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Terence Gallagher of Corporate Governance Associates from an ongoing law.com online seminar, “Implementing Good Corporate Governance,” moderates the following discussion thread excerpt. For more information on this program and other law.com seminar offerings please visit http://www.law.com/seminars. TERENCE GALLAGHER, CORPORATE GOVERNANCE ASSOCIATES, SCARSDALE, N.Y. With the effectiveness of Regulation FD on Oct. 23 there may be some significant changes in how issuers communicate with their investors. What are some of the changes you are recommending to clients in their communications? STEPHEN DOLMATCH, CHASEMELLON SHAREHOLDER SERVICES, RIDGEFIELD, N.J. Regulation FD exacerbates the risks companies bear when they have one-on-one communications with analysts or investors. While some companies may cease all such one-on-one communications, most will probably continue them but place a higher level of care to ensure that they disclose no material nonpublic information. Probably the most important change we see has to do with earnings guidance. The SEC’s adopting release made it clear that an issuer’s private sharing of information with an analyst seeking guidance about earnings estimates would likely be a violation of Regulation FD. Therefore, companies should avoid direct or indirect earnings guidance in other than a public setting such as a public conference call following the release of quarterly earnings. We see this as a benefit to issuers that are not widely followed, whose investor relations officials sometimes feel pressured to give this data to retain coverage by the analyst. Now the investor relations official can point to the rule and tell the analyst, “I wish I could help you but I can’t without violating the law.” Some other changes in response to the rule: issuers allowing broader participation in earnings conference calls (whether with a dial-in number or a Webcast), more comprehensive dissemination of information in these calls, and more attention to the scripting of these calls. TERENCE GALLAGHER, CORPORATE GOVERNANCE ASSOCIATES, INC. SCARSDALE, N.Y. I agree with the analysis posted. It would be a mistake to cut off all one-on-one communications with analysts. A set of guidelines should be prepared that will guide the senior executives and investor relations personnel so that material nonpublic information will not be disclosed in these meetings. Harvey Goldschmid, who was a principal drafter of the regulation, has made it clear that an analyst is still free to construct a mosaic from various pieces of information, none of which is material. This is the function of an analyst. MARK PREISINGER, THE COCA COLA COMPANY, ATLANTA, GA. The focus with Regulation FD seems to appropriately center around routine IR such as analyst meetings, conference calls, etc. However, we shouldn’t forget about annual meetings and its potential effect there, particularly with regard to the Q&A segment of the meeting. Is Webcasting the answer? STEPHEN DOLMATCH, CHASEMELLON SHAREHOLDER SERVICES, RIDGEFIELD, N.J. That’s an interesting question. Annual shareholders’ meetings tend to have much less information content from the perspective of the financial marketplace than do analyst conference calls. As a result, I think companies generally do not make new disclosures of material information in annual meetings, and therefore would not be compelled by Regulation FD to Webcast these meetings. Nevertheless, Webcasting broadens a company’s audience and has become so hugely popular in the context of analysts calls. (According to a survey by the National Investor Relations Institute last month, over 60 percent of the 2,500-plus companies that are NIRI members Webcast conference calls, with an additional 23 percent saying they plan to do so by the end of the year.) I would not be surprised if the intense popularity of Webcasting analyst meetings rubs off on other corporate events such as annual meetings. On a related note, companies choosing to hold their shareholder meetings in cyberspace, in accordance with the recent amendments to Delaware’s corporation law, may rely on Webcasting to satisfy the law’s requirements relating to allowing shareholder participation. BRUCE BENGE, HIDE & SEEK TECHNOLOGIES, INC., CLARKSTON, WASH. Mark, how would Webcasting work with regard to an annual stockholders’ meeting? MARK PREISINGER, THE COCA COLA COMPANY, ATLANTA , GA. Bruce, from a technical standpoint I can’t be much help, although there are a number of fine services available to make Webcasting a reality. In general, however, I would recommend the Webcast be real-time, and it is important to communicate to share owners and other key audiences with enough advance notice. With share owners this could be accomplished through the proxy statement, and information on the Webcast could be posted on a company’s Web site. If a company wanted to send a signal that it was cutting- edge in this regard, for the annual meeting they could provide for two-way communication through the Internet, allowing share owners to ask questions in real time. It should be noted that there is concern among some institutions that with the new Delaware law, companies will stop conducting traditional annual meetings in favor of “virtual” meetings. In fact, the Council of Institutional Investors has just issued a letter to many companies asking for a written commitment that this would not happen. They cite concern that virtual meetings would be used to “insulate management and directors from shareholders.” From my perspective, I really don’t see a lot of companies moving away from the traditional format, at least not in the near future.

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