The Disclosure Advisory Board -- a 15- person council of leaders in the corporate, regulatory, investor, reporting and academic communities organized by PR Newswire -- announced today recommendations for shareholder disclosure, voicing its concern that the concealment of shareholder identity is creating a disorderly market in the U.S.
(Photo: http://www.newscom.com/cgi-bin/prnh/20070604/NYM101 ) (Logo: http://www.newscom.com/cgi-bin/prnh/20000306/PRNLOGO )
In a newly published white paper, "Shareholder ID: The Resounding Silence of Non-Disclosure," the Board calls for investors to follow emerging global best practice, and reveal their identities, and for regulators to re-examine existing shareholder disclosure rules, outdated by new derivative investments. Further, the Board contends that lack of shareholder identity disclosure is negatively affecting the U.S. capital markets by allowing destructive behaviors to go unchecked, putting the U.S. at a competitive disadvantage on the world stage.
The white paper, the second in a series from the Disclosure Advisory Board, was published in conjunction with the largest gathering of investor relations professionals at the National Investor Relations Institute's (NIRI) annual conference in Orlando, FL, June 3-6.
"Vibrant equity markets depend on the active participation of investors. However, certain practices in the U.S. send mixed signals and put many investors at a disadvantage," said Mark Hynes, chairman and spokesperson of the Disclosure Advisory Board, and managing director of Global Investor Relations Services for PR Newswire. "Non-disclosure on the part of investors is not just an issue for public companies. It creates a disorderly market for all parties involved.
"Yet it is the company that bears most of the risk. Lack of investor information exposes shares to potential price manipulation from unknown holders with unknown intentions, increasing a company's vulnerability to takeovers and proxy fights. This cloak of investor secrecy also makes companies susceptible to the agenda of hedge funds and other short-term holders who may provoke actions not favorable to longer-term business objectives.
"Consequently, we believe it's time for undisclosed U.S. investors to break their resounding silence. We're calling for shareholder identity transparency to make disclosure a two-way street. In an era of 'right to know' advocacy, U.S. public companies should have the right to know who their shareholders are."
In reaching its opinion on shareholder disclosure, the Disclosure Advisory Board noted the following concerns which it believes must be resolved in order to bring a level playing field back to the U.S. capital markets:
* Lack of shareholder knowledge -- as well as legal or regulatory
recourse -- places companies at considerable risk.
* Market practices inhibit disclosure professionals from communicating
directly with certain investors. As shareholders cry out for majority
voting or for a "say on pay," the embargo on direct communications with
investors is disadvantaging companies and corporate boards of directors,
and even shareholders themselves.
* Lack of investor identity and direct investor communications contribute
to practices such as empty voting which, in addition to affecting the
outcome of directors' elections, may also bestow unfair advantages on
some investors who may even hold negative positions.
* The growing practice of "borrowing" shares enables undisclosed investors
without economic interest or with limited stakes to have an outsized say
in elections that affect issuers and other investors. Once the
borrowers cast votes to achieve their objectives and return the shares,
they leave the other investors and public companies to contend with the
aftershocks.
* Companies have been under increasing pressure to disclose information
simultaneously since Regulation Fair Disclosure in 2002, yet are doing
so to an audience that may only be partially known to them. This makes
effective and targeted communications difficult.
* Glaring paradoxes exist between capital markets in the U.S. and those
abroad. For example, foreign issuers can find out more about their U.S.
investors than U.S. issuers can find out about U.S. investors. Left
unsettled, these paradoxes could thrust U.S. capital markets out of
competition.
* Newer financial products and practices, such as the growing popularity
of cash-based derivatives, enable investors to aggregate shares without
disclosure obligations to issuers or other market participants. The
prevalence and magnitude of this activity has had a resounding impact on
the markets.
William A. Relyea, managing director, H.C. Wainwright & Co., Inc. and a member of the Disclosure Advisory Board, commented, "The end result of this undisclosed shareholder syndrome is it allows investors with significant capital backing a certain anonymity that enables them to make market-roiling moves, particularly in individual stocks. This often has an adverse impact on the company, its stockholders, as well as the employees and others who depend on the services the business provides."
Hynes concluded, "The U.S. shareholder identity problem calls for immediate action. Shareholder non-disclosure is creating a disorderly market in the U.S., making it less attractive than investment venues in other parts of the world.
"It is time for undisclosed shareholders to break their silence and announce who they are. Collective silence on this matter is no longer an option."
The complete white paper, the second published by the Disclosure Advisory Boar, is available at http://disclosureadvisoryboard.mediaroom.com/. To read Mark Hynes' blog, Transparency Matters, go to http://transparencymatters.blogspot.com/.
About the Disclosure Advisory Board
The Disclosure Advisory Board was brought together by PR Newswire in June 2006 to assess and comment upon the state of corporate disclosure and transparency. Comprised of 15 individuals with a combined 450 years of regulatory and compliance experience, the aim of the Board is to debate current disclosure and governance issues, and based on the discussions, propose "best practices" for improved financial and corporate reporting. The Disclosure Advisory Board believes that communication -- disclosure and transparency -- lies at the heart of winning back public consent.
Members of the panel are: John Bierbusse, corporate director and retired equity research analyst at A G Edwards; Janet L. Fisher, partner, Cleary Gottlieb Steen & Hamilton LLP; Valerie Haertel, VP/director of investor relations, Medco Health Solutions, Inc.; Jerry Hostetter, VP/director of public relations and investor relations, Smithfield Foods Inc.; Deborah Kelly, partner, Genesis Inc.; Mark Hynes, managing director of Global Investor Relations Services for PR Newswire; Jack L. Kelly, co-head, industrial research team, Goldman Sachs; Mary Beth Kissane, president and founder, Corporate Perception Research; Sam Levenson, SVP Investor Relations, Sony Corporation of America; William A. Relyea, managing director, H.C. Wainwright & Co., Inc.; Diane Salucci, SVP, Bear Wagner Specialists LLC; Martin Shea, EVP, investor relations, CBS Corporation; Kurt Stocker, member of the board of directors of NYSE Regulation, Inc. and chairman of the New York Stock Exchange Individual Investors Advisory Committee; Anna Sussman, director, Investor Relations and Corporate Communications, Pharmion Corporation; Louis M. Thompson, Jr., partner, Genesis Inc., and managing director, Kalorama Partners, and former CEO, president and board member of the National Investor Relations Institute.
About PR Newswire
PR Newswire Association LLC (http://www.prnewswire.com/) provides electronic distribution, targeting, measurement and broadcast services on behalf of tens of thousands of corporate, government, association, labor, non- profit, and other customers worldwide. Using PR Newswire, these organizations reach a variety of critical audiences including the news media, the investment community, government decision-makers, and the general public with their up- to-the-minute, full-text news developments.
Established in 1954, PR Newswire has offices in 11 countries and routinely sends its customers' news to outlets in 135 countries and in more than 40 languages. Utilizing the latest in communications technology, PR Newswire content is considered a mainstay among news reporters, investors and individuals who seek breaking news from the source. PR Newswire's leading services include ProfNet ExpertsSM, eWatch™, MEDIAtlas™, Search Engine Optimization, MediaRoom, MediaSense™, MultiVu™, U.S. Newswire, the preeminent policy newswire in the industry, and Vintage Filings, the fastest growing Edgar filing company.
PR Newswire is a subsidiary of United Business Media plc of London. Contact:
Rachel Meranus, Vice President, Public Relations, PR Newswire at 212.282.1929 or
NewsCom: http://www.newscom.com/cgi-bin/prnh/20000306/PRNLOGO
AP Archive: http://photoarchive.ap.org/
AP PhotoExpress Network: PRN10
PRN Photo Desk,
SOURCE: PR Newswire Association LLC
CONTACT: Rachel Meranus, Vice President, Public Relations, PR Newswire,
+1-212-282-1929 or