Note: I’ve revised the language I used originally in response to a reader who points out in the comments that I should have been more careful in my characterization of the subcommittee’s statements. The key thing is that while the subcommittee says it has heard concerns that companies are not archiving earnings call replays, it is not suggesting any action on call replays specifically, which is the main point of discussion in this article.
WE HAVE long been critical of the many investor relations departments that do not post replays of their earnings calls for long enough periods — and now the problem has caught the attention of a US Securities and Exchange Commission (SEC) committee.
The Delivering Financial Information Subcommittee of the Advisory Committee on Improvements to Financial Reporting has drafted a “preliminary hypothesis” that calls for companies to post earnings call replays information on their sites for at least a 12-month period, as was suggested by the SEC in 2003 in its comments on Regulation G covering non-GAAP disclosures.
The subcommittee says it has “heard concerns that companies were not keeping their earnings calls and related information posted on their websites for more than one quarter after the call, thus making quarterly comparisons difficult.” You can download the discussion document (PDF 421KB) on the SEC’s website.
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| You don’t have to look far for evidence that investors like earnings call archives. You’ll even find requests for them on Twitter, the short-messaging service. |
None of this should be a surprise, of course. As I wrote two years ago, 38% of the companies in our survey failed to provide access to replays of even their most-recent conference calls on their IR websites when we visited. Today, that number is 32%, so not much change in two years.
No new rules, but shake the tree a little
What I find interesting, though, is that the subcommittee is not yet saying the SEC should explicitly require companies to post earnings call materials for no less than 12 months. It’s simply saying the SEC should reiterate it’s suggestion that they do so for GAAP reconciliations.
Interesting that they should shy away from making it a requirement and that they do not address call replays specifically. But it’s actually quite clever because it is better for investors if the SEC does not make it a requirement. The status quo makes it easier for investors to identify companies that have IROs and legal counsel who believe management isn’t competent or trustworthy.
You see, it works like this: Those 32% of companies are mostly not posting earnings call replays because their legal counsel and IR departments believe that leaving up those call replays makes it too easy for shareholders to hold managers accountable for their past remarks and predictions. They don’t have confidence in management’s ability to accurately predict future results or give reliable answers to questions.
If you’re an investor researching a company for the first time, a lack of earnings call archives can be a potential indicator of trouble. But if the SEC forced every company to start providing 12-month archives, investors would no longer have that useful little indicator.
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| About half of all companies in our survey are providing access to their earnings calls going back 12 months or more. |
No other valid excuses
Of course, some IROs and legal counsel will argue that there are other reasons companies don’t provide archives of their earnings calls and other presentations. One of them is ignorance; companies just don’t know that investors want them.
However, you’d have to have been living under a rock for the past 10 years not to know that investors want access to archived calls. Every survey with investors on their IR website needs that I can think of has highlighted the need for archived replays.
In fact, just this week at the Canadian Investor Relations Institute annual conference, John Reucassel, a managing director of research at BMO Capital Markets, remarked in a session blogged by Tony Zuck of zu.com that companies should leave up as many calls as they can. He said that he personally has gone back 5 years in some cases in his research.
One more excuse that companies might offer for a lack of archived calls is cost. But that also doesn’t wash, especially now that MP3s are so widely supported. Posting an MP3 recording on your website will cost about as little as a typical CEO lunch.
Actually, I noticed the other day a curious message posted on Twitter, the short-messaging service. It was written by Gregor Macdonald, a trader and writer who focuses on the global oil market. In it he advises companies to post MP3s of all their conference calls and he commends two companies — Petro-Canada (NYSE:PCZ) and Schlumberger Limited (NYSE:SLB) — for their practices.
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| Petro-Canada offers an RSS feed that enables investors to subscribe to automatically receive earnings calls in MP3 format. |
I mention that just to show that you don’t have to look far to find evidence that investors really want earnings call archives. (Actually, there’s a lot more I could say about Gregor’s tweet and the companies he mentions, but you don’t have time for that now.)
The bottom line is that there really is no valid reason companies shouldn’t be providing archives of their earnings calls for 12 months or even 12 years.
Except if they have something to hide.
Note: I am only using Schlumberger and Petro-Canada because they were mentioned in Gregor Macdonald’s message. Their inclusion here does not imply that IR Web Report considers them examples of best practice.
Dominic,
Not sure cost is an issue, it is the choice of the company. With PrecisionIR Webcasting (formerly known as Vcall) product, we do not charge for keeping an earnings call up past 12 months. We have some clients that have events from the past 5+ years still on their landing page. We keep our client’s webcast replays up for as long as they tell us to but we do not charge extra for keeping them available past the first 12 months.
A few comments:
First, it would have been helpful if you posted a direct link to the SEC document (http://www.sec.gov/rules/other/2008/acifr-dfisupdate-050208.pdf, I think.) It was surprisingly hard to find from your link to the advisory committee. (This omission was also surprising, given your advocacy of easy-to-use websites.)
Second, the initial SEC recommendation on this topic related to “disclosures regarding GAAP reconciliations for non-GAAP measures presented on earnings calls”, rather than specifically advocating replays for 12 months. You should be careful with how you represent the SEC document.
Third, roughly 95% of the website replay activity on our site occurs within a month after the call. I have never received a complaint that one quarter is an insufficient time window for the replay.
Your post brings up a reasonable point, but I wonder whether you are making a big deal out of a minor issue.
Roger
Hi Roger,
Sorry you had to work so hard to find the committee document. My bad.
The subcommittee, not me, is the one that decided that the SEC’s guidance around GAAP reconciliations should be reiterated, which I commented on as being the most interesting thing because they specifically say there are concerns about the lack of conference call archives.
What about the 5% of people who are using your archives? Don’t you care? Even if they are the ones who will buy and hold large amounts of stock? Short-term traders don’t care about archives.
If you’re *not* hearing complaints from investors, that’s when you should worry because it might mean they’re just not interested. So easy for investors to just move on when they have a *world* of choices.
Is it ever a minor issue if someone thinks your executives have something to hide because you’ve failed to think through the implications of your decisions?
While adding the link to the source document as Roger suggested, I realized that he is right that I should have been more careful in how I characterized the subcommittee’s statements. This was a case of imprecise writing rather than not understanding what the committee was saying, as I think is clear from the thrust of the article. Thanks, Roger, for pointing out my sloppiness and I’ll try to be more precise in future.