INTRODUCTION
The landscape for Wall Street and publicly held American corporations in the past several years has changed more than at any time since the Great Depression, and with that, the operating environment for investor relations professionals. Arguably, only the early years of the Great Depression, with the seminal Securities Act of 1933 and the Securities and Exchange Act of 1934, resulted in greater alterations for public companies than the reforms and changes in sentiment resulting from the
post-1990s meltdown on Wall Street.
Yet as important as relatively recent legal and regulatory changes are—such as
Regulation Fair Disclosure (Regulation FD) or the Sarbanes-Oxley Act—Wall
Street and publicly held companies 
were already entering an environment much different from that existing just a
generation ago. A most notable advent has been the proliferation of financial
media, especially electronic services. Few Americans need to be reminded of the
ubiquity of cable television, which rendered “narrow casting” economically feasible. Amid the flood of new shows were the all-financial stations, which now
routinely air in newsrooms and trading houses across the nation, seemingly
incessantly. And the Internet, with its marvelous ability to immediately present
and then archive news stories, press releases, and data, and its “chat
rooms” about company stocks—and rumor-mongering online traders—was
virtually unknown only a decade ago. Now, every company must consider the
effectiveness of its website, at the minimum.
There has also been a floodtide of new business publications, as well as a
beefed-up Wall Street Journal, and a
new national daily, Investor’s Business
Daily. Many major daily papers have expanded their business coverage. One
could contend, with just a little hyperbole, that it is difficult to live in any
major city in America and not be aware of the trading range of the Dow Jones
Industrial Average.
Public companies today address a radically larger, and in many ways a
better-informed, press corps than ever before. One could even argue that the
phenomenon of the “corporate crisis” is as much fueled by the avalanche of
media coverage as by bona fide corporate misdeeds. A generation ago, would
accounting scandals have attracted nearly the attention they receive today or
have elicited calls for systemic reforms?
The same might be said for the perhaps quixotic campaign of New York State
Attorney General Eliot Spitzer and the Securities and Exchange Commission (SEC),
to reform brokerage analyst research. Such research has been compromised for
decades, some would say ever since brokerage houses could both underwrite
securities and then advise investors to buy them. Why the reforms now? There
was, after all, a prolonged and ugly bear market after the 1960s boom years on
Wall Street, but no reforms or even talk of a regulatory shake-up. To be sure,
the transgressions of the 1990s seemed to epitomize all that was wrong with Wall
Street, and on a grander scale than ever before. But surely, media coverage
played a role in the actions of Spitzer and the SEC.
In addition, Wall Street and corporate America have been pressed by other
tectonic shifts in the economic and business scenes, which have been building
for years. These include the following factors, notably:
• The number and size of mutual funds have
exploded in the last two decades, representing an enormous financial stake for
many American households—and that much more reason for legislators to
scrutinize Wall Street and push regulators to be more aggressive. Moreover, a
generation or two ago, pension funds hewed closely to bonds, but they now invest
heavily in equities as well, while millions of Americans hold equities in 401(k)
plans. A few brave foundations, declaring themselves “permanent investors,”
even went so far in the late 1990s as to invest only in equities, which
historically have outperformed bonds.
Consequently, how the enormous baby
boom population of America—those born after World War II through 1968—will
fare in retirement is tied to Wall Street, a daunting thought. One can guess
that in the years ahead, the intertwined fortunes of stocks and wanna-be
retirees will lead to a gathering level of interest and concern about Wall
Street, corporate governance, and accounting standards, as has already begun.
• Like so many other business sectors, Wall
Street has been globalized during the past twenty years. Many foreign
corporations now seek listing on U.S. exchanges, and many foreign companies
often wish to buy U.S. companies. Oftentimes, such entities will have to learn
to comply with the increasingly rigorous U.S. regulatory mandates and accounting
standards.
• Though recently cooling, the last decade saw
an unprecedented upsurge in mergers of public companies, a trend one can expect
to revive a bit when economic conditions allow—although the M&A salad days
may be over for good: Too many mergers have not panned out, a fact that will
force public companies to concentrate on generating returns for shareholders
through improved operations, organic profits, or even share buybacks.
• New funding mechanisms have emerged,
including much more sophisticated financing for mergers and acquisitions (which
helped the M&A boom of the 1990s), and more recently, private investments in
public equity, or PIPEs.
• Wall Street has become increasingly
litigious, with seemingly every stock plunge or accounting scandal bringing an
onslaught of lawsuits.
• Proxy wars are likely to become more common,
due to ever more forceful shareholder activism. Mergers or expansion campaigns
that appear to be empire building and not in the interests of shareholders are
more likely to be challenged.
Given all of the above developments, I have selected a retinue of investor
relations or Wall Street professionals to present their expert opinions on the
current status of investor relations, or IR.
From The New Investor Relations ©2004 by Benjamin Mark Cole
To arrange an interview with David Silver, author of Chapter 4, The IR-PR
Nexus, please use this form.
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