What sets great companies apart? Executives and directors at the most admired corporations in the world call it strong corporate “culture.” That means everyone–employees, investors, business partners–embraces the same values and principles. They share a unified sense of how success is identified, and of the kind of impact the company should have.
Culture, thus defined, is essential to marketplace success.
At the management level, executives should exemplify the culture through both actions and words. Although directors are not typically viewed as arbiters of corporate culture, in fact, leading boards also exemplify and demonstrate those shared values.
As boards and individual directors help set the “tone at the top,” they influence how the company is perceived by investors, regulators and other stakeholders, thus significantly impacting the company’s performance, reputation and value.
Four veteran directors from leading global companies will join a panel discussion at the upcoming 2012 NACD Board Leadership Conference to talk about the vital role directors play in establishing a culture that motivates the workplace:
Seth Goldman, president and TeaEO of Honest Tea, provides keen insights into how he created a company now viewed as a beverage industry innovator–and how leaders can imbue their organizations with a spirit of just such innovation.
Robert Hotz is a senior managing director and co-chairman of Houlihan Lokey. He is also the global co-head of corporate finance and a member of the board of directors and operating committee. Hotz serves on the board of directors of Universal Health Services and is chairman of the board of Pep Boys.
Ralph Sorenson is managing general partner of the Sorenson Limited Partnership. He is also president emeritus of Babson College, professor emeritus and former dean of the University of Colorado Business School, and former professor at the Harvard Business School. Dr. Sorenson serves on the board of Whole Foods Market, where he chairs the nominating and governance committee.
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.