Ethical Issues in Investor Relations and ESG: David Calusdian

Joining me on this week’s episode is David Calusdian, the President of Sharon Merrill Associates. Sharon Merrill is an investor relations firm that helps private and public companies enlist the support of their stakeholders in both routine and critical situations, including IPOs, financings, activist engagements, executive transitions, guidance revisions, mergers and acquisitions, and more.

David discusses a number of important issues including

Why don’t you us a little bit more about yourself and your career?

I studied political communications at Emerson College and then went to a political consulting firm for a few years. However, it got a little slow in the odd years when there weren’t a lot of campaigns going on. And since I like getting paid every year and not just in the even years, I started looking for something else.

I answered a want ad from Sharon Merrill in the Boston Globe. I know I’m definitely dating myself with that. I didn’t actually realize what investor relations was at the time, but there was a media component to the job so it sparked my interest. I was a media public affairs guy at the time. I started at the entry level at Sharon Merrill as an Account Specialist and I’ve really loved investor relations ever since. For a guy who never really loved numbers as a student and went to a college that had a total of one, maybe two math classes, I did pretty well communicating financials over the years.

I got involved with the National Investor Relations Institute, NIRI, and served on the NIRI Boston chapter board as President and served a term on the NIRI national board up until a few years ago. I worked my way up at Sharon Merrill and then after about 21 years at the firm, Maureen Wolf, my partner and our CEO, and I bought the company out from Sharon Merrill about four years ago. And we’re having fun growing the business and working with a lot of great clients.

I believe communicators, we love language. And the language of business is numbers so more of us should really love communicating numbers and finance and talking the language of business.

I agree. It can be a lot of fun. It can be intimidating sometimes to some people, but once you get into it, it’s all communications.

You’re the first investor relations professional I’ve had as a guest since I started EthicalVoices in 2018. And thinking about your career, what is the most difficult ethical challenge you ever confronted at work?

When I look back at the most difficult ethical challenge I ever confronted, I actually go back to before I got into IR. One event that has always stayed with me was from early on when I was still in politics. I was in grad school as a political communication major and a friend of mine, another political student at Emerson, were trying to get candidate clients for our nascent political consulting business that we wanted to start. We were introduced to a great candidate who was running in a primary to capture a seat from an opponent who we really wanted to unseat. This guy was smart, well-spoken, had a stellar record in the community and really cared about doing a good job for the people. He wasn’t on an ego trip. He really wanted to make a difference, and he was somebody that we really liked and we thought could make a difference in this campaign.

Then we found out he was on the wrong side of one particular issue that we both really cared about and we faced a tough choice. Do we not take this business that would be great for us professionally and work with this guy who, other than this one issue, was a great candidate who lined up with us politically? We spoke with friends and family and in the end didn’t take him on. That one issue was just too important to us.

Ironically, we ended up working with a candidate who was totally in line with us, hook, line, and sinker on everything, but was just a terrible candidate. We took the loss on that one, but we’re glad we took the route we did. I always think back on that and know that you need to always live your values, and that goes for any client that you’re taking on as well.

That’s a common challenge agencies face, what if a client is doing something that they don’t agree with, or their values don’t agree with? What’s your advice to agencies as they’re grappling with that issue?

That’s right. That’s right. It’s a constant challenge.

I come back to that story because it shows how it wasn’t a black or white issue. This guy was a really quality guy. He just was not lined up with us completely. And thinking about politics, it’s not like you’re getting married to the candidate. It’s more like getting on a bus and going in the right direction with someone. When you’re working with a client, you need to think about does the company overall reflect your values? Can you do a good job for the client and know that at the end of the day you’ve contributed to the greater good?

That’s great advice. Beyond your personal experience, what are you seeing is the key communication ethic challenge for today and tomorrow?

I don’t think ethics changes much in a broad sense. The broad issues are eternal. You can go back to Aristotle and Plato and we’re talking about virtue and the consequences of our actions, and that’s obviously still relevant today. So many of the situations we as PR or IR practitioners deal with often comes down to being honest with your audiences and being honest with yourself. The details will constantly change based on the channels we use and the clients we’re working with and the products that we’re marketing.

Going back to our conversation, do you work for someone you don’t agree with to pitch a product that may be harmful to consumers? Edward Bernays paid women to smoke cigarettes or as he coined them ‘the torches of freedom’ back in 1929 in the Easter Parade. Granted the dangers of smoking weren’t as well-known as they are now, but PR practitioners now have internal debates, on whether to promote cannabis or e-cigarettes or any other so-called sin product.

And what we’re working with now is not an Easter Parade. It’s largely digital media or social media, but the concepts are the same. In IR, I’m actually really excited about what I see as an ethical opportunity in our field. And I’m talking about ESG or environmental, social, and governance.

Why don’t you tell me more about ESG ethics issues?

If you look at IR, it’s been seen at least in recent decades about communicating purely to shareholders in order to achieve a fair valuation for the company. And I think most people would look at IR as you’re dealing with the stock market. But it actually has always been more of an integrated communication field where you’re not only communicating with investors, but also with employees, customers, suppliers, the overall community and other stakeholders.

ESG has become critical to investor communications. I’ve seen stats that over $20 billion are flowing into ESG funds in 2019 in the US alone. And a lot more even non-ESG funds are considering ESG factors in their investment decisions. So it’s not something anyone can ignore anymore. It has become an important part of an overall investor relations campaign. And we’re even seeing some IR positions, when you see IR positions advertised, starting to include ESG in the actual job titles, which is fantastic. So now we have the opportunity to not only drive fair valuations for companies, but also do good for all stakeholders. That’s great.

ESG has gained so much importance over the years. But around sustainability there’s been a lot of greenwashing going on. What are some of the ethical pitfalls that you’re seeing organizations fall into when it comes to ESG?

You hit the nail on the head with greenwashing, which is where companies are misleading the public as to how green they are, or promoting ESG initiatives where there’s really no substance. And when you think about it from an IR perspective, done well, companies should be looking at the material risks from ESG issues and then focus on the areas where the company can do good and de-risk the company long-term at the same time. Now just for an example, if a company is planting trees because they want to look good and they want to brag about it on their website, but they aren’t doing so because it’s offsetting any material risk, well then they won’t be getting the credit from investors that they could have and maybe they’ll take a hit. Now if you’re focused on water conservation because you happen to be a huge user of water in your manufacturing process, or you’re planting those same trees as an offset to your massive carbon footprint, and you’re communicating what you’re doing and why you’re doing it, now that’s a whole lot more meaningful.

That makes a lot of sense. And are you seeing pressure from companies to try to stretch the limits in terms of how they’re reporting their ESG, or are they all pretty much playing it straight?

I think the issue is more companies are trying to figure out how to communicate what they’re doing. I think a lot of companies don’t realize the level of E, S, and G that they’re actually doing that they don’t realize. They need help taking an inward look and saying, look at all these things you’re doing. That’s ESG. You just need to tell people about it. You need to focus on the communications around those issues that go to de-risking your company in the long term, or enabling your long-term growth by doing these things. It has to be integrated into your overall strategy. That’s where companies need help. I don’t think companies are stretching the boundaries. Some companies may be slapping some things up on their website because that’s what they think they need to do. The challenge is more helping them to communicate in a more strategic way.

We’ve talked a lot about the E and the S part of it, but not so much the G part. Are there changes or issues with governance, transparency, or other topics?

The issue with governance right now, is we’re seeing companies focus on board diversity in a lot of different ways. Gender diversity and racial diversity are definitely top of mind right now. And companies are, I think, overall making an effort to improve in those areas so that’s where we’re seeing now.

Beyond ESG, what are some of the other ethical issues you’re seeing IR professionals encounter?

In IR you need to be honest about a company’s performance. That’s what it all comes down to. And it’s an ethical issue, but it’s also a legal one. The SEC will point out when you’re being misleading by just focusing on the positives of a company’s performance. What you said, for example in a press release headline might be true, but if you aren’t giving investors all the information that they need to make an intelligent investment decision, then the SEC has an issue with that. And any good IRO will have an issue with that too. You need to communicate the good with the bad. It has to be holistic communication that in the end gives an investor all the information they need to make an intelligent investment decision. Obviously you want to put your best foot forward, but most importantly as you do so you have to be honest in what your overall communications is telling investors. So that’s where the ethical issue comes in. You may get pressured to only put the positive forward, but as a good IRO, you need to tell the whole story.

What’s the guidance you give in terms of disclosure, in terms of timeliness? Because sometimes something may look bad and you need a day or two to fix it, and the situation may be resolved. Do you need to disclose it immediately, or do businesses ethically have time to try to address a pitfall before they then have to communicate it?

Timing and disclosure are always connected. As an example, companies are sometimes debating whether to pre-release poor performance before quarterly earnings, but they may not know how bad it’s going to be. They may not know exactly if they’re going to miss and by how much on a certain date, but they may want to give investors the heads up. So they are then faced with the situation of okay, do we go out right now and give some more incomplete information or do we wait a few days and make sure that we understand exactly where we’re going to come in? Or wait until we have a reasonable assumption of where we’re coming in, and be able to discuss more of the factors that are going into that. So there’s that decision as to whether you wait and give better information, or go out really quickly. So there’s always that debate going on.

And is there a clear guideline or is it really situational?

It’s all situational, it’s all situational. It’s like a crisis. Sometimes a crisis will hit a company and you may not know all the facts and the playbook may say, get it out as quickly as possible. But if you might know more information in the next day, you might want to give yourself the day. It’s very situational, very company specific.

One of the examples I use a lot in my ethics class at Boston University is around the timeliness of disclosure of information because it really highlights the challenge, that’s why I value getting your perception on that.

It’s very easy to say get the information out as soon as you know it, but it’s not always that easy. Sometimes you may get more information in the next minute, hour, or day that can help the public better understand the situation.

That’s really good advice. Speaking of advice, what is the best piece of ethics advice you were ever given?

Don’t do anything you wouldn’t want to see on the front page of the New York Times. I think that’s the best piece. And the other thing I think about is they say the definition of character is what you do when no one’s looking. And I think if you think about those two things you’ll be okay.

Absolutely. I was just talking about that with another guest Dan Tisch last week. It’s a really good piece of advice that I think a lot of people hold to.

Listen to the full interview, with bonus content, here:

Mark McClennan, APR, Fellow PRSA
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Mark W. McClennan, APR, Fellow PRSA, is the general manager of C+C's Boston office. C+C is a communications agency all about the good and purpose-driven brands. He has more than 20 years of tech and fintech agency experience, served as the 2016 National Chair of PRSA, drove the creation of the PRSA Ethics App and is the host of


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