return to Headlines

Professional Development

Governance Part II: Dealing with Activist Shareholders – February 7 at your location

Create a plan to deal with activist shareholders when they strike. Gain tips and best practices for before, during and after activist shareholders voice their opinions, gather support and execute their plan.

Web Link | Return to Headlines

Finance Essentials for Banking & Financial Services Industry – March 19 & 20 in New York, NY

Let the experts help you understand the essentials of finance and communicate your company’s financial story.

Web Link | Return to Headlines

The New Capital Markets – March 21 in New York, NY

In this one-day seminar, we’ll make sense out of all the recent changes in the capital markets and drill down to what it all means to the practice of investor relations.

Web Link | Return to Headlines

Member Services

NIRI Career Center

NIRI's Career Center is a highly valued member resource that is one of the most frequently visited web pages on the NIRI Web site. Members can search job listings and post resumes confidentially. Employers and recruiters can post a job for a 30-day period for a $350 fee, and search resumes.

Web Link | Return to Headlines

NIRI Office Move

Please note that NIRI has moved - our new address is:

225 Reinekers Lane, Suite 560
Alexandria, VA 22314
Phone: (703) 562-7700
Fax: (703) 562-7701

Return to Headlines

Industry Events

This Week in the Boardroom

Watch NIRI Board Member and SVP, Investor Relations, Barbara L. Gasper, and Mark Schwartz, Board Member, MasterCard Inc. as they discuss the importance of the Board/IR link with TK Kerstetter.

Web Link | Return to Headlines

The Buzz

Stock Trading Is Lowest in U.S. Since 2008 After Fund Withdrawals, Job Cuts
Bloomberg (01/23/12) Wang, Lu

Wall Street job losses and mutual fund withdrawals have sent trading in U.S. stocks to the lowest level since 2008, according to data from Bloomberg that tracks back three years. Trading fell to 6.69 billion shares in the 50 days ending Jan. 18, which is the lowest level since 2008, while the New York Stock Exchange is seeing its lowest volume since 1999 and Nasdaq its lowest in six years. The data indicates investors are still skittish following the financial crisis and one of the most volatile years ever for the S&P 500, while the loss of more than 200,000 jobs at securities firms is also undermining confidence and taking players out of the game. The decline in volume was not even offset by this month’s 4.6 percent increase in the S&P 500. Mark Turner of Instinet says that for volume to rise, investors need to see the U.S. economy improve as well as a plan to deal with Europe’s debt crisis. The biggest venues are seeing the largest declines in volume, as they are increasingly dealing with competition from alternative venues such as Direct Edge and Bats, which now have about 20 percent of transactions. Mutual fund withdrawals have been ongoing for five years, sparked by the subprime mortgage crisis and continuing today on concerns about Greece’s debt.

| Web Link | Return to Headlines

Cameras May Open Up the Board Room to Hackers
New York Times (01/22/12) Perlroth, Nicole

Advanced digital videoconferencing equipment has vastly improved meeting opportunities for coworkers and clients across the globe, but the new systems can also be hacked to spy on those meetings, potentially jeopardizing confidential client data or corporate secrets. In a recent demonstration, HD Moore, a chief security officer at Boston-based IT security company Rapid7, showed that he could remotely manipulate videoconferencing equipment to hear or see anything in a board room. “These are literally some of the world's most important boardrooms--this is where their most critical meetings take place--and there could be silent attendees in all of them,” warned Mike Tuchen, chief executive of Rapid7. According to Tuchen, these vulnerabilities are caused by IT administrators setting up videoconferencing links outside of company firewalls and configuring them in ways that create easy targets for hackers. No company has yet announced that they have been compromised using videoconferencing, but it is also entirely possible that companies have been victimized and may not be aware. Some new systems are outfitted with a feature that does not require users to accept every person that dials into their conference. These features can help a meeting run more smoothly, but may also make uninvited guests much harder to detect. Moore recently wrote a computer program that would allow him to detect any videoconferencing links located outside company firewalls and configured to automatically answer calls. In less than two hours, he scanned about 3 percent of the Internet, discovering 5,000 open conference links at law firms, pharmaceutical companies, oil refineries, universities, and medical centers. To prevent hackers from being able to do the same, Rapid7 recommends companies set up a "gatekeeper" that securely connects calls from outside the company firewall.

| Web Link | Return to Headlines

Investors Submit Proposals at 40 Issuers Calling for Disclosure of Lobbying Dollars
BNA Securities Law Daily (01/20/12)

Political lobbying expenditures are the focus of a major shareholder initiative. Institutional investors announced on Jan. 19 that they have submitted proposals calling for the disclosure of political spending at 40 companies. Bank of America, Caterpillar, Coca-Cola, Northrop Grumman, and Pfizer are among the companies that have received the resolutions. According to a joint release from the investors, shareholders have the right to know how corporations spend resources to affect political elections and influence public policy. "Hence, this lobbying disclosure initiative is a natural extension of an ongoing shareholder campaign, which encourages greater political spending transparency and accountability," says the release. Investors behind the release include the New York State Common Retirement Fund, Walden Asset Management, and the American Federation of State, County and Municipal Employees' Employees Pension Plan. Shareholders have called for greater transparency in corporate political spending following the U.S. Supreme Court's decision in January 2010 to lift longstanding limits on such activity. The release also cites a November 2011 study funded by the Investor Responsibility Research Center Institute that reveals S&P 500 companies spent $1.1 billion on political contributions and lobbying in 2010.

| Link to Full Text Unavailable | Return to Headlines

SEC Approves NYSE Deal
Wall Street Journal (01/19/12) Bunge, Jacob

The proposed merger of NYSE Euronext and Deutsche Borse secured the approval of the Securities and Exchange Commission (SEC) on Jan. 18. SEC officials passed a spate of rule filings by the NYSE Euronext-owned exchanges and the Deutsche Borse-owned International Securities Exchange (ISE) relating to a shift of ownership, provided the planned merger closes. Analysts and investors strongly doubt this will occur after European Union (EU) antitrust examiners made a recommendation that EU commissioners block the agreement on the grounds it would create a monopoly. The New York Stock Exchange and its sister markets, Amex and Arca, made exchange rule filings related to changes of ownership in mid-October. A similar rule change was submitted by ISE and two stock markets operated by Direct Edge Holdings. The SEC's approval of the merger follows approval from other major U.S. regulatory agencies, including the Committee on Foreign Investment in the United States and the Department of Justice. But those approvals will be rendered null and void if EU commissioners determine the deal to be anticompetitive.

| Web Link - May Require Paid Subscription | Return to Headlines

Groups, Stressing Economic Impact, Ask SEC to Host Roundtable on Pay Ratio Rulemaking
BNA Securities Law Daily (01/20/12)

Business groups believe the pay ratio requirement would impose a significant burden on businesses, and now have asked the Securities and Exchange Commission (SEC) to hold a roundtable to discuss the rulemaking. The effort to craft a rule requiring issuers to calculate a ratio comparing their chief executive officer's pay to that of employees stems from Section 953(b) of the Dodd-Frank Act. The law directs the SEC to amend its rules to require companies to disclose the "median" annual total income for all employees except the CEO and the annual total income of the CEO, and to calculate the ratio comparing the two figures. Twenty-three business associations, institutions, and non-profit organizations, including the National Investor Relations Institute, made the request Jan. 19 in a letter to SEC Chairman Mary Schapiro, and also asked the commission to create a negotiated rulemaking advisory committee that includes business representatives, as well as submit any proposed rules to the Office of Information and Regulatory Affairs for a review of their costs and benefits. SEC staff is working on a proposal that it intends to recommend to commissioners by mid-2012. The ratios could enable investors to gain a better understanding of the overall health of companies, according to investor advocates. Business groups say the calculations would be difficult and time-consuming, especially for large multinational companies that pay workers worldwide in a variety of methods. Meanwhile, action is pending in the House on legislation that would repeal Section 953(b)--H.R. 1062, introduced by Rep. Nan Hayworth (R-N.Y.).

| Link to Full Text Unavailable | Return to Headlines

With New Law, Profits Take a Back Seat
Wall Street Journal (01/19/12) Loten, Angus

Seven states have now passed benefit corporation laws, and hundreds of existing businesses plan to incorporate under a new and untested corporate charter in the coming months. The alternative business model, which is not tax exempt nor a nonprofit, is intended to offer protection from investor lawsuits to boards that want to consider social or environmental goals ahead of profits. Investor suits can result when company decision-making involves anything other than maximizing shareholder value. The biggest value of the benefit corporation may come at the time of the sale or breakup of a business; Jeff Furman, a director of Ben & Jerry's since the 1980s and its current chairman, says the board probably would not have agreed to the Unilever deal if benefit corporations existed in 2000. A company that takes advantage of the benefit corporation designation must include its social and environmental goals in its bylaws and must publish an annual "benefit report" to measure itself against its objectives. Charles Elson, who teaches corporate governance at the University of Delaware, believes the legal structure is a bad idea for investors. "The structure creates a lack of accountability," he says, so if the management of a benefit corporation makes a bad decision, "there's very little you can do about it as a shareholder."

| Web Link - May Require Paid Subscription | Return to Headlines

How Long Does the Average Share Holding Last? Just 22 Seconds
Telegraph.co.uk (01/18/12) Farrow, Paul

Former Chase Manhattan Bank economist Michael Hudson said that stocks are held by U.S. investors for just 22 seconds on average, though that is up from an average of 20 seconds a year ago. The extremely short amount of time that stocks are held by U.S. investors is the result of high-frequency trading, which is used in roughly 70 percent of all trades. The average foreign currency investment, meanwhile, lasts 30 seconds. That is up from 28 seconds in December.

| Web Link | Return to Headlines

US Exchanges Seek to Extend 'Flash Crash' Safeguards to July 31
Fox Business (01/18/12)

U.S. stock exchanges plan to extend a system of buffers against rapid price swings through July 31, while regulators and market operators craft a more permanent solution. So-called "circuit breakers" that temporarily interrupt trade in overheated securities would remain in play on a pilot basis until the end of July, under exchange proposals filed with the Securities and Exchange Commission. The circuit-breaker plan was implemented in the weeks following the May 6, 2010 flash crash, when the U.S. stock market plummeted rapidly by about 700 points amid a crush of selling, data slowdowns, and a massive, bearish trade in stock-index futures. The episode kickstarted debate about the fragmented nature of electronic markets and highlighted the role of high-frequency trading firms, after a handful of the largest participants stopped trading amid the chaos. In recent weeks, NYSE Euronext, Nasdaq OMX Group Inc., BATS Global Markets, and Direct Edge have filed proposals for a joint extension of the existing circuit breakers, which stop buying and selling if a stock's price moves too widely within a five-minute period. Regulators, meanwhile, are considering a new system of price limits that would rein in trading--but not put a stop to it--if a security's price abruptly jumps or falls. That proposal is now being weighed alongside a plan by exchanges to tighten up a circuit breaker for the entire stock market that would bring a stop to business in the event of a sudden plunge or rise in a major U.S. stock index. Such a market-wide circuit breaker is already in place, but remained inaccessible even at the peak of the flash crash.

| Web Link | Return to Headlines

FASB Releases 2012 U.S. GAAP Taxonomy in XBRL
Accounting Today (01/18/2012) Cohn, Michael

The Financial Accounting Standards Board (FASB) has released the 2012 U.S. GAAP Financial Reporting Taxonomy that is used for submitting XBRL-formatted financial filings to the Securities and Exchange Commission (SEC). The FASB is now responsible for the ongoing development and maintenance of the taxonomy for public issuers registered with the SEC after taking over from XBRL US two years ago. The newly issued taxonomy contains updates for accounting standards and other improvements to the 2011 version now used by SEC issuers. Proposed improvements to the taxonomy were released by the FASB in the autumn to provide users with a chance to give feedback on the updates and all users to become familiar with it. Questions about using the taxonomy for XBRL-tagged interactive data files should be directed to the SEC through the agency's portal on XBRL.

| Web Link | Return to Headlines

Note to CFOs: Give Investors Attention When It Comes to Investment Strategy
CFO World (01/17/12) Harris, Roy

There is a need for better dialogue between CFOs and investors, with a special emphasis on explaining engagement in risky markets characterized by rapid growth, according to a study of global transactions from Ernst & Young (E&Y). The firm thinks that both elements of this risky-market scenario--the investing itself, and investor communications about the investment strategy--need to be studied together. "Much of this is new territory for a position that has been historically focused on managing the company's finances, prompting many CFOs to become more well-rounded business leaders who excel at communicating with key stakeholders," says Diane Larson with E&Y’s Assurance and Markets unit. "With more companies investing in risky, rapid-growth markets while managing new demands from regulators and investors, the role of the chief financial officer is undergoing a profound transformation. Investors and regulators want more detailed and timely information from CFOs, while CEOs and boards of directors are expecting them to go beyond the numbers and serve as strategic business advisers who can better manage risk and pursue new growth strategies." The implication is that shareholder relations has to be a more key focus of the CFO's agenda. "Above all else, investors want to understand changes in the risk profile so that they can factor these into their decision-making," the E&Y report notes. "This trend highlights the importance of communicating more frequently with investors and of bringing them along on a journey as the company's strategy evolves." The study supplies a roster of lessons for CFOs, beginning with the CFO's need to monitor any company resource allocation change, along with the general growth that is part of the corporate projection. The report observes that the application of financial discipline in the area of resource allocation demands that finance guarantee "that budget for capital expenditure is kept in line with the company's expectations for growth in revenues for each market. By keeping tight control over these metrics, CFOs can apply an objective yardstick for changes in investment."

| Web Link | Return to Headlines

Talking Points: Say-On-Pay Best Practices in 2012
BoardMember.com (01/17/12) Reeves, Jamie

Patrick Quick, a partner at Foley & Lardner LLP, said recently that as boards of directors move forward in 2012, they should pay close attention to shareholders' opinions in negative say-on-pay votes. "The results [of last year's votes] showed that, for the most part, companies won the say-on-pay votes," Quick says. "So the question is, beyond that is there some other level of a negative vote that is also considered a defeat? And there are people who say if you had a 30 percent negative vote, or maybe even a 20 percent negative vote, then you lost. Therefore, a company should not take comfort in the fact that it won by a 51-49 margin by any means. If a company had any meaningful negative vote, [the board and management] need to figure out why they got that vote and how to address it." Another thing to keep in mind, Quick says, is that shareholders were very worried about pay for performance, and while that is not anything new, companies must be clear about how they gauge performance. While it is easy to say a board measures performance through an increase in revenues or return on assets, Quick notes, if shareholders are measuring it a different way, then the board at least has to pay attention to how they are doing it and understand how they are going to measure performance "because if you defend it your way and it doesn’t match theirs, then you are not going to convince them." Quick says a second reason boards have to be clear about their pay-for-performance program is there have been numerous lawsuits following recent say-on-pay votes that have taken companies by surprise. A big argument in these suits is that companies described their compensation as pay for performance and then did not describe clearly what they meant.

| Web Link | Return to Headlines

Private Meetings of Public Companies Thwart Disclosure Rules
Harvard Business School Working Knowledge (01/16/12) Nobel, Carmen

Two researchers have released a study that found investors who have private meetings with members of a company's senior management team make better investment decisions. The researchers, Eugene F. Soltes, an assistant professor at Harvard Business School's Accounting & Management Unit, and David H. Solomon, a professor at the University of Southern California's Marshall School of Business, found that investors who had meetings with members of management were more likely than investors who did not participate in such meetings to increase their positions before periods of high returns and reduce their positions ahead of periods in which returns were low. Soltes and Solomon observed that a 10 percent increase in the next quarter's stock was associated with a 33 percent increase in the size of the position of investors who had meetings with at least one member of senior management. In addition, Soltes and Solomon found trades that followed meetings with executives performed better than those that did not. Soltes and Solomon theorized that the better performance of investors who had meetings with executives may have been the result of investors being able to use non-material information discussed in these meetings to develop a strategy they could act on. Soltes and Solomon noted that even if material information is not being discussed at these meetings, investors are still using them to gain an edge, meaning the discussions seem to be violating the spirit of Regulation FD.

| Web Link | Return to Headlines

Risk Factors: Time for a Tune-Up
CFO (01/12) Fabens, Andrew

CFOs must pay attention to risk disclosures and revisit their strategies every year. Executives frequently set too high a bar for overhauling the prior year's presentation or admitting new risks, while counsel's fear of drawing the wrath of top executives results in years of tweaks rather than the necessary critical review and analysis that should take place with each annual report. Consequently, risk factors often are overlooked despite their role as a protective counterbalance to forward-looking information in the annual report and other corporate directives. There are four simple checks for making sure that key nonfinancial portions of the annual report have received due attention and are in solid shape. First, survey comparable company disclosures, beginning with the stock-performance peer group identified in the proxy and adding any other good comparables, and build a matrix of risk factors to see the extent to which the risk factors overlap with competitors' disclosures. Next, review analyst reports on the company and industry to weigh the risks and challenges analysts and other experts are pointing out. Third, converge risk oversight. As boards continue to standardize their risk-management oversight functions, their work should be coordinated with company disclosures. And finally, consult and review backup every year when updating the annual report. This is a critical step that will circumvent speed bumps in capital-markets offerings later in the year.

| Web Link | Return to Headlines

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January 24, 2012

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NIRI is dedicated to advancing the practice of investor relations and professional competency and stature of its members.

IR Weekly , distributed every Tuesday, is an executive summary of upcoming NIRI professional development programs, timely member services information and noteworthy articles pertaining to investor relations and public company disclosure current issues and best practices. Our editorial staff monitors nearly 11,000 newspapers, business publications, Web sites, national and international wire services, and other periodicals and summarizes significant articles into an easy-to-read executive summary.

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IR Weekly - January 24, 2012