The CEO – a communicative performer

Of all criteria in IR Nordic Market 2015 CEO – Public Performance got the highest average grade. A strong public performance builds credibility and trustworthiness and therefore have a big impact on the financial markets view of the company.

The analysts appreciate a CEO that is a clear communicator and give answers that the analysts can trust, e.g. who is not being misleading in any way. But what happens when the CEOs communication is not that strong or clear? Over the years we have seen that common complaints about public performance from dissatisfied analysts regards unclear communication, misguidance and low transparency / not answering questions. Sometimes it even raise concerns about the company hiding something. Not a good situation.

The CEO role is crucial for the company also from a communicative viewpoint, and the platforms are many and varied: individual meetings and conferences, phone conferences, breakfast- or lunch meetings, road shows, CMDs, site visits etc. Alongside all these demands for communication and interaction, the business still needs full attention.

So how good are CEOs on average in communicating?

We asked: To what degree do you perceive the CEO as competent and capable during presentations, interviews and other public appearances? A third of the analysts were very satisfied and gave a high grade (9-10) while 47% graded it as good (7-8). 15% indicated that the CEOs communication was not satisfactory (1-6).

Not every CEO (or person in general) enjoy the center stage. It is therefore important to find and develop the platforms that feel most comfortable for the CEO. If the big stage is not where the CEO comes across best, focus on breakfast meetings etc. If the phone conferences feel limiting, keep it short and supplement it with separate phone time slots afterwards or possible physical meetings.

While technology makes it possible to communicate long distance it narrows the experience of the communication simply because people are not in the same room. The trust and interaction a personal meeting accomplishes is very hard to create in other ways. Offering generous access to top management in conjunction with the CMD is both time effective and very appreciated as we saw in the CMD focus area in IRNM 2014.

Adjusting the communication channels to better suit the CEO’s communication style can be a very successful way forward, and it is important to succeed in this area. This is why:

Good communication builds trust.

When we looked at the importance of communication and public performance to build trust the picture was clear. As shown in the chart there is a strong correlation between the CEO’s communication, public performance and the trustworthiness. Same as with all communication it is not only what is being said, but how and when that affects how the message is received and interpreted. A strong communicator that delivers bad news in an honest and open way will most likely lessen the negative impact and help the company regain trust in a difficult situation.

The CEO owns the strategy.

When we looked at the Equity Story comments in IR Nordic Markets 2015 it was clear that for the financial markets the company’s strategy equals the CEO’s strategy. For the analysts there is little doubt who owns the strategy so whenever a new CEO starts there is a strong uncertainty which direction the company might be taking. So if the communication from the owner of the company’s strategy is not clear, the company’s strategy might be unclear.

Having the CEO talk about strategy and the bigger picture while CFO or IRO talk more details is also a way to add to the interaction. When we looked at the Equity story in IRNM 2015 it was clear that the actual story easily got overshadowed by details even though the story is so important for both sell- and buy side.  As one analyst comment:

“The story is not too easy to understand, you have to listen to it carefully. Others see this as difficult, but they don’t simplify the story.”

Letting people with “license to talk” focus more on what lies closest to their heart will make communication more passionate. And therefore more believable to the listener. Just make sure someone else supplements the picture with their parts, (preferably just as passionately).

As in all communication between people, what the company say and what the market hear and understand is not identical. Everybody’s own expectations and view of the information will distort the message. And the sender never “owns” the message after it has been communicated.

As one analyst puts it: “Their equity story is very clear but I feel like the market doesn´t feel the same.” So clear, concise and easy to understand (and difficult to misinterpret) information is key.

But that is of course easier said than … said.

If you want to find out more about your company’s financial communication and see how it compares to others, don’t hesitate to contact us:
johan.chasseur@regi.se

Written by Johan Chasseur, Director of Business @ Regi Corporate Services