Tag Archive: Avon

Shareholder Letters: An Overlooked Communications Asset

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For all the hyper-connectivity in today’s world, CEOs and boards have precious few opportunities to reach out to shareholders in a way that is personal, memorable and compelling. Most communication between the C-suite and investors is filtered through multiple handlers and channels. The requisite legal and regulatory compliance language is often such a distraction that the real meaning, and the real intent, of the message can be lost.

The annual letter on the “state of the company” included with a company’s annual report is an ideal tool for CEOs and board chairs to more closely communicate with all shareholders, from global institutions to the smallest investors. Yet too few companies fully seize on this ready-made opportunity. Many CEOs are content to just keep it short and focus on the financial story, offering little context on the events that defined the past year and no articulated vision of what investors can expect in the future.

It’s a missed opportunity, as CEOs could and should be using the annual letter to provide all shareholders a glimpse into who they are and how they’re running the company. They could and should be sharing their best thoughts in their own voice, spotlighting issues and topics in a way that will build confidence among investors that the right management team is at the helm.

The undisputed master of this forum is (no surprise) Berkshire Hathaway Chairman and CEO Warren Buffett. Buffett’s annual letter to shareholders topped the recent NACD Directorship magazine’s list of Best Annual Shareholder Letters, which evaluated the entire Fortune 200 list.

Buffett’s letter is understated yet highly informative, giving credit where credit is due, reinforcing the corporate business strategy, and setting the table for how he wants investors (and others, including analysts and media) to perceive the company and its leadership.

On each of the five criteria that NACD Directorship uses to analyze CEO letters, Buffett was in a class of his own. His letter provides a dynamic assessment of the corporate performance, full transparency, a clear outline of the steps Berkshire Hathaway is taking to tackle its challenges, a strategic process that accounts for environmental changes, and insights into the corporate management style. Buffett transforms the shareholder letter from a simple formality into a major influencer on how his company is perceived.

As a tool that actually builds shareholder value, Berkshire Hathaway’s letter is in a class by itself but certainly not the only notable example. Coca-Cola, FedEx, General Electric, General Motors, Google, and Wal-Mart all stood out as companies that go beyond formalities by utilizing the annual report letter as a critical communication tool.

NACD Directorship also singled out others—including the Bill and Melinda Gates Foundation, Abbott Laboratories, Amazon, Avon, Exelon, Hewlett-Packard, News Corp., and Zipcar—for how their letters coherently explained and evaluated special circumstances that had arisen.

All of the letters on this year’s list of the best offer a real insider’s view—and it is, after all, the essence of effective IR to help investors feel they’re personally part of the team. Executives act like leaders when they show their stakeholders how they lead.

For more examples of great shareholder letters, visit www.NACDonline.org/Power-of-the-Pen. We hope they inspire you to utilize some powerful communications strategies of your own.

Balancing Act – Building a Better Board

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Boards today face an increasing number of demands. In addition to an increasing number of regulatory requirements, they are also meant to be the problem solvers and strategic leaders for companies. With the fast pace and growing complexity of business today, that is no small task. To guide an organization through today’s challenging business environment, the board must be comprised of directors with a wide range of skills and experiences

Diversity of a board is not simply guided by race or gender. There must be diversity on an intellectual level. A board that truly serves as a strategic asset to investors is one that brings together a team whose skill sets are aligned with the goals of the company. For example, a U.S. company interested in expanding overseas operations should have a director on its board that has experience taking a company global.

Even companies that have a targeted demographic, such as Avon “the company for women,” have diverse boards. Although Avon’s tagline is generally a women-centric company, the company’s board is represented by a mix of men and women, as well as directors with varying ethnic backgrounds. Boards today need to have a range of skills and experiences in their portfolio to help companies succeed in an increasingly competitive environment.

NACD and the Society of Corporate Secretaries and Governance Professionals held joint roundtables nationwide to bring directors and legal professionals together to discuss the board building process. This distinguished group identified three fundamental concepts for creating the optimal board composition:

1. Analyze the needs of the board, its strengths and weaknesses, and determine what skills are needed for aligning the board with the strategy of the company.

2. Recruit to the board’s needs by casting a wider net to find candidates who have the skills, experience, desire, and time necessary to drive performance at the board level.

3. Evaluate the board regularly to identify areas to improve its own performance and develop a plan to address them.

Boards of directors are working to build better balanced boards through the assessment of skill sets and experience. NACD offers several board composition planning tools to help directors determine the best possible construction for their boards.