New York, NY – Last Thursday, January 10th, NYSE Euronext sponsored a panel discussion and Webinar called Expert Networks – Opportunities and Issues for Public Companies.
This panel discussion attempted to address the various issues and concerns that the expert network use by hedge fund and asset managers pose for publicly traded companies. Between 90 to 100 IR professionals from various publicly traded companies and investment professionals at both mutual fund and hedge funds attended, either in person or via the webcast.
Speakers on the NYSE Euronext panel included the following:
Keith Ackerman, Global Head of Next Generation Research, Thomson Financial
Howard Dicker, Partner, Weil Gotshal & Manges, LLP
Michael Lynch, Managing Director, Global Commission Management, Merrill Lynch
Jonathan Glick, Director of Research Operations, Gerson Lehrman Group
Michael Mayhew, Chairman, Founder & Global Director of Research, Integrity Research Associates
The focus of this panel discussion was to ascertain how publicly traded companies should respond to the growing buy-side use of expert networks to contact industry consultants, doctors, academics, employees at publicly traded companies, and former employees at publicly traded companies.
The panel did a good job of explaining why hedge funds and asset managers use expert networks. Attorney Howard Dicker also highlighted the various risks that such use might create for public companies.
Unfortunately, some IR professionals felt that the most appropriate solution would be to tell current company employees that they cannot participate in Expert Networks and consult with investors. And while we understand this feeling, it is not clear to us that such a move would really solve anything. The following is our rationale for this view:
1. Banning company employees from participating in Expert Networks would require that public companies develop appropriate policies, communicate these policies to employees, and then rely on employees to live by these policies.
2. Even if this approach worked (which we greatly doubt), companies would then be faced with the likelihood that investors and analysts at thousands of hedge funds and asset management firms would try to call employees directly themselves.
We believe that a better approach would be for public companies to establish employee consulting policies and then proactively approach the two dozen or so Expert Network firms to implement these policies for their buy-side clients. This would create two levels of restriction — with the Expert Network firms AND with employees.
The biggest question we have with this approach is whether Expert Network firms have the infrastructure to implement the types of filters necessary to limit client access to certain experts based on the policies of the public companies that employ them.
Unfortunately, research we have done in this area indicates that most Expert Network firms do not have the technology required to implement a company’s compliance and disclosure policies. The team at Integrity Research Associates will be covering these and other topics in its upcoming ResearchFocus Report on Expert Networks (due out by the end of January).
Click the following link to register for and see the the NYSE Webinar.