The Corporate Story is Never Static

It seems a little remarkable that I last published a piece related to this topic in May 2016, when fragile and volatile markets were testing the communication nerve of many boards and their senior executives.

Remarkable in the sense that three years later, the same old habits keep appearing. Markets are volatile; earnings are strained; performance is down; let’s hibernate and hope no one notices!

It is a well-worn path.

Any ambitious corporation goes to significant lengths to shape a story around its fundamental investment case. After all, in the competition for capital, the competition for attention is just as intense. The mistake that many boards and senior executives make when the bears appear though is to forget that their story and its underlying investment case is not static. And it is easily forgotten. The story needs to be regularly tended and restating the underlying investment case needs to happen again and again.

The boards and senior executives that brave the conditions no matter what and keep fronting up with their story naturally earn respect. And respect is what builds and sustains a reputation (remembering that reputation is what others say about you). When it comes to competition for capital, a good reputation captures attention and builds trust with stakeholders - invaluable when markets and conditions are really challenging.

So, in today’s prevailing environment of market, trade and geopolitical uncertainty, it’s worth remembering:  

• Front up. Boards and senior executives who disappear when their share price suffers from a market correction, or their earnings collapse, will find it exceedingly hard to get back on the radar. The competition for attention is just as intense as the competition for capital. Presence counts, in good and bad times, because it builds trust. When conditions do improve, investors will be in a buying mood and those companies who have maintained relationships will prosper.
• Keep it straight. Credibility is attained by telling it as it is. And credibility is a precursor to trust. Giving investors factual information in a fearful market environment helps them understand and assists in their analysis. It may not influence when they might act but it will influence who they act upon.
• Communicate control. For all corporations, control is instructed by strategy. It is after all one of the primary duties of a Board to oversee strategy and the responsibility of management to execute that strategy. As it is usually other people’s money involved, control is a not-negotiable.
• Don’t surprise. In the event of a significant issue, be the first to acknowledge it, be clear in outlining it and be confident in your ability to manage and address it. In particular, investor’s reaction to surprising events can be harsh and associated stakeholders like the media can turbo charge a negative reaction. Don’t let a vacuum emerge by staying silent as that vacuum will only be filled by the views of detractors.
• Too much pre-planning is not enough. Disruptive issues today can emerge from all angles; credit markets, economic downturn, job cuts, regulatory intervention, political instability, union intervention and competitor disruptions are but a few. It is extremely difficult to plan and communicate effectively when a company is in the midst of a major issue or even worse, a crisis. Develop a communication roadmap before an issue or crisis emerges and keep the roadmap fresh.

Ultimately, the boards and senior executives that are perceived to be in control in difficult conditions will be perceived to be the ones that will flourish when conditions improve.  

A version of this article was first published in Listed@ASX in May 2016.