Taking Stock

It always happens at the end of the year – people take stock of the past 12 months and measure what was most important, popular, read or viewed.  Not to miss out, below is Lead-IR’s top 5 blog posts of 2018.

Lead-IR Advisors
Top 5 Most Viewed Blog Posts of 2018

  1. Ahead of the Curve, April 18, 2018
  2. Replay: New Kid in Town, September 26, 2018 (Original post: February 21, 2018)
  3. Face North, October 31, 2018
  4. Long Days, Short Stint, October 10, 2018
  5. Its Personal, Redux, August 1, 2018 (Original post: January 5, 2018)

In reviewing this year’s top posts, three key themes emerged:

Beyond Business Issues
Should CEO’s and companies address public policy, political or social issues? If so, when and how?  In the past, such topics were considered beyond the normal scope of business and companies and CEOs could stay out of the fray.  However, the general public and investors increasingly believe it appropriate for companies take a stand on issues relevant to fostering a healthy business environment. Both the Ahead of the Curve and Face North posts offered perspectives and best practice pointers on doing just that.  The former outlined how Jamie Dimon, Chairman & CEO of JPMorgan Chase discussed public policy issues in his annual letter to shareholders.  The latter highlighted the importance of having a deep understanding of company purpose, values and culture to guide decisions on where when and how to take a stand.  While not in this year’s top 5, the Stay or Go post from early May 2018 also addressed this topic.

C-Suite Transitions
From the sudden passing of Fiat Chrysler’s CEO Sergio Macchione, to Pepsico’s CEO Indra Nooyi’s retirement and the surprise ousting of GE’s former CEO John Flannery, CEO transitions were a hot topic in 2018. So, it’s no wonder readers found It’s Personal, Redux’s discussion of key disclosure considerations related to CEO health matters and Replay: New Kid in Town’s pointers on introducing a new CEO to investors, particularly relevant.  If you’re working with a new CEO, I suggest reading October 2018’s Just Being post and reflecting on what “becoming” a CEO means in the full sense of the word.

Focusing on Tomorrow
Or rather, there’s not enough of it – focusing on the long term, that is.  Everyone and their brother complain about the short-termism prevalent in the markets today.  Yet, as discussed in the Long Days, Short Stint blog post, it seems every solution to counter this is focused on what companies should or shouldn’t do.  Certainly companies can do some things to counter this as suggested in the Give No Quarter post.  But, as outlined in the Easter Bunny blog post, the current market structure is designed to support investors who drive a big chunk of trading today and have short-term investing horizons.

Lisa Ciota
President/Founder
Lead-IR Advisors, Inc.

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Just Being

Last week, I highlighted the high level of CEO turnover so far in 2018 and offered some thoughts on introducing a new CEO to the Street.  This week, I want to share some insights gleaned from research conducted by leadership advisory and consulting firm EgonZehnder to help investors relations officers become more fully aware of some of the behind the scenes dynamics of a C-Suite transition.

First, it pretty much goes without saying that new CEOs – both internal and external hires – need a acclimation period to fully understand the company’s issues and formulate a plan.  But its more than that.  You’ve probably heard the phrase “what got you here, won’t get you there.”  The knowledge and skills built over a career of “doing” (executing) is necessary, but not sufficient to “being” a CEO.

“Being” is the operative word here.  The CEO role is an intensely transformational role and in this sense the acclimation period is never truly over.  The CEO role is one that must be inhabited and embodied according to EgonZehnder’s CEO survey.  During the transition period, new CEOs need to not only gather and assess information, but also accelerate their ability to internally reflect and become more self-aware in their decisions, actions and feedback received.  It’s a process that never really ends, although CEOs get better at it over time.

This is why a less is more approach with investors is generally best in the first few months. It provides space for the new CEO to internalize some of the transformation required. However, new CEOs can be surprised at how little honest feedback they receive from the Board or senior management team, which can slow the transformation process.  Investor Relations should be sensitive to this dynamic and may be able to help.  Think of  investors who have unique or nuanced insights and with whom it may be useful for your new CEO to meet with early on (in a listen-only mode) in order to gather perspectives helpful to setting strategic priorities.

Next, new CEOs are also new to navigating board relationships.  Let’s face it:  The Board may have chosen the new CEO, but the CEO didn’t choose the board.  This can make for some interesting dynamics as the new CEO asserts their leadership and gets to know the board individually and collectively.  A focus on value creation and understanding of the investor perspective is important in aligning the board and CEO around a strategic vision.  Investor relations can play a role here as a steward of the shareholder perspective.

The EgonZehnder CEO survey also indicates new CEOs sometimes don’t realize how important communications experience and skills will be in their new role.  The need to come up to speed quickly is something investors relations can support.  IROs are typically well experienced with message and Q&A development, rehearsing presentations and media training, so they can be pivotal in providing some coaching in these areas to strengthen a CEO’s presence.

IROs spend a lot of time with CEOs.  A solid relationship is important to the success of both.  By understanding that C-Suite changes are just as much about transitions as transformations, investor relations can contribute to stronger and more impactful individuals and organizations.

Lisa Ciota
President/Founder
Lead-IR Advisors, Inc.

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Replay: New Kid in Town

879 – that’s the number of CEO’s who have left their companies year-to-date August according to Challenger, Gray & Christmas’s monthly CEO turnover report.  This is a 15% increase versus the same prior year period, but roughly in-line with previous years.  Approximately 28% of these exits were retirements and another 10% reflect CEOs moving on for new opportunities at other companies according to the data.  Makes sense: with the economy good and labor market tight, why not exit while on top or seize new opportunities at different companies?

It’s typical to see 1,200 – 1,300 CEO exits in any given year according to the Challenger, Gray & Christmas data.  This is neither good, nor bad … its just a reality.  At some point, every company, board and investor relations officer is going to face a transition in the C-Suite – the new kid in town.  To that end, republished below is an earlier post on the topic of introducing a new CEO or CFO to the street.


New Kid in Town

February 21, 2018

 

There’s talk on the street; it sounds so familiar.
Great expectations, everybody’s watching you
                                                           New Kid in Town, Hotel California, Eagles, 1976

With the average tenure of 8 years for CEOs and 5 years for CFOs, it’s going to happen – there’ll be a new kid in town.  The new kid will need to be introduced to the street, expectations will need to be managed and everyone will be watching to see what happens.

C-suite tenure 2

Source: Korn Ferry Institute C-Suite Age & Tenure Study 2016

Of course, a lot depends on the situation.  Is it a planned transition?  What factors drove or precipitated the change? Is the new CEO or CFO an internal or external candidate?  What is their background? What are the company’s challenges or opportunities? What is investor sentiment like?  The answers to these questions will inform the introduction process.

If it was a planned transition, the business is doing well and the new leader is an internal candidate who is at least somewhat known by the street, then a “business as usual” approach may be fine.  But then again, when does that happen?

All new CEOs and CFOs – particularly external hires – need an acclimation period to understand the company’s issues and formulate a plan.  Generally, investors understand that so brief introductory calls focused on the new leader’s experience should be sufficient initially.

However, in more challenging environments or where activists are involved, investors may demand time with new leadership right away.  In such cases, it may be important for the lead independent director to make a statement or perhaps even meet with activists.  Carefully weigh the risks of having the new leader – particularly new CEOs – spend time listening to investor feedback early on. This could be beneficial for informing his/her thought process and strategic priorities.  It may also earn him/her early support if investors feel they’ve been heard.  Conversely, it can consume valuable time better spent developing a go-forward strategy.  In the end, investor sentiment should be one – but not the only – guidepost.

Throughout the initial transition, investor relations has – as always – an internal and external role. Internally, investor relations should provide the new leader a SWOT (strengths/weakness/opportunities/ threats) analysis identifying key risks from an investor perspective as well as background on sell side coverage, a profile of investor style and turnover plus a risk/opportunity assessment of top investors.  It’s also important to take the new leader’s pulse as to their experience, comfort and understanding of the investor community to optimize the new leader’s future investor interactions.

Externally, investor relations’ initial role is to highlight the new leader’s relevant experience and keep investor expectations at bay as the new leader’s strategic plans develop.  Of course, the new leader will need to engage on earnings, which may be before their strategies are fully formed.  Depending on the timing of earnings, the new leader should thoughtfully articulate key learnings, areas of focus and priorities without making premature promises or announcements.

By their third earnings calls, CFOs are often considered old hands.  However, at the same point, the typical new CEO is beginning a 2- to 3-year period filled with significant strategic moves.  Given the likely pace of change, there probably won’t be time for a formal CEO debut tour or investor day. Its important to be flexible during this time and explore different opportunities for investors to get to know the new CEO.  For example, hold webcasts in conjunction with strategic announcements to expose the CEO to investors in addition to participating in high-profile conferences and non-deal roadshows.  Once a significant portion of the change agenda is in play, consider hosting an investor day or other forum to outline the company’s transformational vision and financial targets.

When a new kid is in town, use it as an opportunity to reset the company’s narrative and investor relations priorities. Be flexible, be open and optimistic, because while the …

People you meet, they all seem to know you.
Even your old friends treat you like you’re something new.
New Kid in Town, Hotel California, Eagles, 1976


Lisa Ciota
President/Founder
Lead-IR Advisors, Inc.

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Join NIRI-Chicago at its annual Investor Relations Workshop – September 28, 2018
Print

New Kid in Town

There’s talk on the street; it sounds so familiar.
Great expectations, everybody’s watching you
                                                     New Kid in Town, Hotel California, Eagles, 1976

With the average tenure of 8 years for CEOs and 5 years for CFOs, it’s going to happen – there’ll be a new kid in town.  The new kid will need to be introduced to the street, expectations will need to be managed and everyone will be watching to see what happens.

C-suite tenure 2

Source: Korn Ferry Institute C-Suite Age & Tenure Study 2016

Of course, a lot depends on the situation.  Is it a planned transition?  What factors drove or precipitated the change? Is the new CEO or CFO an internal or external candidate?  What is their background? What are the company’s challenges or opportunities? What is investor sentiment like?  The answers to these questions will inform the introduction process.

If it was a planned transition, the business is doing well and the new leader is an internal candidate who is at least somewhat known by the street, then a “business as usual” approach may be fine.  But then again, when does that happen?

All new CEOs and CFOs – particularly external hires – need an acclimation period to understand the company’s issues and formulate a plan.  Generally, investors understand that so brief introductory calls focused on the new leader’s experience should be sufficient initially.

However, in more challenging environments or where activists are involved, investors may demand time with new leadership right away.  In such cases, it may be important for the lead independent director to make a statement or perhaps even meet with activists.  Carefully weigh the risks of having the new leader – particularly new CEOs – spend time listening to investor feedback early on. This could be beneficial for informing his/her thought process and strategic priorities.  It may also earn him/her early support if investors feel they’ve been heard.  Conversely, it can consume valuable time better spent developing a go-forward strategy.  In the end, investor sentiment should be one – but not the only – guidepost.

Throughout the initial transition, investor relations has – as always – an internal and external role. Internally, investor relations should provide the new leader a SWOT (strengths/weakness/opportunities/ threats) analysis identifying key risks from an investor perspective as well as background on sell side coverage, a profile of investor style and turnover plus a risk/opportunity assessment of top investors.  It’s also important to take the new leader’s pulse as to their experience, comfort and understanding of the investor community to optimize the new leader’s future investor interactions.

Externally, investor relations’ initial role is to highlight the new leader’s relevant experience and keep investor expectations at bay as the new leader’s strategic plans develop.  Of course, the new leader will need to engage on earnings, which may be before their strategies are fully formed.  Depending on the timing of earnings, the new leader should thoughtfully articulate key learnings, areas of focus and priorities without making premature promises or announcements.

By their third earnings calls, CFOs are often considered old hands.  However, at the same point, the typical new CEO is beginning a 2- to 3-year period filled with significant strategic moves.  Given the likely pace of change, there probably won’t be time for a formal CEO debut tour or investor day. Its important to be flexible during this time and explore different opportunities for investors to get to know the new CEO.  For example, hold webcasts in conjunction with strategic announcements to expose the CEO to investors in addition to participating in high-profile conferences and non-deal roadshows.  Once a significant portion of the change agenda is in play, consider hosting an investor day or other forum to outline the company’s transformational vision and financial targets.

When a new kid is in town, use it as an opportunity to reset the company’s narrative and investor relations priorities. Be flexible, be open and optimistic, because while the …

People you meet, they all seem to know you.
Even your old friends treat you like you’re something new.
New Kid in Town, Hotel California, Eagles, 1976

Lisa Ciota
President/Founder
Lead-IR Advisors, Inc.

Enjoy these posts?  Sign up to receive them via email
and like them on LinkedIn or Twitter.