Finance in Public

Relations

Financial Publics of PR Department

The Shareholders The Investment Community Security Analysts Investment Clubs

Shareholder’s Profile

Individual Investor• Lack the ability to understand or the inclination to strive to

understand complex financial data.• Primary motive is family security.• Interested in dividend policy, quality of assets and earnings.

Capital Gains Investor• Primarily concerned with the future- historic growth of

earnings, role of change of that growth, and the anticipated growth rate of future earnings.

Investment Community

Composed of:• Stockholders• Security Analysts• Trust Officers• Bankers• Financial Counselors

Function:Counsel individuals and banks, insurance companies, pension funds, mutual funds, charitable foundations, universities and

hospitals in evaluating, buying, and selling securities

Security AnalystsFunctions

• Fact Finding• Passing judgement

on the merits of securities

• Criticizing the financial practices and policies of corporations

They are employed by institutional investors, banks, brokerage houses, investment counseling firms, trust funds, and insurance companies to keep them informed about the financial status of corporations.

Investment Clubs

Investment clubs are formed by small group of persons who meet regularly to discuss the merits of investment in particular corporations and to invest club funds. They discuss investment objectives, study the principles and techniques of investing, and make investments in corporations after gathering information and weighing the risks involved.

What is Shareholder Relations?

Corporations, through their shareholder-relations program, are keeping these investors supplied with information about corporate financial status and future prospects.However, many corporations fail to understand the importance of keeping the shareholders informed.

To arouse owner interest in the corporation Create a better understanding between the company, its shareholders, and the financial community Persuade stockholders to consume and recommend the purchase of products of the corporation Reduce the turnover of shareholders and promote holding of stock as a long-term investment Reduce stockholder criticism and organized opposition to management Stabilize the market for corporate securities Raise the prestige of a corporation in the eyes of the community by enhancing its standing among its owners

Objectives of Shareholder

Relations

Laws and Ethics of Shareholder

Relations A corporation, or anyone else involved in the sale of a new issue of securities is prohibited from using public relations as a part of the selling effort during or immediately before the offering period A corporation should always avoid half-truths or false or misleading publicity to promote purchase or sale of stock Price of a company’s stock should reflect company’s earnings, finances, and management, and a higher price should not be sought by publicity for the corporation and its stock

Timely Disclosure Prompt release should be made whenever there are important developments which might affect security values or influence investment decisions of stockholders or the investing public Following are the activities that should be avoided to ensure compliance with the Securities and Exchange Commission: Manipulating stock prices Deliberate attempts to falsify a company’s financial position overly optimistic sales and earning forecasts withholding important financial information

Responsibility for Shareholder

RelationsCorporations with limited no. of shareholders designate the secretary or clerk to be responsible for communicating with shareholders, arranging for the annual meeting , reporting the proceedings, and handling all stockholder affairs.In large corporations, a stockholder-relations section is established in the public relations department under the direction of a stockholder-relations manager responsible for communication of information to the shareholders in an effective manner.

Shareholder Relations Policy

1. Shareholders relations policy is to convince the corporation’s investors and shareholders that it is a profitable long-tern investment.

2. Its operations are well-managed3. It is dedicated to a progressive program of production,

sales, and growth supported by continuous research and developments.

Conducting a Shareholder-

Relations Program

Corporations conduct surveys because they want to learn what investors think of the way management is operating the company and how the company is communicating with them.

The principle methods of conducting shareholder opinion surveys are mailed questionnaires and personal interviews.

Surveys are conducted at regular intervals by the shareholder-relations section of the public relations department, or by an outside counselor or opinion research organization.

Surveying shareholder opinions

Effective shareholder relations requires that the corporation’s shareholder-relations staff know the characteristics of the shareholder public.

Mail surveys and personal interviews are the great means to determine shareholder characteristics.

By obtaining a better understanding of the shareholder public, communication problems may be solved more readily.

Determining shareholder

characteristics

Corporations inform the communications to the shareholders in order of frequency.

Corporations inform shareholders about their plans for expansion, new product developments, new financing plans, forecasts of sales, forecasts of earnings, profits on overseas operations, marketing strategy etc.

What shareholders should know

Information should be presented to stockholders in simple, clearly understood, nontechnical terms.

Stockholder communications should be continuous from the day a shareholder acquires his stocks until he sell his holdings.

Management should tell shareholders both sides of its business story-the bad news as well as the good.

Fundamentals of shareholder communications

Media of communicati

on with shareholders

The annual report Interim reports Notices of annual and regional shareholder’s meetings Shareholder magazines Annual report advertisements Shareholder correspondence Financial publicity Financial window displays Shareholder booklets and folders Promotional literature Reports of shareholder’s meetings Shareholder contests Employee-shareholder communications

Printed communications with shareholders

The corporation’s annual report is the primary medium of communication in stakeholder relations and a secondary medium of communication with non shareholder employee, community, distributor and supplier publics.

The annual report is an opportunity a company has each year to tell shareholders and other publics what it has done, is doing and plans to do.

It reflects a corporation’s image and the caliber of its management and it may attract new investors and affect the price of its stock.

The annual report

Annual reports include the following features:o Financial informationo Production informationo Marketing informationo Personnel informationo Miscellaneous informationo Physical features of annual reportso Illustrations Annual reports are distributed 15 days before the

annual meeting to news media including television and radio commentators, editors, special financial writers, libraries, educational institutions and members of investment community.

In the intervals between annual reports, corporations communicate with shareholders through interim reports in the form of dividend enclosures, quarterly newsletters, folders, booklets and bulletins.

Interim report

Notices of annual meetings are mailed to stockholders together with a proxy form on which absentee shareholders may vote for directors and on matters to be voted upon at annual meetings.

Notices of annual and regional shareholder’s

meetings

Corporations publish quarterly shareholder magazines and reports about company finances and developments to secure understanding and support of owners.

In addition to financial news, these periodicals discuss new products, new plants and laboratories, research and other subjects of interest to owners.

Shareholder magazines

Annual report advertising is placed by some corporations in national consumer magazines and newspapers in financial centers.

These advertisements feature the highlights of current finances, build prestige for a company in financial community, and interest investors in acquiring corporate shares.

Annual report advertisements

Correspondence with individual shareholders is an important factor in good shareholder relations.

A letter of welcome from president is mailed to new shareholders. When a shareholder sells the stock, he or she receives a letter of regret, with the hope that they will again be numbered among the company’s owners.

Some corporations make regular mailings to security analysts discussing the economic progress of the area served by the company.

Shareholder correspondence

Corporations communicate shareholders and general public through press releases to financial magazines, daily news services and radio and television commentators.

Financial publicity

Some large companies employ window display firms to install displays of their products in brokerage-house windows.

Financial window displays

Shareholders are informed about corporate operations through periodic mailings of booklets and folders which cover a wide range of subjects, including company management, personnel, products, production facilities, plants, industrial outlook and executive speeches.

Shareholder booklets and folders

To inform shareholders about the company’s advertising and products, proofs of advertisements, booklets and folders and other promotional literature are enclosed with stockholder correspondence and dividend mailings.

Promotional literature

Shareholders who do not attend the annual or regional shareholder meetings are mailed a post meeting report of the proceedings.

Shareholder magazines carry word and pictures stories of shareholder meetings, condensed speeches by executives and illustrations of owners and management taking part in the program.

Reports of shareholder’s meetings

Shareholders are encouraged to participate more effectively in the affairs of their companies by means of contests offering prizes for constructive criticism and suggestions on the operations of the company.

Shareholder contests

The employee periodical is the principal medium, along with annual report and booklets.

Special editions of annual reports in simplified terminology are prepared for employees.

Employee-shareholder communications

Shareholder films: Film are based upon a corporation’s annual report and dramatize the contributions to company progress and profits.

Television: closed-circuit television broadcasts of annual meetings are transmitted to regional meetings of shareholders in other parts of country; making it possible for shareholders who cannot attend the annual meeting to witness the proceedings.

Audio-visual communication

Annual shareholder’s meetings Regional shareholder’s meetings Open houses or plant tours for shareholders Personal visits to shareholders Meetings with members of financial community Lectures and forums for investors

Oral communication

The corporate laws of every state require corporations to hold annual meetings at which shareholders have an opportunity to exercise their rights to elect directors, hear reports of management and transact business.

Annual meetings provides an opportunity for the major executives of a corporation to establish friendly personal contacts with the people who are supplying the money to operate the business.

The meetings provide face-to-face exchange of information and opinion.

Annual shareholder’s meetings

To make it possible for more shareholders to attend corporation meetings and participate in company affairs, many companies hold regional meetings.

These are attended by employee shareholders to hear executives discuss the annual report, answer questions and announce plans for expansions.

Regional shareholder’s meetings

It can be used to inform stockholders about properties, operations and products of he company.

It also gives them an opportunity to see for themselves how their money is invested.

These events feature speeches by executives, product exhibits and motion pictures.

Open houses or plant tours for shareholders

Management personnel visit shareholders to discuss company finances and answer questions.

Personal visits to shareholders

Many corporations arrange periodic meetings with security analysts and other members of financial community to discuss corporate finances and corporation progress; to answer questions; and to hear the chairman, president, and other officials discuss corporate finances and investment outlook for corporation’s securities.

These meetings are supplemented with tours of company’s facilities, demonstrations of new products, and motion pictures.

Meetings with members of financial community

Important lectures and forums in an investor’s information program are given for shareholders and prospective investors.

Many department stores sponsor the lectures as a service to their customers and local communities.

Lectures and forums for investors