CEO’s who speak in their real voices can build trust

By Chris Plunkett

I can remember preparing a CEO for an IPO years ago and there was some concern that he was personally selling too many shares in the offering. When management sells into an IPO, it can send a signal that growth is slowing. After all, if you believe in the company’s investment potential, why would you sell shares, especially when you’re asking investors to put their money at risk in the IPO?

As we counseled him on addressing the top investor questions expected to be asked, we came to the question of why he was selling so many shares. His answer: “you don’t know my wife, this isn’t nearly enough.” In this case, you might think a better response was in order. But, this was, in fact, the best answer – because it was true. It was also amusing and completely in sync with the CEO’s personality. In fact, sometime after the successful IPO, his spouse went on to build one of the largest and most expensive houses in the nation.

Moreover, not long after the IPO, the company was sold to a conglomerate, delivering a nice return to the initial shareholders who believed in the story. The company’s business strategy was indeed solid – and the CEO played a major role in creating value for investors, for himself – and for his spouse.

The company’s business strategy was indeed solid – and the CEO played a major role in creating value for investors, for himself – and for his spouse. This is an example where a very challenging question was neutralized by a very candid response. It worked, not only because it was true, but also because investors trusted the CEO. He was actively engaged, had been the visionary behind the company’s business – and had delivered great results. The point is candor works best when it’s real. By that I mean when it’s delivered in the CEO’s true voice and is consistent with his or her personality – and it certainly doesn’t hurt when the company has a healthy track record.

This is an example where a very challenging question was neutralized by a very candid response. It worked, not only because it was true, but also because investors trusted the CEO. He was actively engaged, had been the visionary behind the company’s business – and had delivered great results. The point is candor works best when it’s real. By that I mean when it’s delivered in the CEO’s true voice and is consistent with his or her personality – and it certainly doesn’t hurt when the company has a healthy track record.

In another example, during quarterly conference calls, a former client was often asked to provide guidance on revenue expectations for the quarter ahead. This became difficult to do because the nation had entered a recession, the business had become erratic and visibility was limited. Projecting revenues a couple of months out had become all but impossible. Yet, some management teams at peer companies were attempting to dance around the question.

We had counseled the CEO to simply explain that given the macro environment, he could only provide color on revenue pacing at the time of the call. He took our advice. But he also alternated between two additional responses whenever he was asked the guidance question. The first was that he would have to check his Ouija board to see what the spirits might tell him regarding future revenues – and the second was that he needed to step outside to see what the Indian smoke signals indicated on the horizon.

Investors loved the CEO’s responses because they brought levity to what had become a rather unanswerable question. They also appreciated his dose of candor – of the real kind. His answers were in sync with his engaging personality. He was also a well-respected executive, considered one of the most talented in the industry. As the macro-environment worsened the company he led was ultimately privatized – and shareholders received a nice return on their investment. Afterward, I did what was only natural, I sent him a Ouija board for his office.

Candor can be a great tool for CEO’s – especially when it’s real. When a CEO tells it like it is – not just to tell like it is – but because that’s how he or she really talks and views the circumstances at hand – that can be a powerful thing. When combined with a solid business strategy and commitment to accessibility and transparency, real candor can become an anchor of credibility.

Real candor gives investors the true insights they need beyond the small print. It balances the standard risk/reward language with the kind of color that supports some clarity and comfort – even when a CEO can’t provide a definitive answer. Real candor can give investors conviction that they are in fact getting the real story. Whether they like it or not is up to them.