Posts Tagged ‘Ethics’

The intangibles investors like

July 1, 2013

Conversations with investors often focus on the numbers, but we also need to give thought to the “soft information” – intangibles. The cover story in this week’s Barron’s, “World’s Most Respected Companies,” provides a pretty good tutorial on which qualitative issues gain the respect of institutional investors. Respect doesn’t always mean a buy decision, but it opens doors.

The direct point of the article is a ranking: Berkshire Hathaway is #1 in a survey comparing institutional investors’ esteem for the world’s 100 largest companies, Walt Disney #2, Apple #3 (down from #1 last year), Google #4 and Coca-Cola #5. No surprises there.

More interesting to me are the comments institutional investors make about intangibles they consider important. The top three qualities that inspire respect, according to the Barron’s investor group, are sound strategy, strong management and ethical practices:

Barrons respect

Those three are followed by other qualities like innovation, competitive edge and growth. In this survey “the numbers” are secondary: Growth in revenue and profit is key for just 5%, strong balance sheet for 1%.

A few of the institutional investors’ comments:

[On Berkshire] “It’s a well-conceived business model, owning good basic businesses, bought at good prices, and managed by great people. A company much to be respected.” …

Does the firm have a defensible long-term business model, and is it built to innovate, compete, and grow? And how good is management, particularly when it comes to capital allocation? …

[On JPMorgan, #45, best of the disrespected megabanks] “How many CEOs would have come out front and center and said, ‘This is my fault?’ … If he weren’t at the helm, you have to think long and hard whether you want to be in this stock …”

“There is value in investing in companies with high integrity. The likelihood is that they won’t do bad things, very bad things, that will affect their stock prices.”

For the investor relations professional, the question is: Are we communicating these intangibles to our investor audiences?

We ought to be thinking about the intangible value-creating qualities as we approach second-quarter earnings (or any season). The message isn’t just this period’s earnings. It is the strategy guiding the company’s business for the coming years, the leadership team’s experience and performance, and whether investors can trust management to deliver on promises.

What’s your opinion?

© 2013 Johnson Strategic Communications Inc.

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Cowboy ethics

February 23, 2010

As an American child of the Fifties and Sixties, I grew up on westerns on TV and in movie theaters. John Wayne, Marshal Dillon in “Gunsmoke,” the “Bonanza” Cartwrights. Good guys in white hats. Not until recently, though, did I hear about “cowboy ethics.”

It seems that a veteran institutional investor, Jim Owen, a former partner in NWQ Investment Management, has started a nonprofit Center for Cowboy Ethics and Leadership and written a book called Cowboy Ethics: What Wall Street Can Learn from the Code of the West, among others.

I ran across cowboy ethics belatedly from a news story on some people in Wyoming trying to write some of this philosophy into the state’s statute books.

If you’ve got a bit of cowboy in your background, you can learn the basics of cowboy ethics from Owen’s Ten Principles to Live By. I’ll share three of them:

  • Ride for the brand.
  • Talk less and say more.
  • Remember that some things aren’t for sale.

In an age of corporate scandals, revisiting your core values seems appropriate.

IR as a mystery thriller

August 22, 2009

Investor relations as a profession doesn’t often make Page 1, but today’s Wall Street Journal casts IR in a starring role in Deutsche Bank‘s covert maneuvering against a dissident shareholder and courtroom enemy.

“Banker, Gadfly, Lawyer, Spy” is a mystery thriller worthy of a John Grisham novel. For IROs, the story is just that: a good yarn to read on a late-summer weekend. Entertainment, unfortunately at the expense of errant corporate staffers.

The story has everything: a private investigator with two code-named teams, rich and powerful enemies in German corporate suites and a Mediterranean isle, a young lawyer suspected of posing in a job interview to gather intel at a plaintiff’s law firm, even an elusive Brazilian seductress. Too bad it’s not fiction.

Deutsche Bank’s head of investor relations was let go when the corporate snooping and surveillance became a scandal, and there are ongoing investigations – not to mention that litigious shareholder, a target of the bank’s “Magnum PI” efforts.

By the way, Deutsche Bank issued a press release July 22 with its own somewhat dry version of what it has found looking into the company’s snooping activities. The bank said the “incidents originated from mandates initiated to achieve legitimate goals, but, during the course of these mandates, the external service providers retained by the Bank engaged in questionable activities.”

IR people should read today’s WSJ piece, simply because IR doesn’t usually make headline news. You might even be prepared to tell co-workers, “No, we don’t generally spy on shareholders (or anyone else).” There is no practical guidance in this story for doing the actual job of IR – other than an implied warning.

It’s a cautionary tale that says don’t get caught up in a corporate “battle” that later will be viewed as corporate wrongdoing (see last month’s posts, Someone should’ve said no and On the ethics front …). The messy consequences are sad. After all, no one wants to wind up on Page 1 of the Wall Street Journal this way.

On the ethics front …

July 22, 2009

Investor relations professionals need to stand on our own ethically, thinking through and following our convictions on what’s right or wrong. The Wall Street Journal brought a reminder yesterday of the need for personal responsibility with news that the head of investor relations for Deutsche Bank has been dismissed.

You may remember the story earlier (“Someone should’ve said No“) about Deutsche Bank hiring private investigators to spy on members of its management and supervisory boards – and an activist shareholder.

Now the tale unfolds further with news of the firing of two executives: Deutsche Bank’s head of investor relations and head of corporate security in Germany. One of four surreptitious surveillance actions cited in press reports involved a dissident shareholder and a media mogul who was in a legal fight with the bank.

To be clear, I have no first-hand knowledge and wouldn’t attempt to judge what Deutsche Bank or its people did. But the reputational consequences, from a corporate and personal standpoint, are obvious. Yesterday’s WSJ headline said “Deutsche Bank Fires Two in Spying Probe.” The story continues to dribble out, with more details in today’s WSJ. In Germany, where privacy and “big brother” tactics are a sensitive topic, newsmagazine Der Spiegel has aggressively reported this story.

My point on ethics and personal responsibility is this: In the heat of battle, when the company is under attack and the world looks like “Us vs. Them,” be careful. Go back to your core principles: telling the truth, obeying the law, treating others as you would want to be treated, whatever convictions shape your outlook on life. Seek guidance in places like the NIRI Code of Ethics: Although codes won’t offer a specific rule for something like hiring a private eye, they do provide principles.

And consider how any action you take might appear in the harsh light of public disclosure a year or two later. Your responsibility to decide on your actions isn’t erased because you’re part of a larger corporate staff. Taking a stand just might save the company from serious reputational damage. And, down the road, it might keep you out of a headline that says “… Fires Two in (Whatever) Probe.”