The CFO — no longer the CEO — is king when it comes to dealing with buy-side analysts, Greenwich Associates concludes in this year’s U.S. Corporate Investor Relations Study.
The 688 Wall Street equity analysts interviewed for the annual survey, for the first time, ranked the credibility of a company’s finance chief as more important to the overall IR effort than that of the chief executive. And the proportion citing CFO credibility as an essential factor increased to more than 80 percent in 2008 from roughly three-quarters last year. This year, about three-quarters of respondents said called CEO credibility “essential” criteria in their corporate assessments, a proportion unchanged from 2007.
As it does every year, the survey ranked U.S. companies in a range of industries, based on the effectiveness of their corporate investor relations programs. Rated in the top 16 were Allergan Inc., Monsanto Co., Procter & Gamble, Simon Property Group, Adobe Systems, Rockwell Collins, EOG Resources, McDonald’s Corp., Gilead Sciences, Emerson Electric, FPL Group, XTO Energy Inc., United Technologies, AT&T Inc., Texas Instruments, and C.R. Bard Inc..
But it was the endorsement of the CFO’s that captured the most attention in the report. “In a slowing economy, analyst focus shifts from broad questions of strategic positioning relative to future growth potential to nuts-and-bolts measures of cash flows and financial health,” said Greenwich Associates consultant Bill Bruno. As a result, he says the firm is recommending that clients to make sure “their CFOs are ready for the spotlight.”
Said Bruno, “Analysts today are often much more interested in questioning and judging the capability of the CFO than in talking to the CEO. But many CFOs have backgrounds in accounting or finance as opposed to sales, and many have not received the same type of speaking and presentation training common among CEOs. Our data suggest that, outside of ensuring transparency in our accounting, one of the best things you can do to buttress your IR effort is to get your CFO some good communications training.”
For the survey of top corporate IR programs, each analyst was asked to evaluate large publicly traded companies they cover based on 12 qualitative factors, including capability and credibility of senior management, the quality of written reports, the accessibility of senior management, the transparency of accounting information, the quality of investor meetings, and the overall performance of each company’s investor relations department. A companies must be evaluated by at least 10 analysts to be included in the Greenwich rankings.