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The article below addresses the lack of public access to last week's pioneering "Fifth Analyst Call." The proponents of the call, Deborah Gilshan of Railpen Investments and Elizabeth McGeveran of F&C Asset Management, have been invited to comment on their invitation-only approach in the context of the standards of fair communication developed by the Forum's "E-Meetings" public interest program. For other comments on adaptations of this type of investor conference call, see |
IR Web Report, April 27, 2011 article
Did OXY’s “fifth analyst call” violate Reg FD?TWO senior members of Occidental Petroleum’s (NYSE:OXY) board yesterday held a private conference call with a group of shareholders ostensibly to discuss the company’s corporate governance practices, but uninvited investors might well be wondering what was discussed on the call given the subsequent performance of the stock.
Occurring less than 48 hours before the company is due to report its Q1 2011 earnings, the unusual 9:00 am ET conference call was organized by UK-based institutional investors who are championing a so-called “Fifth Analyst Call,” an initiative to encourage board directors to answer shareholder governance questions ahead of their annual meetings. OXY is thought to be the first company to hold such a call. However, unlike most other analyst calls that comply with the SEC’s Regulation FD requirements, OXY did not publicly announce the event in a news release, an SEC filing or anywhere on its IR website. And access to the call itself was not made available to the public via a call-in number or webcast. Consequently, if any material, non-public information was disclosed on the call by OXY’s lead director and audit committee chair Aziz D. Syriani or compensation committee chair Spencer Abraham, it would likely implicate Regulation FD. Stock outperforms on the dayLooking at OXY’s stock price action immediately following the call and during the rest of the regular trading session, it is obvious that investors were pleased about something. OXY’s stock closed 2.5% higher on the day, roundly beating the S&P 500, which was up 0.9%, and the performance of any of its direct peers. As the chart below from Google Finance clearly shows, OXY’s stock began rising immediately after the opening bell at 9:30 am, a half-hour into the conference call, and it continued its ascent throughout the day beating the performance of runner up Exxon Mobil by more than a full percentage point.
What explains the superior performance? I dug around for possible explanations and learned that Deutsche Bank upgraded its rating on OXY from Hold to Buy and raised its price target from $110 to $120 prior to the call. But does that fully explain the outperformance on the day, or was something divulged by OXY’s directors that shouldn’t have been? We may never know because we don’t have access to a recording or transcript of the call. In fact, I can find no record of the call even taking place, although this CorpGov.net post by Jim McRitchie the day before the event – the only one I found providing any useful information about the call – seems to indicate that it probably did happen. Highly unusualWhat we do know is that an audit committee chair holding a private conference call with a select group of shareholders two days ahead of his company’s earnings announcement is highly unusual – and that’s putting it mildly. It’s ironic that the people who arranged this elitist and secretive event – widely reported to be the UK’s Railpen Investments and F&C Asset Management — did so in the name of better corporate governance. If this is how fifth analyst calls are going to be conducted, then no responsible board director, executive or investor relations professional will have anything to do with them because they involve unacceptable reputation and regulatory risk. That doesn’t mean the idea is entirely without merit, but any such call should be conducted in the same way as the other four analyst calls: with adequate prior notice and in full view of the public. Anything less is bound to raise questions about fairness, transparency and plain old good judgment.
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