Market Monitoring - 05/23/2018
Management that influences perceived value
Can top executives influence your Company’s perceived value and risk?
Only a few companies currently have executives that are aware of their companies’ perceived value and risk and are equipped to influence them. The rule of thumb for companies that invest in capital market and investor relations is still very focused on communication tools, such as IR websites, well-written analytical earnings releases and reader-friendly annual reports featuring truly material information in easy-to-understand language, among others.
However, my experience allows me to contend that a large share of the value and risk perceived by analysts depends on interactions with top executives and their resources designed to make the market understand intangible assets that cannot be expressed using the usual communication tools. Here, I am talking about attributes that impact emotional aspects and that can only be communicated through human interaction, such as confidence, competence, honesty, legitimate interest in accountability, commitment and true attention to changes in the environment and continuous learning, among others.
In this sense, allowing full access to key executives at such an important time as the earnings season has become very relevant. What I call full access is something equivalent to a face-to-face meeting, where investors use their senses to “feel” the executive and are open to being influenced by the messages passed on to them. Please note that by sense I mean everything that is perceived by our central nervous system after stimuli excite cells capable of converting chemical or physical signals into electricity, which travels through neurons and reaches the brain. I will not go into detail here, but I refer to that theory about the two ways of thinking: fast and slow (Thinking, Fast and Slow), which earned Daniel Kahneman and Amos Tversky a Nobel Prize and gave us an innovative tour of the mind, challenging the idea that our decision making is essentially rational.
Gestures, tone of voice, eye contact, a serene facial expression and other attitude and visual resources can influence investors’ and analysts’ cognition.
We recently had two important events that relied on resources to increase engagement levels, one abroad and one in Brazil.
The international event was the celebrated Annual General Meeting of Berkshire Hathaway, which used the web to allow its two top executives, Warren Buffet and Charlie Munger, to interact with shareholders from all over the world. It caused a commotion not dissimilar to the one that follows pop stars, as they spent more than seven hours providing explanations and answering questions. That’s it, seven hours of audio and image, which you can access here.
In Brazil, we had Gol’s groundbreaking event, with top executives recording a video (in Portuguese and in English) explaining the results for the first quarter and answering questions from investors. The video was later posted on Gol’s IR website together with the other disclosure materials (earnings release, financial statements, presentation, etc.). Investors were able to see and listen to comments from senior management even before the conference call that was held on the following day, allowing the company to dedicate more time to the Q&A session. This was a clear indication of the executives’ commitment and awareness of their mission to embody the capacity to create value and influence the perceived risk of their decisions and actions conducting the business. You can learn about this initiative here.
I hope that more and more companies and executives undertake similar initiatives, since their interactions and accessibility can lead to a significantly more accurate perception of results, allow management to “set the tone” for reading the indicators and align expectations. In addition to giving the entire shareholder base direct access to senior executives, this new form of communication also makes the company’s relationship with all its investors more personal and “tangibilizes” important attributes of the team, including professionalism, earnestness, competence, openness to dialogue and accountability.
Originally published by Valter Faria