Exceptional CEOs

I’ve worked with many CEOs over the last 25 years. Some great, some good, and some who didn’t quite make the grade.  The great ones had a few traits in common…they were excellent communicators, compassionate and whip smart.  (Italicized text represents my own editorial.)

The Harvard Business Review recently outlined four essential behaviors of successful CEOs:

  • Making quick decisions with conviction. Decisive.
  • Engaging for impact. Collaborative.
  • Proactively adapting. Doer.
  • Delivering reliably. Expectation setter.

Russell Reynolds Associates, a global search and leadership advisory firm, offers the following in their thought leadership blog:

  • Willingness to take calculated risks. Gutsy.
  • Bias toward action. Doer.
  • Ability to efficiently “read” people. Insightful.
  • Forward thinking. Innovative.
  • Intrepid. Courageous.

And from CNBC reporting on a panel at SXSW which examined the traits of many successful Silicon Valley CEOs:

  • Psychopathic???

I admit, this one stumped me. Dictionary.com describes psychopathy as “a mental disorder in which an individual manifests amoral and antisocial behavior, lack of ability to love or establish meaningful personal relationships, extreme egocentricity, failure to learn from experience, etc.”

Doesn’t exactly scream successful CEO to me. However, venture capitalist Bryan Stolle believes that psychopaths are common within the CEO ranks because to successfully start a company you need to be “uncompromising in your vision, which requires a hearty dose of both ego and persistence, and you have to be willing to sacrifice almost everything for success.”  Still not sure I buy it.

Dr. Igor Galynker, the associate chairman for research in the Department of Psychiatry at Mount Sinai Beth Israel, believes that “lacking empathy, more often than not, will help you in an environment where you have to make decisions that create negative consequences by necessity for other people.” I’ve never known or worked with a psychopathic CEO, but according to a 2016 study, 21 percent of senior professionals in the U.S. had “clinically significant levels of psychopathic traits.”  Kind of frightening for those working with these 21 percent.

While collaboration, innovation and insightfulness are clearly important CEO qualities, I suppose it is possible that a little bit of ego, tenacity and charm could also result in success.

Laurie Berman, lberman@pondel.com

The Protocols of Selling a Story

Everyone is selling something.  It doesn’t matter if you’re in business, education, or politics, we’re all trying to sell a widget, a way of thinking, a party affiliation.  The difference is the method in which something is sold.

For example, are solid facts used to back up a thesis about why a consumer should buy something?  Does an educator emote and use theatrics to explain a concept to students?  How authentic is a politician when she or he attempts to relate to the needs and wants of constituents?

The IR world is no different in that most public companies are creating investor theses to sell a company’s story.  There are a lot of variables that influence the efficacy of a pitch to investors.  But in the spirit of writing a pithy blog post in 500 words or less, following is an abridged guide to what’s hot and what’s not when selling a company’s story in today’s market:

What’s Hot

  • Financial Performance – Nothing beats a solid track record of financial performance when trying to attract investors
  • Transparency – The easier it is for investors to understand a company’s model, P&L, and balance sheet, the more likely an investor will be inclined to take a calculated risk and invest
  • Management Relevance – There is a distinction between relevance and years of experience. Relevance is demonstrating why an executive is the best person for the job today, not a decade ago
  • Long-Term Competitive Advantage – The company must present a compelling thesis in terms of why it has built one of the greatest mouse traps that goes the distance when up against competitors
  • Consistent Communication – Somewhat self-serving here, but if all of the aforementioned items are firing on all cylinders and there is no communication … <insert that sucking sound>

What’s Not

  • Hyperbole – Adjectives such as “leading,” “best,” “greatest,” often instill more skepticism than confidence
  • Homogenous Board – In the age of activism, boards of directors are easy targets, especially if they lack independence and diversity
  • Compensation that Isn’t Tied to Performance – Speaks for itself
  • Press Release Overload – Some companies are prolific and have an endless stream of news to relay to investors, although it becomes rather obvious when companies are simply issuing press releases for the sake of “looking” productive
  • Revolving Door in C-Suite – Too much turnover at the top doesn’t curry favor with most investors

– Evan Pondel, epondel@pondel.com

Annals of Communication—Thank you, Dave

I had a breakfast meeting the other day at the Mid-Town Café on 56th between Lex and Third in New York City. It’s not a fancy place, but one of many non-descript diners where the waitresses call you honey as you walk in the door and ask if you want coffee as you are getting seated.

A view shows U.S. postal service mail boxes at a post office in Encinitas

The meeting was arranged by my long-time colleague, Gary Fishman, as a casual introduction to meet the principal of an investor relations advisory firm, similar to PondelWilkinson. For purposes of this blog, I’ll just call him Dave.

No need here to discuss our conversation, which is not the point of this piece, so fast forward to the end of our meal. (I had oatmeal and blueberries, the other two gents had eggs.) The waitress brought our check. All three of us made a move to our wallets. My credit card was out first, and with the total check being $19.95, I volunteered to buy. Then we went on our ways.

Within a couple of hours, I received a thank-you email from Gary for my time and for buying breakfast. I was going to email David to tell him how much I enjoyed meeting him, but thought I would wait a while, for certainly he also would be sending me a thank-you email…or so I thought. Then I forgot about it.

I returned to California, and the following day, I received a letter in the mail. It was from Dave, saying how much he enjoyed our visit and thanking me for playing host. In today’s era of speed, did I need instant thanks via email anyway? Probably not.

Receiving the letter struck a chord. While the message could have been precisely the same in an email, there’s something to be said for taking the time to send a letter through the U.S. Postal Service…it commands attention. Compared with hundreds of email messages that we all receive every day, it was the only personal communication I received via mail all week.

– Roger Pondel, rpondel@pondel.com

 

 

 

 

 

The Write Stuff

I recently taught a writing course at NIRI’s Fundamentals Conference, which is mostly geared toward IROs who are relatively new to the business, as well as more experienced folks who’d like to brush up on the basics.

My presentation focused on the fundamentals of writing earnings news releases, conference call scripts and shareholder letters. The biggest challenge people said they faced is crafting a compelling story in what has become a template-driven world.

Following are some boiled-down writing tips from my presentation to help make that writing resonate:

Know Your Audience

Your written piece should address the following:

  • What Information do they need?
  • Why do they need it?
  • What do they currently believe?
  • What should they believe?

Plan & Organize Your Content

  • Identify your key messages
  • Create and work from an outline
  • Use blocks of content to develop a sequence of thoughts
  • Test your sequence for clarity

Draft Without Judgment

  • Fill in the outline
  • Work quickly – don’t agonize
  • Read it out loud. Is the flow logical?
  • Listen to your own ears
  • Give it a rest and re-read in the morning

Revise for Power

  • Punch up the opening and closing
  • Change passive voice to active voice
  • Strip out excess words, phrases and fluff
  • Make it natural and conversational – should “fit” the company/spokesperson

– Evan Pondel, epondel@pondel.com

Trump’s Effect on IR

There has been a heap of stories written about President-elect Donald J. Trump’s effect on trade relations and health care, but nary a peep about how his presidency is going to affect our world, meaning investor relations.

Granted, it would be unusual for media to report on how our country’s new chief executive officer will influence investor relations because, um, IR isn’t necessarily something bandied about in the Oval Office.

But consider this: The American people are like investors, and how you treat them in good times and bad will affect the valuation of the country. And depending on how Trump executes his policies, many publicly traded companies and their investors will have to adapt to changing market conditions.

Following is a prognosticator of sorts on how Trump will affect the world of investor relations from an industry perspective. The analysis is based on discussions with the Street and analyst notes.

  • Consumer – Investor relations executives in this sector may experience an increase in inbound calls based on exposure to manufacturing overseas, particularly in China. Trade issues may thwart valuations and likely raise a lot of questions if a company has manufacturing exposure in foreign countries.
  • Construction – Generally, investors should have optimism regarding this sector’s near-term future.  At the same time, more dollars flowing to infrastructure could prompt greater scrutiny of infrastructure companies that aren’t performing.
  • Renewables – This sector has received bipartisan support in recent years, and there is no reason to expect otherwise during the next presidential term. The biggest conundrum for IROs in this space is selling the value proposition of renewable technologies and how soon they can be realized under the incoming administration.
  • Healthcare – With a lot of questions surrounding the future of the Affordable Care Act, many investors and investor relations professionals are likely unsure of where certain business models will stand under the new administration.
  • Technology/media – Hard to say what challenges may surface in this sector. Social media companies may come under fire for alleged fake news practices, as well as influencing the presidential outcome, which could certainly keep IR pros on their toes.
  • Banking – Investors are expecting interest rates to rise, which could bode well for the bottom line in this sector. Loosening up on regulations could also help move more financial services stocks into the black. IR executives will likely have to speak to how banks will enhance their net interest margins once the new administration is in full swing.
  • Aerospace/Defense – With a lot of suppliers in foreign countries, there could be a backlash with respect to manufacturing costs. Even though a Republican administration generally bodes well for this sector, optimism may soon fade if trade relations continue to slide.

– Evan Pondel, epondel@pondel.com

Girl Power

Sequoia Capital made news this week when they hired the firm’s first female investment partner in the United States.  This appears to be a 360 degree turn from last year, when, according to The New York Times, Sequoia’s Chairman said the firm did not have female investors in the United States because it did not want to lower its standards.

Women are rare in the highly competitive and cutthroat field of venture capital. According to The Times, research from Babson College showed the percentage of female venture capitalists at 6 percent, down four percentage points from 1999, at the height of the dot-com craze.  The CrunchBase Women in Venture report found that of 100 venture firms studied, 7 percent of the partners at those firms were women, and that 38 percent of the top 100 firms have at least one female partner.  In February, Bloomberg columnist Barry Ritholtz sought to answer the question: Why aren’t there more women in finance?  A possible answer is that “it may be a legacy of what has not only been a male dominated society, but it probably also reflects an industry that is particularly resistant to change,” or that “there are simply not a lot of women in senior positions in all of business, and finance to a great extent mirrors that reality.”

One would think then that there is a perception that women are not as accomplished as men. According to Ritholtz, several studies (Fordham University and the CFA Institute) have found that women in the actively-managed fund industry tend to outperform their male peers.  If true, why are the numbers still so lopsided?

Perhaps the tide is turning for women in business, however. The Los Angeles Times noted that among the largest U.S. companies, women now fill 20 percent of board seats, up from 15 percent in 2005.  In fact, women have made strides recently in other male-dominated professions.  There are now female referees and coaches in the NFL, female play-by-play announcers for major league baseball and female heads of state.  Great news, for sure, but how is that playing out in corporate America?

A 2012 case against Kleiner Perkins Caufield & Byers showed that women and men don’t always play nicely in the sandbox. That case saw a female partner, Ellen Pao, sue the firm for gender discrimination.  She lost the suit in 2015, but during a press conference Pao was quoted as saying, “If I’ve helped to level the playing field for women and minorities in venture capital, then the battle was worth it.”  Pao recently launched Project Include to assist startups and HR departments with recruiting, hiring and retaining a diverse workforce according to Wired.  Project Include also works with venture capital firms whose business is to help startups develop.

There is a lot of work to be done, but it’s my opinion that embracing diversity in the boardroom, on Wall Street and in business can only help improve the variety of opinions, talents and expertise necessary for us to thrive.

– Laurie Berman, lberman@pondel.com

Let Your Voice Be Heard

With little fanfare or media coverage, the U.S. Securities and Exchange Commission last week said that for the next 60 days it is seeking public comment on disclosure requirements relating to a host of management, security holders and corporate governance matters.

SEC Chair Mary Jo White is leading a charge to address outdated and redundant disclosure requirements for the benefit of the nearly half of all Americans, who in some form, own stock in publicly traded companies—from direct ownership of individual securities, to ownership through 401-K and pension plans, IRAs, mutual funds and ETFs.

As part of the SEC’s “Disclosure Effectiveness Initiative”, the Commission wants to be certain that information disclosed by public companies and relied upon by investors to buy, sell, or hold, is as clear, accurate and comprehensible as possible, conveyed in a manner that is timely, and delivered making best use of today’s technology.

Amendments being considered address outdated and redundant disclosure requirements, and providing investors with what they need to make informed decisions.

Granted, for most Americans, revamping public company disclosure practices may not be one of the most important issues facing the world today. But if you are reading this blogpost, you likely are reasonably close to the heart of this matter, so let your voice be heard. You have until the end of October to do so.

Roger Pondel, rpondel@pondel.com

Nudge, Nudge…Wink, Wink

Once upon a time I was an idealistic investor relations professional who assumed that when Reg FD (Regulation Fair Disclosure) was enacted in 2000, all public companies would follow the SEC’s initiative to the letter of the law.  No speaking to one before speaking to all, at least where material, previously undisclosed information was involved.

Did Reg FD have the impact the SEC was hoping for – a more level playing field? In 2001, CFO magazine quoted Boris Feldman, a securities attorney at Wilson Sonsini Goodrich & Rosati as saying, “Is the market better informed?  Of course not.  There’s more transparency, but less meaningful information.”  The article went on to say that in that year’s fourth quarter there were nearly 800 pre-announcements because “analysts are less likely to be told on the QT to shade their estimates.”  The Pepperdine Law Review in 2002 surmised that “the only thing that has changed is the amount of securities regulation operating on American markets.  The investors are no better off; the analysts are no worse off; the lawyers are the only ones who may have benefited.”

Although I could not find many examples of how Reg FD has benefited corporate disclosure or the investment community at large, there are many examples of the SEC’s enforcement of the rule. To name a few, in 2007 the SEC contended that Office Depot’s then CEO and CFO selectively disclosed to analysts and investors that the company would not meet analysts’ earnings estimates.  Office Depot paid a $1 million fine to settle the allegations.  In 2013, the SEC charged the former head of investor relations for an Arizona-based company for giving certain analysts and investors a heads up about an upcoming major development.  He paid a $50,000 fine.  Last year Bloomberg reported that since Reg FD’s beginnings, the SEC has brought 14 enforcement actions.

Today, the practice of meeting one-on-one with investors appears as robust as ever. In addition to non-deal roadshows, companies routinely present at broker-sponsored conferences with individual meetings sprinkled throughout the day, while one-on-one phone conversations between companies and their investors happen multiple times a day, every day.  What’s being said during these conversations?  According to a new article in the Wall Street Journal, Barry Diller, chairman of Expedia and IAC/InterActiveCorp, “analysts and investor-relations executives work together to keep estimates low.  ‘It is a rigged race,’ he says.”  The supposition is that companies send signals to analysts to ensure the companies meet or beat quarterly Wall Street expectations.  An analysis by the paper found that after the end of a quarter, earnings estimates often decline steadily.  The Journal looked at daily changes in analysts’ estimates at S&P 500 companies since the start of 2013 and compared them with what the companies actually reported for each period.  In nearly 2,000 instances, companies “would have missed the average earnings estimate if analysts hadn’t changed their numbers in the 40 trading days before the company’s quarterly earnings report.”

To avoid the potential of selectively disclosing material information, in this case where revenues and EPS will land in any given quarter, many companies have adopted stricter quiet periods and formalized processes related to analyst and investor communication. The idealist in me wants to believe that more companies than not adhere to the rules and don’t give some an unfair advantage over others.  However, while I in no way condone running afoul of securities law, the hardened realist in me thinks there will always likely be some nudge, nudge…wink, wink.

– Laurie Berman, lberman@pondel.com

IR 101 for Private Markets

CrowdWith the first quarter of 2016 the slowest period for initial public offerings since 2009, market watchers are wondering if the trend will continue in the year ahead. So, where might investors look for new opportunities? Try private markets, or specifically, companies utilizing crowdfunding as a financing method.

Starting May 16, the general public will have the opportunity to participate in the early capital raising activities of start-up and development-stage companies through crowdfunding. You can read all about it on the Securities and Exchange Commission’s website.

What isn’t discussed on the SEC’s site is how these companies will communicate effectively with their investors. Many of these companies are likely on tight operating budgets, and the idea of allocating funds toward investor relations is not exactly a priority.

However, now that the general public has the ability to participate in a stage of investing usually reserved for institutions, management teams need to ensure these new investors are communicated with regularly, as well as treated with the same dignity and respect as a Fortune 500 investor.

Following is a top-10 list of IR advice for companies going the crowdfunding route:

  1. Initiate some form of periodic communication with your investors, perhaps in the form of a quarterly update letter, podcast or even blog post.
  2. Select a representative from the company or an outside consultant to handle incoming inquiries from investors.
  3. Utilize presentations, fact sheets, video and social media to help investors understand the company.
  4. Consider hosting an investor call on a periodic basis to foster transparency and an open line of communication.
  5. Develop an investor relations page on your website to keep investors posted on recent news and the company’s progress.
  6. Consider hosting an annual meeting that investors will actually attend. The event could generate more support, as well as more funding for your company.
  7. Keep investors in the know about relevant industry news, so they, too, can become experts.
  8. Under promise and over deliver. Managing investors’ expectations is key, especially for early stage companies.
  9. Stay away from divulging too much information about your company’s future financial performance. Again, this harkens back to under promise over deliver.
  10. Treat investors as owners not strangers.

Bottom line: Professionally crafted communications form a foundation to attract and retain investors, regardless of an issuer’s size, but even more so for early stage companies, as they go to market for the first time and build their organizations.

– Evan Pondel, epondel@pondel.com

PW’s CEO to Serve as Panelist at Forum for Corporate Directors on February 23

R Pondel small

A focus on board involvement with investors. Roger Pondel of PondelWilkinson will be participating on a panel discussion at the Forum for Corporate Directors exploring the dynamic between board members and investors.

In today’s volatile stock market and increasingly activist investor environment, it is vital that board members fully understand the unfiltered views of investors as they govern theirrespective companies. James Moloney, partner with Gibson, Dunn & Crutcher, will moderate a panel on this critical topic February 23, at the 7 a.m. breakfast meeting of the Forum for Corporate Directors, at the Pacific Club, 4110 MacArthur Blvd, Newport Beach.

Directors who are aware of their investors’ perceptions and expectations are far better equipped to clarify, remedy and reinforce their companies’ messages. The panel will feature Glenn Welling, Founder and CIO of Engaged Capital; Glenn Schafer, Chairman of the Board of Janus Capital Group and Lead Director of Genesis HealthCare; and Roger Pondel, CEO of investor relations consultancy PondelWilkinson.

For more information and reservations, email michelle@fcdoc.org or visit http://fcdoc.org.