The book, Investing Between the Lines: How to Make Smarter Decisions by Decoding CEO Communications, by L.J. Rittenhouse, documents a compelling relationship between effective communication and corporate stock returns.
Rittenhouse, an investor relations specialist, has compiled an annual survey since 1999 of CEO letters to shareholders which ranks 100 large companies based on corporate culture and candor. The surveys have tracked CEO shareholder letters since 1999 to study their words versus deeds.
The surveys found that corporate leaders who do what they say have more efficient, productive, and successful companies. Rittenhouse’s annual rankings have consistently shown a compelling relationship between executive candor and stock returns.
Who knew? We all did, that’s who. Communication professionals have been urging business leaders to engage in honest, candid, two-way communication with all stakeholders, including investors, for decades now. However, I think honest, frequent two-way communication with shareholders is now more important than ever. With so much emphasis on the troubled world economy, investors deserve straight talk from business leaders.
As Rittenhouse proves, effective communication leads to better stock returns. That’s a win-win.