A.G. Lafley, Procter & Gamble Co.’s chairman and chief executive, speaks on just one of the company’s earnings calls a year but meets regularly with investors in private. PHOTO: TIMMY HUYNH/THE WALL STREET JOURNAL
Procter & Gamble Co. Chief Executive A.G. Lafley speaks on just one earnings conference call a year, down from his previous practice of every quarter. The company says that helps him stay focused on pulling P&G out of a growth slump.
But Mr. Lafley still meets regularly with investors in private. In March, Mr. Lafley’s comments during a string of conversations with investors in New York gave a Wall Street analyst who was present the strong impression that he would step aside as CEO sooner than expected. That hunch was confirmed in July.
P&G says it is careful not to reveal market-sensitive information to investors and analysts who get special access to the company. For the past 15 years, selective disclosure by companies has been illegal under U.S. securities rules. Yet the same rules explicitly allow private meetings like those by P&G.
The result is a booming back channel through which facts and body language flow from public companies to handpicked recipients. Participants say they’ve detected hints about sales results and takeover leanings. More common are subtle shifts in emphasis or tone by a company.
“You can pick up clues if you are looking people in the eye,” says Jeff Matthews, who runs Ram Partners LP, a hedge fund in Naples, Fla. He says he never invests in a company without meeting its management.
A Bebe Stores window in New York City. In April, the retailer said it had made an ‘inadvertent disclosure’ while meeting with a ‘select group of investors.’ Photo: Craig Warga/Bloomberg News
Access usually is controlled by brokers and analysts at Wall Street securities firms, who lean on their relationships with companies to secure meetings with top executives. Invitations are doled out to money managers, hedge funds and other investors who steer trading business to the securities firms, which in turn provide the investors with a service called “corporate access.”
Investors pay $1.4 billion a year for face time with executives, consulting firm Greenwich Associates estimates based on its surveys of money managers. The figure represents commissions allocated by investors for corporate access when they steer trades to securities firms.
Publicly traded U.S. companies held an average of 99 one-on-one meetings with investors apiece last year, according to a survey by market-information company Ipreo.
General Electric Co. said in its annual report that it “ensured strong disclosure by holding approximately 70 analyst and investor meetings with GE leadership present” in 2014. The total was roughly 400 when including meetings with other executives, such as those in GE’s investor-relations department, a spokesman says.