In 1948, W Howard Chase tackled the topic of Stockholders in the Corporate Family in his chapter in the book Your Public Relations (serialised here), with the intention of challenging conceptions of them as a ‘thin-lipped fiscal schemer’, ‘money-baron’ or ‘decadent, bespectacled aristocracy’. Fifty years later, the global financial crisis began, and today the image of stockholders continues to suffer with an impression that their interests are short-term returns on their investment at all costs.
Chase is best known for his work in originating the term ‘issues management‘ in 1976. At the time of authoring this chapter, he was Public Relations Director at General Foods Corporation before taking up the same role in 1952 for Eisenhower (and subsequently serving in his presidential administration).
It is perhaps not surprising that the focus of Chase’s chapter is that ‘internal corporate education is the first step in any successful stockholder relations program’. His argument was that members of top management failed to recognise that ‘we should look among farmers, schoolteachers, grocers, house-wives, salesmen, and small businessmen, to find our average stockeholder’. As he stated:
The program can be fully effective only when there is appreciation on the part of all who can influence its progress that the stockholder is, first, a citizen; second, a capitalist; third, a consumer, and fourth, often an employee in a basic industry.
Chase contends that his view of the need to ‘encourage a close affinity between a company and its stockholders’ is ‘not shared wholeheartedly’, although he observes ‘some forward-looking companies have signed to a public relations specialist the relationship functions which were formerly considered a bothersome task included among the corporation secretary’s many responsibilities’.
Today investor relations and financial PR are established practices – often viewed as an exceedingly well-paid specialism found alongside lawyers, brokers and financial advisers. The 1980s was the boom decade for the financial PR sector – making Chase’s chapter seem genteel in comparison:
What should be the goals of a program for stockholder relations: Simply put, the aim should be to cultivate the investor’s friendliness and loyalty to his company.
Chase’s stockholder advice included a need to ‘keep them constantly informed’, viewing the annual report ‘as a sound instrument for good public and stockholder relations’, seeking to ‘humanise your story’, ensuring a ‘central theme which runs through the entire report’ and ensuring ‘management participation”. He also discusses ‘special offers’ such as General Foods’ ‘bargain offer of a Christmas Gift Box to its stockholders and employees for delivery to friends and relatives’.
Quaintly, a photograph of the president of Pepsi-Cola Company greeting one of the stockholders at the company’s ‘family party’ shows rows of elderly women in flowery hats, and men in formal suits.
Chase fails to consider stockholder activism, even though Carroll and Buchholtz argue this emerged in the 1930s. However its establishment as a movement in the 1960s and 1970s clearly relates to Chase’s own emphasis of issues management at that time. For example, Campaign GM – aka Make General Motors Responsible – challenged the company to address social issues.
‘New Progressive Trends’ was a sub-head in the chapter within the Editor’s Note (authored by Griswold & Griswold). This related to Lewis D Gilbert deemed to be a ‘gadfly and a nuisance’ for ‘his constant heckling for more exact and useful information and stockholder confidence throughout the country’.
Despite raising such activism, the focus of the chapter tends to be on presenting ‘interesting and informative material’ rather than recognising the validity of any stockholder criticism.
Today, stockholder (or shareholder) activism is defined by the Financial Times as “designed to deter poor governance that might pose a long-term threat to the profitability of the companies that shareholders invest in.”
Sadler in 2008 concluded:
the corporation is not always responsive to social activist shareholder resolutions.
However, pressure from stockholders in the current global financial environment reflects many different forms, such as:
- Activist hedge funds – eg ValueAct Capital and Third Point Offshore
- Direct action activism – as seen in campaigns against oil companies, BP and Shell.
- Small investor activism – or corporate gadflies as they are still known
It is hard to imagine the Pepsi-Cola smartly dressed Americans of the 1940s in the context of contemporary activism. And the belief that keeping ‘shareholders informed in detail as to the employee and community relations problems, and the programs which are intended to solve these problems’ feels rather naive.
We are also a long way from the big-budget, power-fuelled financial relations of the 1980s, as today the focus of stockholder/shareholder relations is more around reputation and effective governance, whether PR is working for the corporate or for activists.
One final point made in the 1948 book is interesting and one that doesn’t seem to have a high profile today. That is:
the question of inadequate accounting for the public relations program of most corporattions. Many of them are spending freely on public relations and yet do little or nothing to explain the expenditure from the point of view of either stockholder interest or public interest.
Given contemporary discussion – and critical examination – of the use of Return on Investment as a (questionable) measure of effectiveness, and consideration of alternate approaches such as Communication Controlling – it appears the value of public relations within corporates is more of a matter of concern for senior executives than for stockholders.