A great many institutional investors insist on meeting senior management before taking a position in a company. Understandable: the CEO represents the vision, drive and energy of the firm, among other more formal duties. He, or she can give investors a close look at not just what the company stands for, but also how it might approach the inevitable successes and failures inherent in the business cycle. CEOs (and other senior executives) through their words, deeds and body language, can give shareholders confidence, can articulate the long-term potential of the business, and can provide a glimpse of the leadership qualities that will bring a line of strong candidates into the succession plan of the firm. Or not.
Not all senior executives are blessed with the communication skills that match their other talents of intelligence, vision, organization and determination. Dare it be said that some CEOs can be a liability for a roadshow, when the need for clear, comprehensive explanation can be overwhelmed by ego and a misguided view of what shareholders are actually entitled to know.
As with much in life, there is a neat compromise that can satisfy most of the requirements here: educating and informing shareholders; senior personnel hearing direct from investors.
Leave the Executive team at home.
Just as institutional investors like to see senior management before investing, once they’re in, they are happy to meet with well-informed, professional IR teams. The fully-enabled IR officer has many advantages over his or her management: a clear understanding of what investors need; relationships with key shareholders; availability at all times (especially during crises when senior management will NOT be available); access to and the time to contact the right people for the right answers when needed.
It might be interesting to consider why and when shareholder communications are important and thus decide who from the company is most needed.
Times of great success: investors will happily speak to IR – but CEOs may enjoy a victory lap.
Times of great trouble: investors need to speak to the CEO but he is not available (cleaning up the great trouble).
All the other times (meeting internal and external expectations): IR is fine.
If you agree with these scenarios in principle, organizing roadshows and other investor communications around CEO involvement may be an ineffective solution, while complete enabling of the IR team offers an efficient, long-lasting, repeatable approach to a critical function.
Simply put, shareholder communications are much more important when the company is struggling but that is exactly the worst time to expect full participation of senior management to communicate the problem. CEOs should enable their IR colleagues (including executive and Board status); IR teams should push for greater engagement with all decisions at the company; and investors should applaud and support these measures.