CEO communication archetypes
The king is dead! Long live the king! I remember reading these lines in history class at school. Their lesson was that in a monarchic form of government, succession is known in advance and is immediate on occurrence. There exist rules which state who is next in the succession line and, barring the interference of some barbarian at the gate, the transition takes place automatically.
Although modern corporations are certainly not monarchies, it can happen that leadership succession occurs with the same ease. I say this because I have just experienced this change at my company: the chief executive officer gave up his CEO title as of December 31, 1995; although will remain chairman until his official retirement date three years hence. The current president has become CEO. The transition was announced some time ago so that when the change took place, it did so easily and with no disruption to company operations or the perceptions of the investment community. I can look forward to working with my new CEO with virtually no worry of uncertainty regarding Schering-Plough's investors, because he knows them and they know him.
I consider myself lucky because stories abound of cases where the route through a leadership transition is more like an off-road adventure through the Sonoran Desert than an excursion down the Autobahn in a luxury car.
One case comes to mind of the company that had a succession of CEOs who felt they were capable of taking on the investment community without benefit of the advice or expertise of their investor relations department. The results were that one after the other they came back asking for help after investors beat them up.
As for the IR professionals who had to live through this, I am sure that the satisfaction that came from 'I told you so' was small compensation for the effort required to rebuild bridges and reestablish credibility.
With this in mind, I once again decided to reach out to our IR colleagues around the world to collect stories and anecdotes about CEO's, either their own or others they have known. Given the sensitivity of the subject, though, I promised full anonymity. So, unlike my past articles, the only name you will see here is my own.
From the input I received, I managed to construct several CEO archetypes. The first one is the Great Communicator. He or she takes time to listen to IR staff and others; articulates the story well without going into unnecessary detail; handles questions deftly, even the difficult ones; and oozes credibility. This is the CEO of our dreams for whom we all want to work and, when comments are made for the record, we all do. The problem is that it is not much fun to talk about the Great Communicator: perfection is dull, which is why nature tolerates so little of it.
Moving on to more interesting types, we have the CEO I call Mr Don't-Tell-Them-Anything. This is the person who says: 'They have our annual report, why do they need anything else?' Even when the company news is superb, he manages to convey it with a lack of fervour if he conveys it at all. Working for this type of CEO means countless apologies from the IR staff in order to offset the impact of his style.
The opposite of Mr Don't Tell-Them-Anything is Mr Tell-Them-Everything- and-More. This is the CEO who manages to take the characteristic of openness, a virtue when used in moderation, and turns it into a vice of excess. This is the leader who will discuss whatever is on the top of his mind, regardless of its significance or appropriateness and in near-total disregard of the proper rules of disclosure. He is so eager to be open with people that he forgets that discretion is often the better part of valour. The IR department's job becomes one of trying to rephrase what he said to what he really meant and put it all in an appropriate context.
A close cousin of Mr Tell-Them-Everything is Mr Wing-It. With this CEO, you never know what may happen. Things may turn out fine or he may revert to genealogy and tell his life story. He never needs a written speech and he never needs a briefing binder, all perceived pluses for the investor relations staff - only you never know what might happen next. What will he say, what will he say? I wish I knew.
Perhaps worse than either of the two extremes is the CEO I call Mr Depends-On-How-I-Feel-Today. This is the person who can be the soul of openness at one meeting and a devil of a cold fish at the next - for reasons that bear no relation to the news he has to discuss. This type almost makes me believe in astrology as the only systematic approach for explaining and predicting his behaviour. I suggest that when you work for someone like this that you have his zodiac chart prepared quickly and plan your meetings accordingly.
The final CEO archetype is Mr Peacock/Mr Turtle. This is the leader who is very happy to present the good news and does so with a flare and enthusiasm that are contagious. When the news turns sour, however, he suddenly becomes embarrassingly conspicuous by his absence, leaving the IR staff to handle the problem. My advice if you work for this type is to get your speech ready early on about why one must speak to investors in good times and bad.
Since I have been giving advice here, I would also like to pass along the advice offered by my IR correspondents to a new CEO about investor relations. Here are the comments I received:
- Listen to your IR department and take time to learn the basic rules of the investor relations business;
- Include the IR department in matters which may be of interest to the investment community so that they do not hear news from outsiders;
- Be there when the news is good and be there when it's not so good;
- Be communicative in your delivery, not just informative;
- Pick a style that is you, not somebody else's idea of who you should be, and stick to it.
- To summarise, the collective advice of the IR professionals I spoke to is that CEOs should take time to listen and learn; be open, inclusive and courageous; be consistent with others and true to themselves.
- Certainly this is good advice and perhaps advice that CEOs may also want to give back to us. I wonder what, if given equal time, they would write as a treatise to their investor relations officers.
02/96
Compass points
Privatising the World
Governments around the globe are looking ahead to another year of privatisation. Mammoth deals - like Deutsche Telekom's $11 bn IPO or Brazil's planned $1 bn privatisation of Companhia Vale do Rio Doce (CVRD), the metals mining giant - are piquing some investors' appetites.
Italy has plans to unload parts of Enel, the power utility, and another tranche of Stet, its telecommunications company. If these transactions go ahead as planned, 1996 could yet turn out to be the year of the mega-deal for the ADR market.
However, signs of overfeeding in the past months are worrying some global marketeers. The past year's spurt of privatisations met with a lukewarm reception from foreign investors, threatening the surge expected for 1996. Some 18 countries were responsible for over 42 per cent of the new DR capital raised in 1995. Yet in a tepid environment for foreign investment, the governments of France, Indonesia and Italy all had to slash the prices and sizes of transactions to be sure of getting them away.
In France all but two of the government's last eight privatisations have suffered a fall in share price since listing. Usinor Sacilor, the steel company, has declined sharply since its July flotation, with investor interest sluggish both at home and overseas. Analysts believe the US response would have been better if the transaction had been fully registered, while fund managers complained of too many European companies gate-crashing sell-side presentations on Wall Street.
Seen as a test of the French government in the face of lousy market conditions for privatisations, Pechiney, the aluminum and packaging group, drummed up patchy foreign interest in December. The sale, slated to raise up to $1.2 bn, came in at $933 mn and the stock had dropped 10 per cent by year-end. Now France is looking ahead, with plans to sell a further tranche of Renault, the car company, and France Telecom.
Perhaps hardest hit by the privatisation blight of 1995 was Indonesia's PT Telkom. Viewed as a victim of the glut of telecoms offerings expected worldwide, the telecommunications company's stock sale was halved in November to $1.59 bn. Still, as Citibank's Mark Bach points out, PT Telkom's offering was sizeable by any measure, and impressive for an issue from a young market like Indonesia.
Moreover, the price of PT Telkom's NYSE-listed ADR was up 40 per cent by year-end, challenging even the brightest stars of the US IPO boom.
Other cautiously priced DRs went on to perform well, including Italy's ENI, the gas and oil company, whose $3.9 bn IPO went up over 4 per cent during the course of December.
Eric Frank, vice president of depositary receipts at Morgan Guaranty, is looking ahead to a boom year for privatisations, as depositary for the likes of STET. 'Telecoms privatisations were viewed by investors in a different light last year,' he says. 'With the right price and timing, and a boost from ENI's strong showing, STET should be well-received.'
Meanwhile, portfolio managers at Alliance Capital remain bullish on privatisations, citing hundreds of state companies - worth a total of $300 bn - waiting to be sold.
The Alliance Worldwide Privatisation Fund, invested in over 200 securities in 47 countries, is looking ahead to power privatisations in Latin America, banking sales in Australia, Hungary, Poland and Sweden, and telecommunications offerings from Belgium, the Czech Republic and Spain.