Our latest research provides clear guidelines to help CEOs create more valuable Analyst relationships.
Research has consistently confirmed that perceptions of Corporate Leadership is the No.1 most important influence on Investment Decisions and Share Valuation.
But our most recent research confirms that CEOs do not control the management of Analyst relations with the same discipline as they manage many other – less critical – parts of their executive responsibilities.
We carried out a series of confidential interviews with a representative sample of Buy-Side and Sell-Side Analysts who cover Asia-based Corporates.
Our aim was to identify the most persuasive influences that shaped their positive and negative impressions of CEOs.
And we found that Analysts were consistent and crystal-clear about their requirements from CEO engagement:
10 Principles For Effective Analyst Engagement
Throughout all our interviews there were 10 core principles that consistently created a perception of ‘CEO Added Value’ – regardless of sector.
Different Analysts gave different priorities to each characteristic, but the core guidelines were always the same.
These principles are detailed here, with the relative importance of each principle ranked by qualitative evaluation:
- Strategic Clarity
Most important of all, Analysts gave a much higher value to CEOs who were able to communicate a clear, compelling rationale for their Strategic Decisions.
This Strategic Clarity demands a clear, consistent description of their primary Corporate Objective, a persuasive articulation of their Strategic Options, an Option Analysis including their respective upsides and downsides – resulting in a clear, powerful support for their chosen Strategic Direction.
Analysts attributed a significant Premium to those CEOs who delivered impressive Strategic Clarity – and a significant Discount to those who were less effective.
- Industry Vision
A CEO’s Vision for the future of their Industry in the mid- and long-term is absolutely fundamental.
Vision determines the potential value of the CEOs entire Business Strategy. It must shape every decision, and every value judgement.
Analysts are obviously specialists in their sector, and they encounter many different Visions of the future, and have access to all relevant data on which to make their evaluations.
Every CEO must therefore be able to clarify a persuasive view of future trends, threats, opportunities & implications, based on facts, presented with power and passion.
- Honest Dialogue
Analysts place enormous value on having access to open, one-on-one dialogue with CEOs.
This personal dialogue and relationship shapes trust, confidence and empathy – and enables a clearer understanding of the CEOs Vision, Strategy and Issues.
This dialogue must always be informal, unscripted, one-on-one contact – preferably face-to-face, definitely on con calls.
The CEOs who provide the most personal, unscripted access are invariably the ones who are most confident in their own abilities and decisions, and – consequently – the ones who command the highest ‘Leadership Premium’.
- Consistent Delivery
On many occasions, Analysts have found themselves impressed by a CEOs ability to articulate a persuasive Business Strategy based on a convincing Industry Vision – only to hear of inconsistent actions or directions with little advance notice or explanation.
This creates confusion and doubt.
Analysts fully appreciate the need to move fast in order to seize opportunities or mitigate threats.
But they frequently hear of Management Changes, for example, with no warning or explanation.
Not only does this make them doubt the decision, but it also undermines their CEO confidence.
Analysts have most confidence in CEOs who deliver management actions that directly relate to their Vision and Strategy.
And if there are necessary variations, they value advance notice and a persuasive explanation.
- Future Focus
The more obsessed a CEO sounds with their Short-Term results, the less confident Analysts feel about their long-term potential.
Institutional investors assign premium value to Corporations with CEOs who have identified a persuasive Industry Vision, a powerful Business Strategy – and the Management Capability to deliver.
The more focus placed on Short-Term results suggests Short-Term problems and Short-Term focus – neither of which, obviously, lead to premium Valuation.
- Conscious Transparency
In conversations with Analysts, CEOs often try to avoid, minimise or dismiss developments which could threaten their Vision, Strategy or Plan.
That never works.
It often makes things worse.
Analysts give much more respect to a CEO who is both alert to potential new threats and challenges, honest regarding their implications, and prepared for response.
- Competitive Respect
According to Analysts, many CEOs are hardwired to either dismiss the strengths of competitors, or to diminish their threat.
Obviously, Analysts are specialists in their sectors and have a full understanding of the competitive landscape. They are not fooled by a CEOs feigned confidence.
Analysts therefore place a high value on CEOs who are honest, open and respectful.
And, not surprisingly, they have greater trust for CEOs who exhibit a thorough awareness of their competitors’ strengths and threats, because they will be better prepared to defend against them.
- Critical Visibility
One of the most common and criticised characteristics of CEOs, it seems, is to ‘disappear’ when there are significant problems, issues or challenges for their business.
When the going gets tough, many CEOs go into hiding.
Yet these are precisely the times when CEO contact and dialogue is most critical and most valuable.
Challenges and Crises are the ultimate test of Vision, Strategy, Transparency, Authenticity and Capability.
These are opportunities to add enormous value to the CEO brand.
The more a CEO hides and avoids contact, the worse the impression of their courage and competence.
And the more they avoid direct dialogue, the more they are missing a valuable opportunity to engage, impress and add long-term personal authority.
- Financial Credibility
Many CEOs are more comfortable talking about Vision, Strategy, Management Actions and broad Financial Issues – but are less comfortable leading discussions that drill down into Financial Details.
As a result, they often ‘hide behind the CFO’, leaving responsibility for communication of all financial details to their CFOs.
Analysts, however, have far greater respect for CEOs who are confident debating the numbers, convincing in financial discussions.
This doesn’t mean that they have to lead all finance discussions – of course not.
But they must be happy to lead discussions about the most important financial issues, exhibiting a confident grasp of the most critical details.
- Corporate Consistency
It’s critical for Analysts to see the CEO’s Vision and Strategy communicated throughout the Corporation.
The Leadership team must all be aligned, consistently communicating the same principles as their CEO, and presenting Corporate Actions in the context of the Company’s Vision and Strategy.
This obviously applies to direct Analyst Communication, throughout Earnings Calls, AGMs, Conferences and Investor Websites – but also throughout all internal and external messaging.
Analysts have witnessed several occasions where the CEOs Vision and Strategy is not reflected in further Management Dialogue or Corporate Communications.
The result is simple and profound:
CEO Authority and Credibility is immediately undermined, and Market Valuation is eroded.
Analyst Engagement Demands CEO Dedication, Not Delegation.
All these principles are obvious and logical.
But it is truly amazing how often Corporate CEOs fail to follow them.
CEOs should manage their Analyst engagement with the same discipline and dedication as they manage their business.
They should not be led by their CFOs. They should not be led by their IROs. They must lead all engagement themselves.
Yet, precisely because it is one of the few parts of their role that they cannot delegate or direct, it is often one of the hardest for them to apply.
Reputation is a Research and Strategy Consulting Firm that advises CEOs and Boards of Public Companies how to achieve Fair Valuation for their Company’s Stock.