Wake Up Call

It began like any other day … walking into the office, cup of hot tea in hand.  The place was quiet as staff began to roll in. I had checked the news headlines before leaving home, so it looked to be an ordinary day.  But then, minutes before market open, my phones lit up and email caught fire.

Dumbfounded, I listened to the first of several messages. One of my company’s major customers had issued a press release announcing its intent to temporarily idle a facility where we were co-located.  This customer represented more than 10% of my company’s business and 100% of the co-located plant’s output.

I popped up and peered around the corner, the CEO wasn’t in yet, but I caught a glimpse the COO as he walked in the door.  Off I go to download what’s happening to the COO and on my way, I asked my communications manager to call the affected plant to see what he could learn.  No one knew – not the CEO, not the COO, not the local plant manager.  The customer gave us no advance warning.

I sat in the office with the COO as he called the customer, who reassured they would continue to honor our contract, including inventorying or shipping to alternate facilities all the output our co-located plant produced. But, of course, this information wasn’t in their press release.  Investors in my company could only assume the worst.  The stock opened down, hard and fast, and investors were calling non-stop. This was not going to be a good day.

In a crisis like this, you realize how important it is to have a history of consistent, transparent communications that provide context around your business and its operating environment.  In our case, we regularly discussed the structure and terms of our take-or-pay contracts with investors and the why surrounding them. We even filed redacted copies of these contracts with the SEC to be as transparent as possible.  As a result of these practices, investors had a baseline understanding of how we protected and mitigated commodity, operating and customer-risk.

We needed to respond and fast.  So, leveraging this existing context, we aligned messaging during a brief executive team meeting and then:

  • Issued a public statement indicating our customer’s obligations under our take-or-pay contract remained in effect, regardless of plans to temporarily idle its plant,
  • Blasted an email with this key message to everyone on our investor and media distribution lists,
  • Confirmed our CFO’s attendance at an investor conference scheduled to be held the next day,
  • Painstakingly returned all investor calls over the next several days, initially starting with the sell-side in hopes of amplifying our message faster,
  • The following week we reaffirmed annual guidance in a routine press release to further reassure the investing community.

Late the night of the announcement, I contacted the IRO at my customer company to let him know what we were saying.  It was a late night for him as well, as he quickly replied telling me he received almost as many calls from my investors as his own.

This experience highlights the importance of ongoing, consistent messaging that provide business context.  It also points to the importance of developing relationships with the IROs at customer companies.  After this, I found it useful to periodically touch base and align messaging around customer relationships and businesses with them.  This served all of us well by reducing confusion and the risk of unpleasant surprises.  You may want to consider doing the same if your company depends on a handful of customers or suppliers.

Lisa Ciota
Lead-IR Advisors, Inc.

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
Lead-IR Advisors, Inc.

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Face North

CEOs as global statesmen? CEOs as moral compasses?  That appeared to be the implication of a New York Times Deal Book article (October 16, 2018, Sorkin) about the decision of several very prominent U.S. CEOs to not attend Saudi Arabia’s Future Investment Initiative (aka Davos in the Desert) in October 2018.

All the withdrawing CEOs had important, ongoing business relationships with Saudi Arabia that a company wouldn’t normally jeopardize.  But the decision to withdraw stemmed from a decidedly non-business reason:  unresolved questions about possible Saudi government involvement in the disappearance of journalist Jamal Khoshoggi.

Now, when these decisions were made there were a lot of unknowns (there still are), but in making their decision each CEO was forced to face their true north – how to best act in accordance with their values.  Some might call this CEO activism.

Admittedly, this is may be an extreme interpretation. Some would say it’s not an example of CEO activism at all but reflects a basic moral decision.  But isn’t that what CEO activism is all about:  CEOs leading, communicating and making decisions based on a set of core values?

Today, there is vigorous debate about the theory of shareholder primacy, how to best create long-term value, the role and purpose of business in society and what is real leadership.  The fact of the matter is expectations of CEOs and their companies have changed as has the business, social and political climate in which we all operate.

The general public and institutional investors increasingly look to companies and their CEOs to take a stand on social or political issues relevant to fostering a healthy business environment according to the Edelman Trust Barometer.  At the same time, leading institutional investors like Larry Fink, Chairman & CEO of BlackRock, are encouraging managements and boards to have very fundamental and thoughtful discussions about a company’s purpose, values and cultures and to communicate such to investors.

Most CEOs (likely the vast majority) have no desire to be an activist. Still, smart CEOs choose their issues and don’t want to be caught flat-footed when the vortex of a social or political issue hurls their way.  Knowing whether and how to step in requires a deep understanding of a CEO’s and company’s purpose, values and culture. CEOs, their management teams and boards should identify their true north via disciplined analysis that:

  • Identifies relevant issues that may affect the company’s ability to serve customers, source materials, attract and motivate employees or operate effectively;
  • Evaluates the implications of an issue in view of stakeholder perceptions and potential business or reputational impact.

Based on this analysis, develop a framework to guide your approach and vet it with the board.  There are several paths available. For example:

  • When a quiet or behind the scenes approach is preferred, consider tactics such as lobbying, affiliating with appropriate trade or industry coalitions, or making targeted charitable or political contributions.
  • If visible leadership is important, think about options to weigh-in via social media, public statements or op-ed pieces. Of course, slowing or halting a planned expansion or relocating certain business activities are forceful signals of commitment that should be carefully vetted before using.

Some may say the business of business is business, but real leadership often requires something more.  If, or when, a CEO or company decides to express a view, here’s some thoughts on how to do so in a manner that supports understanding and acceptance:

  • Be Transparent: Stakeholders typically accept a company’s position if they believe a CEO or company are open and forthright and will walk the talk.
  • Be Consistent: Companies should be true to what they stand for and predictable in their actions.  Surprises weaken trust, leading stakeholders to doubt a company’s real intent.
  • Materiality: Stakeholders understand and expect CEOs and companies to take positions on issues relevant to its business, employees, customers or communities, just be transparent when expressing a perspective.
  • Leadership: By being transparent, consistent and presenting a forthright business case for its perspectives, a company will more likely be respected even if stakeholders don’t agree.


Lisa Ciota
Lead-IR Advisors, Inc.