By Gordon Wolfe
Investor Relations Counsel


Investors don't like surprises.

The range of potential corporate crises is immense. Management defections, environmental problems, community issues, falling market share, government intervention, land title claims, product recalls, class actions and the gradual erosion of brand integrity are all real possibilities.

Although many companies have crisis communication programs in place to handle such ordeals, a key audience that is often overlooked in the programs are shareholders. If shareholders are overlooked during a crisis, companies face the very real danger of shareholder and other litigation, as well as negative repercussions to the company's name and well being.

In order to ensure that shareholders are addressed, all crisis communication programs should have an investor relations component. That component combines the disciplines of communications and finance, enabling investors and analysts to forecast more accurately a company's financial prospects. An effective investor relations program promotes a consistent and reliable information flow between the company, its shareholders and the investment community and builds trust between them. It also provides action steps on how to effectively handle any information leaks and how to repair resulting reputation damage.

Following are a few important questions to ask when preparing the investor relations component of your crisis communications program:

Has the company reviewed its regular investor relations needs lately?

At least once a year (e.g. around the time of the annual report), a company should convene a meeting among the investor relations director, senior management and securities counsel to decide explicitly what the company's guidance practices will be for the coming year. Reassessment is also appropriate when a company is entering a risky period, such as when a company is planning to or has just gone public, has just merged or acquired another company, or is simply entering a transitional period, financially or otherwise. During these times, communications efforts will either need to be increased, reduced or eliminated, depending on the situation. Outside investor relations specialists are experienced in determining the best course of action.

Do you know who your shareholders and other audiences are and is that list current?

Crisis communication usually necessitates a rapid disclosure. This means key audiences should be contacted as soon as the appropriate disclosure has been made to the media. A current list of major shareholders (including their fax numbers and e-mail addresses), updated list of sell side analysts and brokers, and a current mailing list of all of your shareholders should be on hand, ready to use.

Is the company's disclosure policy set forth clearly in writing? A company's disclosure policy is a set of guidelines that dictate how and when confidential information should be disclosed to the public. Companies that have the best relationships with Wall Street are those that have designated disclosure committees, which are made up of the investor relations director, senior management and securities counsel, that decide on these policies. As soon as significant news is apparent -- whether a bad quarter, a sanction by regulators, a potential report of environmental liability, the loss of a key employee, etc. -- the disclosure committee should be notified so that it can begin to a develop communications plan.

Who can talk to Wall Street?

When a crisis arises, a company must talk to all audiences with one voice. Outside communications counsel can provide guidance as to who should be the messenger and about the specifics of your message, as well as how and when to send it to which audience.

When discussions are planned and do take place, one way to facilitate consistency is to prepare scripts and questions and answers for investor presentations, and then discourage ad libbing.

It is important that unplanned, individual discussions with analysts, media or other audiences do not take place. If this happens, these conversations should be reported immediately to the disclosure committee and an immediate communications plan should be executed. Off the record discussions are never truly off the record.

Remember, the financial analysts are the toughest audience. They are informed professionals who will pass on information they receive to other audiences including shareholders and the media. Their opinions are highly regarded so communication to them should be very carefully executed.

This article first appeared in the Winter 1998 issue of The Crisis Counselor, the Crisis Communication Center's newsletter. To receive a free copy of The Crisis Counselor, e-mail Carolyn Holt, the Center's Administrative Manager.

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