AT A RECENT roundtable discussion for Chief Executive magazine, several CEOs got together to brainstorm about how to win back the public’s faith in them. After talking about better governance, team building, customer relations and adopting good causes, these CEOs still couldn’t come up with an answer to their dilemma.
To be fair, a lot of people have looked at the issue of rebuilding public trust. The most famous of them, of course, are two American politicians named Sarbanes and Oxley. The New York Stock Exchange, the NASDAQ and the Securities and Exchange Commission have looked at the issue, too. And so has an army of lawyers and accountants.
All of this has cost businesses a lot of money and grief. And guess what? It’s still not working. The American public still doesn’t trust CEOs.
In fact, around the same time that the CEOs were getting together to ponder their reputation crisis, survey firm Roper Public Affairs, on behalf of TIAA-CREF, was conducting a national telephone survey among 1,001 American investors to find out about their trust in America’s corporate captains.
Key finding? Yes, only 3% of investors think CEOs are very trustworthy.
Clearly something is not working if so few people feel they can trust CEOs after everything that has happened on the regulatory, accounting and corporate governance fronts.
Well, perhaps CEOs are listening to the wrong people. Perhaps the best way to find out how to restore public trust is to ask the people concerned — the public.
CEO communications lacking online
That’s just what public relations firm Golin/Harris did back in February 2002 when it asked 700 Americans ‘What are the most critical actions that companies you don’t trust should do to earn your trust this year?’
These were the three most frequently mentioned answers:
1. Be open and honest in business practices (94%)
2. Communicate more clearly, effectively and straightforwardly (93%)
3. Provide the best value in products and services (88%)
So how are CEOs doing on these? I think it’s safe to say that given the new disincentives to being a crook, almost all CEOs are being open and honest in their business practices. And providing the best value in products and services is what most firms try to do to stay in business.
However, from my vantage point reviewing investor relations websites, most CEOs have so far missed the boat on “communicating clearly, effectively and straightforwardly.”
CEOs are virtually invisible on the Web, and especially on IR websites. Even on something as simple as providing a good biography for key executives, 65% of the more than 500 companies in our survey come up short.
This is very odd because IROs say that the most important factor in investors’ decisions is the quality and credibility of management. If IROs know this to be true, why aren’t CEOs more visible on the company’s main communication channel with investors?
Could it be that CEOs just aren’t listening? Or is it that IROs are not giving their CEOs the advice they need or that they simply don’t have their chief executive’s ear?
Of course, there are CEOs who enjoy a credible presence on the Web and who are communicating effectively. If you think your CEO is up for doing his or her part to help restore confidence in the CEO fraternity, here are a few ideas you might want to consider:
Leverage your CEO’s current IR involvement
Many CEOs are already dedicating a lot of time to IR outreach activities. They’re typically involved in quarterly conference calls and regularly attend investor presentations. So asking them to do more might not be very appealing.
However, the problem with these current activities is that they reach only a small audience, albeit an influential one. Even if these events are broadcast on the Web, they still attract only a small and declining audience.
According to the latest NIRI member survey, average investor attendance of webcasts has dropped sharply in the past two years. Listen only usage is down around 60% from two years ago. The average CEO is now reaching only around 150 people with each of these appearances, which hardly qualifies as public outreach.
Partly, this has to do with a general fall off in interest from retail investors. But it is also because webcasts are not a good format for getting archived information. You can’t print or search an audio file, for example.
And if webcasts weren’t unattractive enough, companies and brokerage firms make them even less appealing by requiring people to register before they are allowed access to them. Usability studies show that people don’t like registering just so that they can obtain your company’s information.
Most people will simply avoid a webcast rather than bother registering. So if you want to give your CEO a broader audience, don’t ask people to register.
However, this still doesn’t address audio and video’s inherent lack of usability. The best way to increase your audience and thereby leverage your CEO’s time is by providing transcripts of conference calls and presentations.
Only 10% of large-cap companies are providing conference call transcripts and even fewer are doing so for broker presentations. Companies that do provide transcripts, especially HTML transcripts, are extending the reach of their CEO’s message by making it easier and more attractive for people to use the information.
Show us your CEO!
Problem number two is that CEOs are often absent on the Web. They have no visible presence except perhaps in name and spirit. You don’t see them taking accountability for the company’s products, for its financial performance, its social and environmental practices, or for its culture.
When I say we don’t see most CEOs on the Web, I simply mean there typically are no pictures of them. There may be audio files and scripts and quotes in news releases, but these aren’t the same as seeing them. Often, too, these events are stage-managed to the point of banality. CEOs end up coming across like puppets regurgitating a script.
If CEOs are truly leaders of their organizations, then show them leading. Show people evidence of them being CEOs. Formal portraits are fine for directors, but CEOs should be seen engaged in the activities and affairs of the business.
With this in mind, every business communicator’s must-have new gadget might well be a camera phone so they can instantly email or upload pictures to the web from events and happenings on the road.
CEOs should write their own letters to shareholders
CEOs need an authentic voice to be believable. It doesn’t matter what their personalities are like, so long as they are true. While it is common for executives to want help preparing their speeches, speaking notes and letters, CEOs should never delegate the actual thinking that goes into these.
Even the most famous shareholder letter writer of them all, Warren Buffett, has an editor — Fortune Magazine writer Carol Loomis. But the thoughts and issues are still his own.
It would be enormously beneficial for all CEOs to take the time to write out a draft of their letter to shareholders this year. This will focus their minds on what they want and need to say.
They should also take a tip from Mr. Buffett on how to approach their letter. As he says in the preface to the SEC’s Plain English Handbook (PDF 175KB):
“One unoriginal but useful tip: Write with a specific person in mind. When writing Berkshire Hathaway’s annual report, I pretend that I’m talking to my sisters. I have no trouble picturing them: Though highly intelligent, they are not experts in accounting or finance. They will understand plain English, but jargon may puzzle them. My goal is simply to give them the information I would wish them to supply me if our positions were reversed. To succeed, I don’t need to be Shakespeare; I must, though, have a sincere desire to inform. No siblings to write to? Borrow mine: Just begin with “Dear Doris and Bertie.”
If a shareholder letter is any good, then it deserves to be showcased on the Web. They shouldn’t be dumped in a PDF blob where almost no one will see them. They should be provided in HTML as part of a larger HTML annual financial report. If they are really good, you can do what Mr. Buffett and many Japanese companies do; put them in a main section of the IR website.
Interview your CEO each quarter
Some companies produce a question and answer feature to go with their quarterly results. These can be a highly effective way to get CEOs to address the issues and questions on investors’ minds.
The best of these are video taped and streamed online accompanied by a text transcript. Video has more realism than other media, because it allows users to virtually “look the CEO in the eye” and also gives a sense of being less scripted.
If your CEO is uncomfortable in front of the camera, then a text Q&A accompanied by still photographs can also be effective.
However, in the end, the format is less important than the relevance of the questions. Questions should be real and insightful. If you don’t know what to ask, put out a call for questions on your website.
Provide media interviews and profiles
The most credible way to provide information about your CEO is to provide copies of media interviews and profiles from well known publications and media outlets. Of course, not all CEOs are important enough to attract media interest, but those who are shouldn’t miss the opportunity to offer these to investors.
Articles by independent journalists are less likely to be biased in favor of the company. This gives them greater credibility. The very act of being open enough to invite outside scrutiny speaks to the CEO’s confidence and accountability.