Using the Web to rebuild
trust in CEOs
By Dominic Jones, IR Web Report Related:
Building
CEO Credibility with the Cantos Interview
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.
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Despite
Sarbanes-Oxley, only 3% of
Americans think CEOs are very
trustworthy. Maybe executives
are listening to the wrong people.
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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? 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. 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 for IR Web Report's
IR
Web Report Global Rankings, 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 the IR Web Report Global Rankings 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.
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Listen-only
access to webcasts has dropped
60% in the past two years. That's
partly because webcast are hard
to use.
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According to the latest NIRI member
survey, average usage of a webcast has declined
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 new camera
phone so they can instantly email pictures back
to the office 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 Carole
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):
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.
Addendum (January 27, 2005): A reader
reminds me that you need to get reprint permission
before posting articles on your site. Usually,
there is no permission required for linking
to an article.
Reader
Feedback:
As Managing Director of Annual Reports for
Addison in New York City, I read hundreds of
CEO's Letters to Shareholders every year, and
I am often disappointed at the lack of a sense
of the personality of the CEO coming through
in the letter.
Typically the Letter will be a reiteration of
the financial highlights taken right from the
10-K. I can easily spot the letters that were
written by the CEO him/herself, and those written
by PR, IR or Corp Comm executives whose efforts
were then passed through the legal department's
filters.
A suggestion in the article was to introduce
quarterly reports by the CEOs on the web. It
was not long ago when almost every public company
routinely produced a printed quarterly statement,
mailed out to all shareholders. Some quarterlies
were actually magazines or newsletters, filled
with valuable information for shareholders.
Today, I am not aware of any companies that
regularly issue printed quarterly reports,
but it is, in my opinion, time for their return
both to the email inbox and to the mail box,
in order to bring management closer to investors.
I find it curious that companies communicated
more frequently and effectively to their shareholders
15 years ago than they do today.
Eliott Saltzman
Managing Director
Annual Reports
Addison
20 Exchange Place
New York, NY
http://www.addison.com/
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