Welcome, back to the very last, session. In, our. Stern, faculty, insights, on covid19. Series. For the summer the last session for the summer. Today we have a terrific, lineup. We have two people. From our accounting. And our management, communications. Department. Taking different, perspectives. On communicating. During a crisis. We have mary billings from accounting, and irv shankler. From. Our management, communications. Group. So without further ado. Remember, everyone. That uh you should. Go ahead and register, your questions. In the q and a box. And, uh, and, stay posted. For. More updates. In the fall, of for subsequent. Sessions. Without further ado, let me introduce. My colleague, mary billings. Thanks matias. Um, so, i'm gonna start out uh, just giving a brief, lecture. Uh setting, uh, setting the pers uh communication, during crisis from the perspective. Of u.s regulators. And investors. And then before i take questions i will toss it to irv who's going to talk from a broader, perspective. So, with that said let me see if i can successfully. Share my screen. In today's talk we'll focus on investor relations, and how executives, shape the overall, information, environment. Of their company. Particularly. During a crisis. To begin. It is valuable to understand, what motivates, their communication. Why do executives, communicate, with investors, and other stakeholders. The short, and perhaps, most obvious, answer, is that the disclosures, executives, make influence, their company's stock price. Clearly, the financial, statements that companies, file with the sec. Including. Quarterly, reports. 10 queues. Annual, reports. 10ks. And current reports. 8ks. Help investors, better understand, the underlying, economics, of the company. And as such play a fundamental, role in shaping investors, beliefs, about the future, profitability. Of the business. That said, while sec, filings provide a starting, point for valuation, decisions. For the vast majority, of companies. Communication, with investors, extends, well beyond, the required, sec, filings. As ceos. And other executives. Voluntarily. Provide, a wide array of supplemental, disclosure, to stakeholders. So. Pushing a bit harder on the question, of what motivates, disclosure. Let's talk about why executives. Often choose to communicate. Above and beyond the information, required by the sec. Overall, managers, seek to improve the company's, information, environment, with increased, disclosure. And. Research, suggests, that stakeholders. Reward, them for their efforts. In particular. Academic, research, finds that disclosure. Improves, liquidity. Decreases, the cost of capital.
Reduces, Stock price volatility. Increases, analyst following. And decreases. The likelihood, of big earnings misses that disappoint, investors. More generally. Disclosure. Particularly. Warnings, about impending, negative, news. Reduces, the risk of shareholder, litigation. What communication. Channels do executives, typically, use. Let's first discuss the standard disclosure, landscape. For most public companies. Along with the key regulation. And other frictions, at play during normal times. Next we can talk about some of the steps that the sec, has taken to underscore, their commitment, to investor protection. And market integrity. As well as to encourage, increased, transparency. During the recent crisis. Then finally, we can turn our attention to how executives, have adjusted, their communication. During the pandemic. As i'm sure you know companies, file financial, statements with the sec, on a quarterly, basis. When they do, they often use social media to help shape the narrative, about the results. Perhaps, not surprisingly. Research, finds that companies, are more likely to disseminate, positive, earnings news via social media channels. Their press releases, throughout the year also tend to celebrate, new products, and more generally, steer clear of negative news. The more substantive, disclosure, happens when the company hosts its quarterly, earnings conference, call, where they take questions, from analysts. In those calls, or in accompanying, press releases. Executives, will often provide, earnings forecasts. That guide analysts, and investors, expectations. About future, quarters. Then, throughout the year, the ceo, and other officers, also might attend, invite-only. Conferences. Which are often organized, by suppliers. Brokerage, firms, or other market participants. While there, executives, make presentations. Describing, the high-level, strategy, of the company. But they also take questions, and engage in less formal interaction. At these meetings. It is important to note that in the past, managers, were able to privately, guide the market. Choosing to call up analysts, or selectively, communicate, with investors, to provide forecasts, or to explain companies, strategy. But in october of 2000, the sec, enacted, regulation, fair disclosure. Often referred to as reg fd. In an effort to address concerns, about selective, disclosure. Thus, in the current reporting, environment. Anytime, a company, chooses, to voluntarily, disclose, material, information, to one person outside the company. They must also disclose, it publicly, to all investors. So, while regfd, does not preclude, invite-only. Investor conferences. Companies, are still subject to restrictions. On selective, disclosure. To comply with regfd. Companies, typically, provide, webcasts. And make other concurrent, 8k, filings. Yet, attendees, potentially, gain more information, than those who remotely, listen to webcasts. As in-person, attendance, affords, access, to executives, and other participants. Which allows them to assess visual, and verbal cues. To judge other participants. Reactions, to the discussion. And to continue conversations. Outside, of the formal presentation. In covid times, the shift to virtual, investor conferences. Largely, removes, the potential, for private communication, channels. Even if beer consumption. Holds steady. It is also important to note that a company's, forward-looking, statements. Both written, and oral, for example, earnings, forecasts. Enjoy, safe harbor protection, from legal liability. So long as they are identified, as such. And meaningful, cautionary, language accompanies, them. In the context, of this rich disclosure, landscape, the sec has issued a number of public statements, throughout the crisis. With the aim of, assuring, the integrity, of the market during the growing pandemic. And encouraging, companies, to recognize, the importance of disclosure, in helping investors, and other stakeholders. Navigate. Uncertainty. In terms of assuring market integrity. The sec, acknowledged, unprecedented. Changes to the ways in which information, is disseminated. And accessed. With most market participants, and executives, interacting, remotely.
And Sometimes, crowded households, and less secure, locations. Noting that in these dynamic, circumstances. Corporate, insiders. Regularly, learn, material, non-public. Information, that may hold an even greater value. Than under normal circumstances. And urging, companies, to be mindful, of established, procedures. Insider, trading prohibitions. Codes of ethics. And reg fd, and selective, disclosure. Prohibitions. At the same time, the sec, has been active in alerting investors, to potential, covid related, investment, scams. Toward that end, sec, staff, actively, monitors, trading activity. And the sec. Can and does suspend, trading, in any stock when it believes that information, about a company, is inaccurate. Or unreliable. Since the advent, of the crisis, the sec, has issued more than 30 covid, related trading suspensions. Most recently, focusing, on misleading, press releases, issued by blackhawk. Growthcorp. Citing concerns, about accuracy. And adequacy. Of publicly, available, information, regarding, blackhawk's, purported, agreement, to distribute, covid19. Antibody, test kits. With respect to companies disclosures. During the pandemic. The sec, acknowledges, the difficulty, of providing, forward-looking. Information. For example. In the context, of current challenges. Key drivers, of future operational. Status, and financial, results. Most notably, the time frames for current covid19. Social distancing, guidelines. And other mitigation, related, requirements. Are not uniform, and are likely to undergo, material, change. But, the sec, also believes, it is important for companies, to take on that challenge. Pointing out that robust. Forward-looking, disclosures. Benefit, investors. Benefit, companies. And more generally, support the nation's collective, fight against covid19. The sec, continues. By acknowledging, that the third point is less familiar. Investors, are not the only ones who are interested in how companies, will adjust their affairs, as we pursue our collective, fight against covid19. Broad, and extensive, coordination, across workers. Firms, investors. And governmental. Officials, will be critical. As the sec, notes as an example. If the owner of an industrial, laundry business, becomes, comfortable. That the hotel, industry, is soon to pursue a credible, plan for increasing, activity. The laundry, business may be less likely to furlough. Or may plan to re-hire. Employees. Ultimately. Noting that more broadly, when a company articulates, its strategy, publicly, it gives investors. And the public, a heightened level of confidence. And understanding. This increased, confidence, and understanding. Reduces, risk aversion, and facilitates. Action. This type of positive, dynamic, plays out across our economy, in countless, ways, and further demonstrates, the need for, and the power, of. A coordinated. Dynamic, and forward-looking. Public, private strategy, for fighting kovit 19.. As part of its statement on the importance of disclosure. The sec, encouraged, companies, to lean on safe harbor protections. In order to help guide stakeholders. Through the uncertainty. So. How did companies, respond to the sec's, request, for forward-looking, disclosure. Did executives, give more guidance. Did they embrace the legal safe harbors. Businesses, like general mills, that thrived, during the stay-at-home, orders, tended to embrace the request. While businesses, that faced considerable. Interruption. Like uber, withdrew, existing, guidance, and noted the impossibility. Of predicting, the cumulative. Impact of the pandemic. On their future financial results. Yet, both companies, fully embrace providing, the cautionary, language, necessary, for legal safe harbors. And, not surprisingly. The decision to withdraw, guidance, clustered, within particularly. Hard hit industries. Overall. Of the 416. Companies that made earnings announcements, through may 12. The main time frame of the nationwide, and global shutdown.
Just 11. Maintained their guidance. While, 49. Withdrew, their guidance altogether. And a further 19, percent remain, silent, either not offering guidance, or failing to clarify, guidance, during the earnings call. The moral of the story. Despite the sec's, encouragement. Most executives, seemingly, do not believe that legal safe harbors, will protect, them from the virus. Instead, they remain, fearful, of legal, and other reputational. Harm associated, with pandemic-induced. Erroneous, forecasts. That said while many companies, are reticent, to provide, forward-looking, disclosure, during the pandemic. Some are getting creative with their disclosure, of non-gaap, metrics. Providing, covet, adjusted, ebitda. Numbers to investors. With the aim of helping investors, understand, how kovid has disrupted, their business. Uber for example, provided, an adjusted net revenue metric, that added back 19, million, paid to drivers, personally, impacted, by covid. And adjusted, ebitda, by 24, million, to remove, those relief payments to drivers, along with costs associated, with supplying, personal, protective, equipment, to their drivers. At the same time, auditors, are disclosing, covid, related reasons for issuing going concern opinions, about their clients. With travel. Food and entertainment. And sports club industries, disrupted, by the stay-at-home, orders. That said it is important to note companies, also communicate, information, to stakeholders. Via their actions, during a crisis. As they take steps to obtain, or preserve, cash, by issuing debt, cutting dividends. Or halting, share buyback programs. And finally, it is also important to note that investors, can and do use the trading behavior, of executives, to infer information. For example. Investors, kept an eye on warren buffett and berkshire, hathaway's, decisions, to remove, airline, stocks from his portfolio. And, investors, use sales, by moderna, executives, to question the credibility, of their ceo's, statements about positive, results, for a vaccine. Overall. Communicating, during a crisis, involves, balancing, investors, thirst for information, that will help them predict the future. With the overwhelming, uncertainty, that dominates, nearly every aspect, of running the business. Executive, spheres, of litigation, risk and reputational. Harm, appear to dominate, the protection, provided by safe harbor regulation. Understanding, the frictions, that exist, in the current disclosure, landscape. And keeping an eye on executives. Real behavior. Can potentially, help stakeholders. Navigate, pandemic, induced, volatility. Thanks for listening, i look forward to hearing your thoughts and, questions. All right so. Before. We move on to your questions, i will, toss, um the presentation. Screen to. My colleague irv who's going to talk from a, broader perspective. Beyond just investors, and regulators. Thank you very much mary and. I'm going to kind of take a step beyond what mary has covered which is. Investor relations, stakeholder. Shareholder. Concerns. During. Our specific, crisis, at this point in time. And, i'm going to focus on two components. In our short talk here today. First uh. Talking about a model that i've put together. About, crisis, origins. And then secondly. How companies, typically, develop. Messages. That they. Hope to. Do, to disseminate. And what is the strategic, response, that works best. When, media. Is asking, questions. For many years i was a visiting professor, at the university of lugano, in switzerland. And, worked with executives. From. France, switzerland. Italy. Uh and germany. As they. Work towards a master's, degree in executive, program, uh, in corporate communication. And. What i, kind of. Realized realizes. That, the notion of how to define. A crisis, was very unclear, to them and these were. Operating. Heads, of corporate, communication. In major. Organizations. And, from that experience, i sort of boiled down, three components, that need in my opinion to be present. In certain degrees. For, a crisis, as opposed to a problem. To be manifested. And you can see what these three are and the clear. Component, number one is severe. Severely. Affect, workflow, and distract, senior management. And, financial, well-being. And, finally, the reputational. Aspect, does it hurt, the organization's.
Image And reputation. And, i further. Kind of broke down what to my mind, were the three. Major, categories. Of crises. The first being operational. Something that goes on within the organization. The second, reputational. Having to do with. Image. Responsibility. Reaction. To stakeholder. Concerns, and the third, which is where we are right now today. With covid. Systemic. Crises. One head of corporate communications. Many years ago told me that if. The media, is not aware, of a. Problem. Then you don't have a, crisis. That's no longer the case, because, anybody with a cell phone has become. A media person, and a. Media distribution. Center, so operational. Crises. Very often. Become reputational. Ones. And. What i. Finally, kind of took a few steps to sort of clear away the brush. And find out what is it that really, kind of. Germinates. What what is the central, focus, where a crisis. Seems to crystallize. And i did this to sort of provide, some insight to these heads of corporate communications. That, they are frequently. Dispersing. Their response. To. Crises. In an. Untethered. Manner, without, real focus, on. What's behind, it who needs to be communicated. With, what are the responses, that need to be. Crafted. And i sort of came, up with these, four. Different. Uh. Nodules, you might, might say are touch points. And i'd like to go through each very quickly with you. The first, is. Crisis. That. Derived from public opinion and here are three examples, on the left. Nike. With the product boycott, that went on for, more than a decade. Gap. H m and other clothing. Uh. Companies, manufacturers. In, the, uh problems. Discovered, in toronto, as a result of the rana plaza, collapse. And uber. Uh, in, 2017. When, the ceo. Found himself. In the glare of media. Uh, scrutiny. That the entire, company. Kind of, began, to crumble. In the eyes of very important, stakeholders. So. Nike's, problems, went from 1990. To 2001, and still continue, in certain, markets. Uh. The second kind of, uh crisis, is one that derives, from the financials, when the. The books so to speak are cooked. And there are three examples that i'd like to, bring out here, very quickly. You'll recall. The enron. Anderson, debacle. Many of you, will recall. 2001. And. In 2016. Plus. Wells fargo. Uh. Was revealed, to have been playing, uh. Deceptive. Games with consumers. And customers. Uh, and. 2008. The great recession. A systemic, crisis. In the financial, industry, uh with lehman brothers and and at the hall. And this is a, a. Wells, fargo, image from 2016. When they literally had to shut down because of all the problems that were suddenly. Being revealed. Primarily. Through media coverage. Litigation. Which is something that. We, mentioned, earlier. Uh. Very frequently. Uh, creates, the grounds. For, an ongoing, crisis and here are three examples. The ford firestone, debacle. From 2001. To 2003. Where each company accused the other of malfeasance. In an operational. Sense. Something, then. Fed into litigation. Which had a severe, effect on the reputations. And the bottom line of both companies. General motors most recently in 2014.
With The ignition. Problems, again an operational. Problem. That. Mutated, to litigation. That also. Affected. Public opinion. And, more, more recently, 2006. 16, and so. Uh volkswagen. And its deceptive. Uh shenanigans. Trying to change the amount of, uh. Pollution. Coming from its diesel. Engines. And. The lawsuit, as i said could be the first stage. Of a crisis. And in this, scenario. Ford and firestone. Blamed each other, for, accidents, that were occurring. In the rollover. Of, its popular, suv. Vehicle. And, the irony, is that ford and firestone. Families. Were tied together. Years and years, back. Uh. And. You know it was it. Became a very very, stark, reminder. That litigation. Can. Erupt. Into a crisis. That affects both, the financial bottom line. And, uh. Public opinion, both companies, suffered, from both. And then, there's this. Sort of. Kind of. More, difficult, to really. Define. But, certainly. Obvious. When one, steps back, and. Examines. An event, a, phenomenological. Event, that occurs. Yes it will always, have an underlying. Causation. But it manifests. Itself, in an event. That is felt. An event, that transpires. And occurs. And i've, put three examples. Going back, from a long time back. Uh, more than 40 years ago the three mile island, pennsylvania. Near meltdown. Of, the atomic, reactor. Something that, many people have forgotten about in 1990. There was a major. Recall, of perrier. Water. Which at the time was the favored, yuppie beverage. Of choice. And. There, was. A concern. That. Benzene. A. A. Very very powerful. Carcinogen. Was found, in the water. And. The perrier. Management. Based in paris. Basically, shrugged the shoulders and laughed it off. Until, it could no longer, be. Uh, a joke, the the line that the ceo. Used at that time in french was, perrier, cefu. Perriers. Crazy, stuff, which was their tagline. In france. And then. 2010. It's now 10 years ago. Uh british petroleum, the bp, gulf of mexico, deep horizon. Crisis. These. Were events. And. They. Brought, out, the need to communicate. With a range, of stakeholders. Concerning, this. And in many respects. Covid19. Is an event-based. Crisis, a systemic, one, as is ebola. And sars. And, the complication. For a company, is that, there are. So many relevant. Kinds of stakeholders. Involved. That. Understanding. How to parcel, communication. How to prioritize. How to focus. Is extremely. Difficult. And just with kovid. As mary was showing us that, investors, need to know investors, need to understand. On the along with that. If a company's. Operational. Aspects. Do not take into account for example. Worker safety. Well then that, mitigates, to not mitigate, but that mutates to both litigation. And affects public opinion. And, makes it only worse for the financials. And, here's an early image. Of, covet, 19's. Results. Where. A handful, of new deaths, were being reported. This in korea. And we all know, what has happened, since. And here's a very typical kind of image of a young woman getting her temperature, taken. These are systemic, crises. And, they're as i said they're extraordinarily. Difficult. To to make you can't manage a crisis but you can manage your response, let's put it that way. So. My takeaway, is if the greater the touch points, the more severe the crisis. And for a corporate communication. Perspective. Focusing. On understanding, what's the origin of this crisis, and which are the, relevant. Stakeholders. That need to be prioritized. Should be, the number one concern. To kind of limit, the impact, of the crisis. And, the more that these touch points. Come. You know bring, bring themselves. Together. Uh. The the greater. The crisis, to the industry, or to the organization. And. Daniel gomen, many of you, will remember. As, sort of the, great, proponent, of uh.
Emotional, Iq, eq. Many years back, uh i wrote an article for the new york times that. Always stuck with me about, elements, of, outrage. And risk. That. Exacerbate. A crisis. The sense that people feel that it's imposed. Versus voluntary, risk the sense that's unfairly, shared. Versus equitable, risk or benefits. That it's beyond a person's control. That's human made versus, nature, related. That's linked to a recent catastrophe. Or past lesser events. And it's associated, with an exotic technology. In the covid. Systemic, crisis that we are enduring. Some of this really comes, up. The idea that it's imposed. The idea that's unfairly, shared and recent research, has shown that. Certain demographics. And, racial groups. Are. Are burdened. Much more so than others. That it's beyond, someone's control, versus a controllable. Risk. Uh, the accusation. That the, us government has made, that. Uh. This sort of derived from china, and that's number four number six. And, linked to recent catastrophes. The, trump, administration, keeps going back to the ebola. Crisis. Of a year a few years back. So, again. Starting, with the notion of where does this crisis, originate. That's, i think a key. Component. To making. Your response, or a corporate response, more effective, and so very quickly i'd like to go through a developing, strategic, response. That i put together in a much longer, uh presentation, on kind of sculpted, back very quickly. From. Corporate management's, perspective, there are two. Dynamics, i would argue, that come into play when media, scrutiny, occurs, how aggressively, should we react or how passively. And then. What's the degree of choice, involved how free are we to choose, versus how, forced. Are we to react. And typically. These are the four different, strategic. Responses. That companies. Often believe. Are there, in one way or another for them to choose. In reality. The space, looks more like this, most companies, are either going to be forced to defend. Or. For legal reasons. Forced to avoid, a response. Very rarely, are they free to attack. Very rarely are they free to ignore but these do occur. What's not so frequently. Understood. Immediately. Is the need for a different kind of strategic, response and that is. Being forced to solve or free to solve. Right now systemically. No one is asking, any of the major corporations, that are communicating. With. The investors. To solve, the problem except, if they are in pharmaceutical. Or biotech, area. But in terms of a proactive. Versus apologetic. Style. That is we are committed. The company, says to making, right. Making wrongs, into right. That becomes, a very powerful, message, that is sent to stakeholders. And can have, a, very, uh. Important. Impact. Here are some three quick examples, of companies. That. Went into the, problem, solving. Response. And very quickly some examples, of companies that did this uh, and didn't do this, two years ago starbucks, came under fire about racial, profiling. Immediately. They closed down immediately. They went into training, immediately. They kind of took, responsibility. And accountability. Some people criticized, them but. It it stanched. The crisis. Mattel in 2017. 2007. Was accused. Of uh, selling. Toys, right before the christmas, market. Uh, season. From, china, that were, uh, i'll, stop at a moment, that were, uh contaminated. They immediately. Tried to solve it and. Kind of came through. United airlines 2017. You recall. They forcibly. Took out a customer. And initially, they blamed. The customer, he was the physicians, i recall. And. Then they had to solve the problem and change their approach. Gap hm, walmart. This is the run rana, plaza. Disaster, if, initially they ignored, the problem and said we're not to blame there are middle men, involved. Then they defended. Their presence. In bangladesh. And then finally they had to solve something by coming up with, uh corporate responses. In a, unified, manner. Any of these response, modes can be justified, the question is which will be most effective. News coverage, tends to decline, with the problem-solving. Approach, but, when there's inadequate, follow-up, to this approach. It threatens the organization, with renewed. Harsh. Scrutiny. So that's my little bit overtime. Segment, and i will take it back to bacia. And, mary, and we'll take your questions. Thank you both so much, for, really interesting, presentations. I thought i would just pose a couple of questions. That cut across. The two presentations. And then open it up to some of the questions, that we. Are welcoming, now, in the q a. Line. So, first one of the. One of the things that both of your presentations. Highlighted. Is the fact that crises, are different.
Maybe Than problems. Uh, you know as you highlighted, her, crises, are different. In part because of the high level of uncertainty. That inability. To predict. What is the future, going to. Hold. And this is such a challenge. With, com from a communications. Perspective. Whether it's communicating. To investors, or the general, public, or, or, wherever, else. How. Um. How can you, in this crisis, format. How can you. Uh feel, comfortable. Communicating. Sort of disclosing. What you know, when you when you believe. That. Things will change, where you. Don't feel like you can anticipate. The future. And it seems, like, from mary's, presentation. Very often people were withdrawing. Guidance. And, maybe. Not, providing, alternative. Guidance. Um. Or if you highlighted, the ways that, you could be, maybe. Due to litigation. Risk, forced to ignore. Or you know sort of. Not taking. This proactive. Problem, solving, approach. Uh that, and so i guess i just wonder. You know what guidance, would you have or or how can leaders. Address. This. Um. Challenge, or conflict. Between. Wanting, to communicate. For all the benefits, that it gives them, and the feeling that they could be, unintentionally. Lying or misrepresenting. Or leading people to expect something. That they can't come through on because of the level of sheer uncertainty. In a crisis. One thing that was left out of my segment because we didn't have time, was, the notion of. Issues. Issues that can, affect an industry. Issues that. Grow, germinate, that are stakeholder. Driven. That. Will frequently. Erupt, into a crisis, i really disagree, with the idea that, crises. Can't be predicted, a lot of them. Maybe not so much. But a lot of them yes and a lot of them can be followed, a lot of them the issue, development. And, integrating. The company's, response, about the issue as it grows. Communicating. To stakeholders, who are being affected. Is a really important, means to mitigate. The eventual, impact, of what could turn into a crisis. And, events. You would say well who can predict an event well that's risk. Risk analysis. And. Almost any event has got an underlying. Risk-based. Cause. And. Many companies, do indeed. Follow this idea. Fedex for example. Some years back started with quarterly. Meetings, of people at the management. And the md managing director, and, uh. Bottom line, you know the the, c-suite, area to sort of, sift through and and determine, out of a hundred, possible, issues, that could affect us, which, which ones are hot, which ones are simmering, which ones are cold, and what should response, be, so there are companies that actually have been, you know, following, this sort of approach. And. They're not trying to predict the future. But they are, communicating. With stakeholder, groups that are concerned. And they indicate, what they're trying to do at this point in time. And then when it really hits the fan, lots of companies, just realize. If they do a good job, to, just anchor down, here's what we know. Here's what we need to know, here is what we hope to do. And if you break it down in that way. Media is usually satisfied, as long as you follow through, and stakeholders. Also. You know uh, feel a little bit more secure. In that the company is being accountable. Yeah that's interesting, because it's um her view. Suggests, that maybe the risk is a little lower, than it appears. That mary's. Presentation. Made it sound like companies, believe, it to be, mary i wonder if you could um. Uh, unmute, yourself. And and i wonder if you have a. A. Different perspe, do you think things are different for investors. Or, or. Have a different perspective. Or agree with or. Well this is a this is a tricky one because as i highlighted, in the presentation.
The Sec, is. Encouraging, companies to be forward-looking. And to talk strategy. Um at the same time they're noting that there are these safe harbors, these legal safe harbors in place that should protect, managers. But in hindsight. If you look at kind of history, managers, aren't necessarily. Comfortable, with the safe harbors, because. A lawsuit that's filed even if it's ultimately, dismissed. It typically, takes a very long time, and there's a reputational. Impact, and a diverted, time and all of that. So that's the tricky part in the sense that the sec, can't remove, that friction. Right. But at the same time. What's interesting, i think for, managers, to keep in mind, right, um and i'm i'm not one, um but i study them, and what i think is interesting to keep in mind is, disclosures, about earnings, for instance or the guidance about hey. What we're looking. Looking at in terms of next quarter, or the end of the year. Normally. There are some fierce, um, critics, of providing earnings guidance and arguing. That encourages, managerial, myopia, and we don't want them in into the weeds and focused on meeting this quarter's numbers or next quarters numbers we want them, thinking more broadly and more strategically. So this is an interesting, uh combination. In the sense that we're now saying hey, part of the strategy, is surviving. The short term figuring out how we're going to get to the new normal or the other side, so this is one situation, where, we have a thirst for guidance, and it's not because we're trying to feed this short-term, myopia. We're trying to give investors. And other stakeholders, confidence that we're going to make it through, the short term to be able to continue, pursuing the long term, so that was a long answer to say, it's difficult to remove that friction. The only other thing i would keep in mind is and again i'm i'm focusing, largely from a regulator, and an investor perspective. Is, when you think of earnings guidance, which is you know only one part of the guidance they're giving so even if they couldn't say, eps. Next quarter or this year is gonna be a dollar twelve, or something like that, they can, um, be more qualitative. And you know and you know, kind of flesh out, kind of some some guard rails as to what they're expecting. Um but that involves some risk, in terms of ex post having people armed your quarterback. And say, um you weren't right but the other thing to keep in mind, is that earnings guidance. I don't view it as it's not private information. In the sense that ultimately, earnings are revealed. Firms announce earnings quarterly. And yes coronavirus. Did move some of the first quarter earnings announcements, to happen a little later, but overall, it's not something that, that companies, can keep private, forever. Right, so i view earnings, guidance if we're talking very specifically, about what the sec was requesting. Um, is something where you're just speeding up the frequency. And the timing of a disclosure, that ultimately, does get revealed. So there, so if managers, can maybe think about that tension of, hey ultimately. The jig will be up, right, and the information, will be out there, so would you rather them infer, information, from insiders, trades. Or from, the other market behavior that you take that's non-verbal. Or would you rather kind of i'll call it shape the narrative, that's that's the question. Um. So, that's. That's the tricky part, that's really helpful, and it sounds like you are, differentiating. The narrative, from the numbers. In, um. In our colleagues. Uh, you know in, nashua. Model. And, and it sounds like both of you are agreeing, that the narrative, is something to take hold of even if the numbers, are sort of trickier. Uh can i add just a quick touch. Early on, when fd, was. Put together. The sec, recognized. That, the function of media, and and, business media. Needs to be taken into account and they they created what was called a carve out. For, communicating. With business, media. Which allows a company if they do a good job. To, frame. Their narrative. Using. You know. At that time primarily, mainstream, media i'm not sure. What the sec, is how the sec, considers, social media i haven't kept up with that maybe mary knows something about that aspect. So actually, the second question that i have that cuts across, both of your presentations. Is relevant, to what you just brought up earth and that is the role. Of evolving. Technology. In, the, in, both. Creating, the pressure, on communication. And, creating, mechanisms. For communication. Crisis, communication. Uh to be disseminated. And, and, managed, or, well or poorly. So um. Mary in your talk you are highlighting. That, um, that there are differences. Now in how, things are communicating.
Like. Leaders are communicating, in particular. Kind of the elimination. Of these, in. Conferences. In-person, conferences. And, it um, so there are a number of technologies. That are. Relatively. New that have been evolving, over the last decade, decade, and a half you know with the rise of social media. But then there's, in this crisis. A. Massive, evolution. That a whole lot of people, have become, comfortable. With, technologies. Like zoom. That are. That are. Shifting. Remote. Uh, all kinds, of communications. That would otherwise, be happening in person, i just wonder if both of you if each of you. Might have some reflections. On how. Evolutions. In technology. Are altering. Crisis, communication. And what you foresee. Uh for the future. In crisis, communication. Whether to investors. Or the media and other. Stakeholders. Uh well. That's, that's a tricky one because, if i talk about the current crisis. The current crisis, necessitates. Um, our, full embrace, of the technology. That has already kind of been slow. I won't say depends on, it seems slow now that we've done the full, hardcore, pivot, right. So now, um the reason i say that is because. The crisis, necessitated. A different way of communicating, so part of the crisis, is, adjusting. The communication. During the crisis. So it's hard to disentangle, the two, uh the thing that i just, haven't, quite been able to wrap my mind around here is, setting aside the whole managers, are reticent to provide, forward-looking, information. It also seems, that, and in times of crisis when there is a bunch of uncertainty. And and uh let's say managers, are wanting to. Uh, manage the narrative, but not, put themselves, so, formally. On the line. I think that how technology, has evolved, is there's hard to go, it's it's hard to go off record, to kind of get a narrative, out there that, even i understand reg fd has been around for about 20 years. Um. Closing right in on that, but i guess what i'm saying is even in the presence of reg fd there's plenty of research, to show that there were all of these informal, interactions, or different ways to kind of, you know, shape the narrative, or take the pulse, of a given like let's say, response. Or how you're going to manage that, and so part of what i touched on is like even just the, conference presentations, that are now done over zoom, yes it's more efficient, and maybe it even allows, more, i'll call it investor democracy, in terms of who gets to participate. But at the same time. The the type of participation. Or the type of information, that you can learn is limited. As we even see quite frankly this is the first time i've done a webinar, as opposed to teaching my students. I. Part of teaching, is even if they don't use the chat box or the q a box i can respond to flamboyant, facial gestures, or that something, so, zoom. Has. Caused us, right to think of different ways to get those nuances. Or to get i'll call it that that, on the margin. Conversation, or management, where you're not, let's say. Putting yourself on the line for managers, said x and did why, and that sort of thing so, i don't know if that was a long winding answer but i guess what i'm saying is i think we're still kind of figuring out. What part of technology, helps us embrace, and, survive the crisis. But also what. Some of that human interaction, and kind of the softer, edges of communication. Is lost. By being forced to have. Literally. Um, you know. All zoom, interaction. So, zoom has become a verb. Right, okay. I'll let er pipe in with that one. Uh well. Some. Companies, and these, are usually. Like you know the mega, corporations. Nestle, for example. Uh, maintain. A sort of surveillance. Group. That keeps track, of. Emerging. Issues. Uh societal. Based issues. Uh risk-based. Issues. That, these days are easier, to sort of filter. Using ai. And. These new technologies. To determine. What's, what's simmering, and, who's behind, it, and. Where. Are these, uh. Excuse me. Problems. Geographically. Surfacing. To give them a degree, of can not control. But an opportunity. To, assess, the risk. And to. Integrate. Them, integrate, their message. Into this growing. Issue based uh. Pre-crisis. Let's put it that way, uh. That. May very well, be a, useful. Technique. For investor, relations, as well i'm not as, familiar, with what's, going on recently, within, investors, i used to, pay a lot of attention to it but lately more so uh with the societal. Stuff, um. But, that's one thing that. You know the the technology. Is offering.
Some Insights. That, 10 years ago. Were based upon hunches. And now, they've got some data. So that's, that's one change. Uh. In terms of, you know. Coming to terms. With uh emerging. Issues let's put it that way, yeah so. We will probably, see, a continued, evolution. On this. Uh we have a question, here, from, our colleague, amal shahada. Uh emel shahada, sorry, and it's a question for mary, mary, um. How have analysts, reacted, to firms that withdrew. Their guidance, do they. Basically. Acknowledge. Yeah sure that we we know there's a lot of uncertainty. And it's legitimate, to withdraw, that guidance. Or. Did they, push them to kind of provide, some. Uh greater, guidance. And, and. What conclusions. Do you draw from that. So, that's a great question, in the sense that i'm going to answer it more broadly not just analysts but how the sec, has responded. Um which is analysts. Um, while they're, empathetic. And sympathetic. To the inability, to forecast. They themselves, still. Are tasked with doing exactly, that, so, so they you know so i guess what i'm saying is if what managers, are describing, is impossible, analysts are saying but we're still asked to do so. Right, so, um. Said differently if you look at some of the the conference calls and uh kind of the q a in the discussion, uh more recently. It is kind of pushing managers. On the fact that hey, can we do some scenario. Talk rather than, you know some specific, outcomes, and that sort of thing but can we just talk about some, if this and that and, you know obviously executives, are very reticent to talk about hypotheticals. But that's kind of how analysts, are pushing back. Um and in terms of regulators. And this is um i was, in, putting my, slides together yesterday, for this i was looking uber, you know withdrew their guidance. And uber famously, when it was going public the sec, was very hard on them for what they were choosing to disclose. And how they were trying to shape their narrative, via i'll call it, non-gaap. Performance, metrics, so like ebitda. Is what i mentioned in there they have this adjusted, revenue number that they do, so uber has been, um i'll call it, harassed, by the sec. Division of enforcement. Throughout, their going public, and remaining public, and not surprisingly, just in the past few weeks uber has received some comments. On their recent earnings announcement. Not just for the. They're not required to give guidance so the sec, is not harassing, them for that, but for, the whole, um. Increased, focus on adjusted, numbers, and non-gaap, numbers, and kind of their creative, way of, adding back payments, to drivers.
And Things and the ppe. Equipment and that sort of thing so basically harassing. Uber, for. Controlling, the past narrative. Um, and making that more prominent, than the gap numbers, and that sort of thing so, um i know that the sec cannot regulate, and say you're mandated, to give. Or, thus far has never, um forward-looking, guidance but they can i guess harass. That's not actually a proper term, they can issue comment letters, and encourage, companies. Um to rein in their their. Adjusted, and kind of, their i'll call it narrative, shaping behavior. Thank you. The next question, is from maria, patterson. For irv, and this is a question, about. Um. Whether your model, applies. To non-profits. Like universities. And educational. Institutions. That have certainly. Uh been. Caught, in, this, crisis. And are struggling, to get their. Uh, communications. Out, and, i guess i i wonder whether you might speculate. On. Uh whether there's any adjustments, to your model needed or any recommendations. That you would have. For non-profits. Communicating. Especially. For. Educational. Institutions. Like ours, communicating, in a crisis, like this. Well. You know. My focus. Since we are here at stern, and we are not at wagner. Uh, it is on the for-profit. Segment. Which also. Has some relevance, to government. And to governmental. Policies. And communicating. You know uh, positions. I do think. For non-profits. One would have to really step back and, revise. And. Sort of look to. Examples. Of, where, nonprofits. Have, you know tried to. What their objectives, are and what they're trying to do. A few years back, there were a number of crises. Involving. Non-profits. Where, the ceo. Of um. What is the major. Um. Is escaping, one of the major, um, the non-profit. Uh, groups that, uh solicit, funds and distributes, them, well. Nyu. Always has it what's that thing, called i forgot but. We, yeah. You know what i mean. But anyway the ceo, was caught with his hands in the tiller. And, was. Living it up on, all of the, you know the money that was not being, used, correctly.
And They had to do. In their explanation. Uh it's united, way, you know, united, way. Uh, they had to do something similar to you know what my choices, were or what my, my messaging. Was about, but again that was a crisis. Now. What's, bedeviling. Nonprofits. Here you know educational. It's, it's it's a systemic. This is a systemic, crisis that's nobody's, at fault, nobody's, at blame. Uh. And that changes. It seems to me, how. You know the organization. Needs to analyze. And then, distribute. But they still have to figure out who are our stakeholders, who do we need to, communicate, with who do we need to influence. And, you know right now the federal government is the primary. You know focus on influence, it seems to me in trying to get something, uh. You know accumulated. And, and uh. You know to some sort of. Response. Just today in the news. You're probably all familiar, with what, the federal government is now saying that international, students. Have to go back home. On, if they, are. Here. And will have remote education, which is. A very peculiar. Formulation. Now. You know, they. The the. Universities, are going to have to band together, with some, business. Folks it seems to me to kind of come up with, counter. You know. Counter arguments. But it's also, uh you know it's an example, of. Something that they should really have been, aware that could be, generated. Given the way the federal government, thinks about immigration, and things about, others so, it's not a great answer for maria, but it's a good point for her to raise that it's really worth, stepping back and assessing, a different calibration. Yeah. So the um, we've got a couple of questions, that actually i think apply, to both of you. And, uh and they come from susan, stellick, and jeffrey, sharlak. And uh the questions, are. Basically, what's kind of in common. Is. Is there. Is that are there companies, that are doing this right is it possible. That. This, crisis, could actually be an opportunity. And, that there are companies, that can actually, improve, their reputations. By how they. Manage. Communication. During this crisis, and if so. You know do you have any examples. You know can you think of any, any. Companies, that are doing it well. My my short answer, to that is. As my students, know it's so much more, fun and entertaining. To study the horrible, warnings, as opposed to the good examples. Um. So. With that said slideshows, are generally, made on that, but um, the more fair answer to that i think, broadly, i would say is i'm not viewing this as a situation, where, one one company is right and another company is wrong it's a continuum, so it's more, it's not a problem, that has, one answer, and one clear solution. It's, you know it's a cloud of uncertainty. And, uh, it's kind of, um that and then i'm gonna use yet another bad metaphor. Analogy which is. Everybody's in the same storm, but not everybody's, in the same boat, right so how, keeping in mind. Navigating, the storm. It's, going to need to vary. Necessarily. Across, firms, across time. But the way to think about it is. Even if companies, get it wrong in one moment. That doesn't forever, cast them as. In the wrong book so it's it's, i think in in terms of communication. One of the. The key things i've learned in life, is, um, if you, speak from. A genuine. Sincerity. And an effort to figure out how to get to the right uh so i think there are some companies, out there and i'm reticent, i'm here i can't come up with a specific, one because, i'll be proven incorrect. Um but nonetheless, i would just say, uh you know what do we expect from, ceos, and their conference calls they don't need to give me a point estimate of what eps, is going to be next quarter. But making an honest effort. To help, um acknowledge, where you don't know something, and. Own up to something that you definitely, know already, and that sort of thing so just. A willingness, to. You know own. Own situations. More fully and, you know sincerity. But then i'll pass it off to irv. So. When companies, take on that problem-solving. Approach. That gives them, a space, to occupy. As. Not necessarily. The good guy. Or the good woman. But at least, accountable. And responsible. And, there are more than a few companies, that have done that and as one. Corporate communication, person told me the crisis you never heard about is the best crisis. And, there are companies, that you know, fix. The issue. And, don't get, that much media coverage it's it's the media coverage that, that frequently, you know creates, the uh, you know, the the, difficulty, for a lot of companies and those that headed off.
Very Frequently. You know, can handle it also. The, as. Mary was, was alluding to, the role of the ceo. Taking, you know the spotlight. To redirect, that happened in 2014. With the ceo. Of. General motors. Who had just been appointed. Who took, accountability. And responsibility. For this operational. Problem that had mutated. Into a full-blown, crisis, the ignition. Issue. She's an example, of, people doing that, uh. Nestle, and group de non have had some. Uh. Problems. With a. Withdrawal. Of products. Um. Because of health issues something like that but you don't hear too much about it because, they're so good. At. Stepping ahead. And and sort of solving the issue, and getting to it immediately. And, taking you know making themselves, accountable. I do have a list of companies that have been more successful, than not. And i'm just going to just say there's there in my computer, not in my head right now, so i apologize, for that but it's the companies that do take this problem-solving. Approach that um. You know have a better chance. Of not being remembered, for malfeasance. You know exxon's, never going to get away from what that what happened, with uh, you know the uh. The escape of oil and prince edward sound. And it's that kind of thing they became a meme. And they're never going to get away from that. And we might only know, about the outcomes. In the long run so marriott's, ceo. Was very proactive. In kind of acknowledging. How bad the problem was. And and came across very authentically. But it, you know those. The, stock still got killed like all, in his sector. And so we'll have to just see whether there is a feeling, of trust. Maybe on the part of the employees, or on the part of investors. That will pay off in the long run that isn't immediately, apparent, or certainly can't help them whether through, the immediate, crisis. Starbucks, is an example of a company that you know like i said the first thing i showed. Confronted, with, the accusations, of you know. Racial, imbalance, that they did something, they were criticized, for saying well that's just knee jerk reaction. Guess what nobody's. Castling. Starbucks, today about it. And i i think that's an example of a company that, took the proactive, approach. Thank you both, so much we've gone over time a little bit i want to thank the audience, who stuck with us.
Despite, Going overtime. This has been a really, insightful. Session. With a whole lot of new questions, sorry we can't get to everything. Uh in the list but i just want to thank you both, and. Uh hopefully, we'll all be together, again soon, so hang in there and enjoy your summer, folks. Thank you all thanks very. Much.
2020-09-07