Facts & interpretation: while regulatory requirements set a framework for disclosure, there are other elements that can spell the difference between poor and effective investor communication.

Churn a generous portion of financial information in your bowl of knowledge, combine it with marketing elements, beat in the communications, season it with legal compliance, and you've got the recipe for communicating to investors--a weighty responsibility that requires a great measure of judiciousness and balance.

On a macro level, investor communication propels the financial marketplace by providing the essential information on which major market players rely to make business decisions. If misused or abused, investor communication can also have dire financial consequences. Indeed, investor communication practices in the U.S. have been the focus of scrutiny in recent years, following a wave of corporate scandals that resulted in formidable losses for individuals and institutions alike.

Given its powerful and direct bearing on money, balancing facts with interpretation is a principal objective when communicating to investors. Interpretation includes arguments, analyses or commentary to clarify the facts, contextualize those facts, manage investors' perceptions and drive their behavior.

This is not to imply that communicators would practice anything short of integrity. But the ability to achieve that delicate yet critical balance depends as much on communication skill as on ethical intention. And while regulatory requirements set out a framework of disclosure, there are further elements of balance that, apart from meeting ethical and legal standards, could mean the difference between poor and effective communication.

What comes first?

Though it may seem a trivial point, the order in which a communicator combines facts with interpretation may alter the emphasis of a message.

Diane Gargiulo, the founder and president of the strategic financial communications firm Gargiulo + Partners in New York City, points out, "When communicating to investors, facts should lead the way for transparency and be presented in context, rather than in isolation, from the very beginning." She adds: "After answering an investor's immediate need to become informed and take action, interpretation and 'what if?' suppositions may follow to answer a host of common questions, such as 'What's next?' or 'What does this mean for me?'"

Imagine that a hypothetical company has fallen out of favor with investors for any number of reasons--a spate of depressed earnings, a business setback or a sluggish economic climate. The company can issue a communication to the investment community citing all the relevant facts. It may then offer its perspective to explain the cause for its slack performance, and can encourage investors to consider its track record, management team or business potential as promising underpinnings that may likely outlive any transient financial circumstances and benefit investors in the longer run.

Narrative form

If employed properly, narrative form can--and, some argue, should--be the framework for balancing facts with interpretation.

When recast in a way that's appropriate for business, narratives are a powerful way to communicate complex information. "Apart from engaging investors, narratives reveal truths that quick facts and numbers alone cannot," Gargiulo notes. "They put the facts in context, tell the story behind them, and help present a more complete, balanced and compelling picture."

Whether written or spoken, communications replete with bulleted particulars but bereft of narratives may prove ineffective in connecting with investors. Venture capitalists, for example, evaluate more than just the business specifics or revenue projections of entrepreneurs; they also weigh their views and visions--both of which can be conveyed in narrative form.

And there are instances in which narratives are particularly useful. Several years ago, a U.S.-based investment bank realized it needed to add insightful value to the raw data it was providing to its institutional clients. After years of communicating market intelligence information in the form of numeric spreadsheets, the bank began adding narrative supplements to rationalize the data, which served as a kind of strategic financial counsel to clients. This consultative approach benefited the clients and eventually helped the bank acquire new business.

Narrative form can also lend gravitas by imposing a journalism-like discipline on communication. For example, framing a communication from a reporter's angle is a good way to distinguish between observed facts and cited opinions, and thus introduce a more removed, impartial perspective.

Disclosure: How much is too much?

According to Jane Garrard, vice president for investor and media relations at Tupperware Brands Corp., transparency can quickly be rendered opaque by excessive disclosure. "In certain cases, an overabundance of disclosure may actually defeat its purpose," she says. "It can inundate investors, confuse them with unnecessary information and ultimately cloud their view."

When Garrard and her group issue Tupperware's quarterly earnings release to the public, they make scrupulous judgment calls on what to disclose. "As a multinational company, there are countless factors worldwide that affect our earnings, but specifying each and every one of them in our release would make it impractical for investors to digest," Garrard says. "By carefully considering all of the information and applying our discretion about what material elements to include, we help keep our earnings release graspable--yet informative, balanced and transparent."

Timing and the investor's interpretation

The timing of a release may affect an investor's ability to absorb, interpret and subsequently act upon its message in a timely fashion. Communicators should therefore regard timing as a pivotal component of any investor communication.

For example, the U.S. government's prompt communications to the financial markets following the terrorist attacks on September 11, 2001, are an exemplary case of responding with the appropriate celerity, and aided investors during a period of crisis.

"A free market needs the ability to express itself in response to events," explains Peter Fisher, chairman of money management firm BlackRock Asia who was undersecretary for domestic finance at the U.S. Treasury at the time of the attacks. "The events of that day were particularly extreme and tragic, and the prolonged shutdown of our nation's financial markets in the aftermath intensified investors' anxiety even further. We therefore needed to work toward reopening the markets and fully restoring their operation as quickly as possible."

During the shutdown, the Treasury Department, in collaboration with the New York Stock Exchange and various government agencies involved in administering financial regulation, established a relief initiative for investors. The initiative entailed certain regulatory exemptions for trading, which immediately took effect when the markets reopened. Its purpose was to encourage more efficient trading by alleviating some of the regulations that would have been burdensome in the wake of those difficult circumstances. "We worked hard to ensure the swift communication of all regulatory relief before trading resumed, so that investors would have sufficient time to learn what they needed to know and prepare to take advantage of the exemptions," Fisher says.

Leadership by interpretation

Thought leadership is a classic form of interpretation and another one to be weighed in the balance. It imparts and demonstrates the most fundamental understanding of a business--whether by setting forth pioneering visions for an industry, articulating forward-thinking perspectives on a topic or practicing the very principles it preaches.

In the words of a white paper issued by David X. Manners Co., thought-leadership content and communications are founded on the conviction that companies should differentiate themselves based on their ideas as much as on the products or services they sell.

Though it should not purport to supplant the facts, thought leadership does afford another avenue for interpreting the facts. And only when it is based on a deep comprehension of the topic at hand can it then augment the factual, edify investors with more profound insight and help them become better educated.

A balancing act

To effectively balance facts with interpretation, adhering to legal requirements is no more important than considering other aspects of communication to present a fuller, more balanced and multidimensional picture to investors. Those who invest in both legal and communicative practices with equal intensity are likely to cultivate a productive relationship with investors. And that, as many would agree, is a good investment.

RELATED ARTICLE: Tupperware serves a measured mix.

Tupperware Brands Corp. is known to consumers in more than 100 countries for its premium food storage, preparation and serving items. But as might be expected of a US$1.8 billion multinational company that answers to thousands of shareholders worldwide, corporate earnings--not food--take center stage each quarter end, and Tupperware's investor relations group communicates them to the public in an earnings release published on the company's web site (www .shareholder.com/tupperware.)

Developing the release is a challenging task for Jane Garrard, Tupperware's vice president for investor and media relations. "We obviously need to be transparent with our investors by providing them a balanced and detailed picture of our finances," she says, "but while there are generally accepted accounting principles for financial reporting, not all financial analysts agree on what ought to be their level of detail."

Since their objective is to provide a sufficiently comprehensive release without swamping investors with too much data, Garrard's team employs interpretation in determining how descriptive the release should be. "We distill all of the information to a point where we believe investors would clearly understand the financial results of our business," she says, "and that is when we need to make judgment calls--not only as financial experts, but also as communicators."

The release specifies such key information as historical sales and earnings figures, balance sheets, and various financial measures. Though it is predominantly factual, the release weaves in contextual elements--both numeric and descriptive--to explain the facts, introduce perspectives and provide a consistent frame of reference. For example, if Tupperware determined that irregular gains or expenses unrelated to its primary business had skewed earnings, the release would indicate this and provide adjusted information to better reflect the product of its operations. This is a common accounting practice, and one valued by Tupperware as an interpretive means to assist investors in properly evaluating the company's performance.

Conversely, the release excludes certain financial intricacies, such as low-level taxation and regulatory issues, which Garrard and her team deem materially impertinent to the release's higher-level focus.

All the facts in the release are presented first, followed by interpretation of what they mean to Tupperware and where the company believes it is heading. Rick Goings, Tupperware chairman and CEO, concludes the quarterly sales and earnings summary by articulating the company's level of satisfaction with the results relative to expectations. He then sheds light on particular areas of marked progress or contribution, and refers readers to a webcast of the company's conference call for a more detailed discussion. The interpretive component of the release closes with Tupperware's outlook on sales and earnings for the following quarter.

"Balancing facts with interpretation is paramount to what we do," Garrard says. "Practically speaking, it's an integral part of our daily routine."

Communicating to investors: 5 tips that won't tip your balance

1 Printed material should look attractive but modest, lest investors think you are spending too much money on promotion. Excessive gloss may actually diminish credibility.

2 Maintaining a reporter's frame of mind in written communications can help distinguish between observed facts and cited points of view, thereby lending credibility to your story.

3 The aphorism that numbers speak for themselves is true; often, they speak just for themselves. Use narratives to illuminate their context and explain what they mean.

4 Establish yourself as an expert, but explain industry specific terms and simplify concepts to establish common ground with investors who may not be as versed in your field.

5 The U.S. Securities and Exchange Commission provides a free handbook on how to create clear, simple disclosure documents for investors, available at www.sec.gov /pdf/handbook.pdf. While the handbook is primarily geared toward U.S. securities laws, it offers universal perspectives on styles of writing that may help you develop clearer investor communications in plain English.

Assaf Kedem has served internal and external communication roles at J.P. Morgan Chase, Merrill Lynch and BlackRock Financial Management.