In an attempt to provide a more open line of communication with investors and analysts, many companies are ditching the canned presentation in favor of an informal meeting heavy on question-and-answer periods. Impromptu dialogues — sometimes called "fireside chats" — are more effective at making a strong impression, say investor-relations experts, but they also raise the risk of running afoul of Regulation Fair Disclosure (Reg FD).
Hoover's Inc. CFO Lynn Atchison says the Austin, Texas-based business-information firm hasn't gone down the road less scripted. "I would be wary of regulatory fair-disclosure implications," she says. (Impromptu dialogue increases the risk that an executive could mistakenly reveal material information to a select group, which is prohibited by Reg FD.)
"There is certainly a premium on the kinds of skills possessed by those who are comfortable talking to investors in an informal setting," says Bob Dentzman, treasurer and vice president of investor relations at Herman Miller Inc.
Last April, the Zeeland, Michigan-based office-furniture manufacturer hosted a "kitchen-table talk" as part of an investor visit organized by UBS Warburg Ltd. analyst Margaret Whelan. Dentzman says the informal format of the Warburg meeting, a departure from the conventional scripted presentations of the past, is typical of the way Herman Miller now conducts investor visits. "The analysts and investors had the opportunity to see us firsthand; to talk with Beth Nickels, our CFO; and to see how we interacted with people — you lose that with a scripted presentation," says Dentzman.
Ron Graziano, of Chicago investor-relations firm Ashton Partners, says fireside chats may be right for some companies, but they're not for everyone. "At some companies the message is still being worked out, or the CEO has a reputation for being overly optimistic or saying things he shouldn't." For those who are uncomfortable speaking off-the-cuff, Graziano recommends sticking to the script.
Louis Thompson, president of The National Investor Relations Institute, says the dangers are overblown. "Reg FD is not the big bear in the closet that keeps companies from engaging in open discussion with investors," says Thompson. But if you do slip, he adds, the rules allow 24 hours to revise disclosure with a press release.