How CEOs Talk About the Long-Term

By Brian Tomlinson Research Director, Strategic Investor Initiative, CECP

When presenting to investors, CEOs need to go deeper than just telling a good marketing story. Institutional investors want to hear more from CEOs about how they are positioning their company to succeed in the long-term. CEOs need to demonstrate that the company’s leadership understands how long-term issues impact value creation and has developed a strategy to mitigate risks and ensure sustainable business practices.

The problem we currently face is that the existing marketplace for investor information is oriented to the short-term. There’s an opportunity to decrease the information asymmetry between corporations and investors by increasing the amount and quality of long-term focused disclosures.

CECP’s Strategic Investor Initiative provides comprehensive guidance to CEOs and their Investor Relations teams on the key components of a long-term plan — set out in our Investor Letter to CEOs.

Through feedback from institutional investors we have identified content elements essential to an effective investor-facing CEO-delivered long-term plan:

  • Additive to existing disclosures: Add information to the public domain or provide additional context for existing disclosures.
  • More than marketing — contextualized disclosures: A strategic plan narrative is not a recitation of good news stories. Initiatives should be contextualized to help investors assess their significance.
  • Focused by materiality: A long-term plan should disclose information that is material to the operating performance and financial prospects of the business.
  • Integrated discussion of material Environmental, Social, and Governance (ESG) issues: Part of an integrated discussion — not a silo or presented as a list of “awards.”
  • Forward looking information: A long-term plan is an opportunity for a company to meaningfully talk about the future across a broad range of value-relevant topics, accompanied by goals, metrics and milestones.

In our white paper Emerging Practice in Long-Term Plans, we draw out key themes that CEOs have addressed in their long-term plan presentations delivered at CEO Investor Forums convened by the Strategic Investor Initiative. We identify why each theme is an enduring subject of investor interest and provide examples from CEO presentations of content that was well-received by institutional investors. We also provide suggestions of key additions that CEOs can make to enhance the utility of disclosures on these key themes:

  • Risk factors and mega-trends
  • Corporate governance
  • Capital allocation
  • Human capital management
  • Shareholder and stakeholder engagement

Read the full paper here: http://cecp.co/wp-content/uploads/2018/10/CECP_Emerging-Practice-in-LTPs_Final.pdf

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