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Executive Traits a Critical Gauge of Investment Merit Candor, Access Executives gain credibility by being forthright, freely discussing negative cross currents and challenges. Access is critical, management must be open, available, and responsive to Wall Street and investors as opposed to being evasive or secretive. Humble, Genuine Company leaders should not be arrogant—no attitude or egos, hype, or PR baloney. Firms in the Midwest, for example, seem to be more genuine. Warren Buffet comes to mind, schmoozes with the little guy, eats hamburgers with Bill Gates in the local diner, and speaks with brutal frankness. Executives should willingly admit mistakes and alter course. No one’s perfect or invincible. Trust, Quality, Class Management must be honorable, their comments reliable, their actions straightforward. They should act with class, not be litigious, display no vindictiveness, do nothing shady or sleazy. Investors need to be able to trust executives to the core. Hands on, in Touch Executives should be aware of what’s occurring within the company at several levels and be in contact with the little people, not buffered by multiple management levels. Ross Perot was a master at this, chatting with his lowest-level associates in the elevator and in the cafeteria. John Chambers at Cisco engages all strata of employees. Outgoing, Aggressive, Confident I like to see these elements, and yes, they can co-exist with humility. Executives should not be shy, inward, or parochial. There needs to be a certain toughness, assertiveness, and conviction as long as there is the realization of vulnerability. Old-Fashioned Business Values Management should be long-term oriented, use no stopgap acts to boost immediate earnings, have a certain discipline, and avoid overpaying for acquisitions. They shouldn’t have sumptuous headquarters or ostentatious perks. They should care about low-level employees and small clients. Conservative, Understated Executives shouldn’t mix business with social styling and other over the top dress practice. Investors are bothered by flashy manners, extravagant events or meetings, and anything that substitutes superficial showmanship for substance. Gold chain jewelry, monogrammed cuffs, overly chic designer shoes, or tony fashions are off-putting.
Investors are further disconcerted by executives appearing overly coiffed, with big rings, and fancy designer suits. The same for corporate headquarters, nothing too posh, ornate, or lavish. Making negative aspersions about competing companies and products, or Wall Street analysts who carry a negative view on your stock, is interpreted by investors as a cover-up for internal corporate inadequacies. Management references to their stock price valuation is repulsive to investors, connoting a short-term executive mindset. Executives should run the company to achieve financial goals and let the stock price follow along for the ride. Investors get nervous when they sense executive panic, or during difficult times when management behaves in a deleterious manner, making mistakes that compound the problem. A common miscue in investor communications is assuming a current challenge is a passing, short-term situation, one or two quarter in duration. Executives need to manage investor expectations by veering to the conservative, worst-case scenario. Investors will gain confidence as the outlook improves, and will not feel misled by an ostrich-like management attitude if it takes a little longer to right the ship. Executives should avoid blaming external, uncontrollable factors. Investors perceive excuses such as the economy, foreign currency, irrational competitor pricing, or a rival “buying” a contract, as evasiveness to dodge culpability. Take responsibility, take ownership. Don’t blame non-operational factors, things like inferior forecasting, accounting or reporting systems. As a long-time Street insider, I have even watched executives hold securities analysts and the press responsible when their stock price dives. Never turn inward, wall off the company leaders, or become inaccessible when a storm hits. Hiding from Wall Street, investors, and the press is a serious mistake. It might be calm inside the firm when executives are conferring and contemplating resolutions to a sudden crisis, but be aware that it’s not just investors but also clients, suppliers, employees, lenders, government regulators, and other key stakeholders that are roiled, and in need of handholding. Investors and Wall Street are constantly judging executive aptitude, appraising management prowess to determine a company’s prospects. Little things mean a lot. These factors are an important influence on the value of your company. ©2008 Stephen T. McClellan
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