“The latest revised UK code…states: “There should be a dialogue with shareholders based on the mutual understanding of objectives. The board … has responsibility for ensuring that a satisfactory dialogue with shareholders takes place.”
But how hard companies find this basic task to be. Drowning in technical measurements – total shareholder returns, earnings per share, economic value added, earnings before interest, tax, depreciation and amortisation – they fail to answer the much more important and basic questions: why do you exist? What are you trying to do? Would you buy shares in a company that couldn’t answer these questions simply, in plain English? No wonder some investors lose faith in corporate leadership teams.”
STEFAN STERN, Financial Times (31 May 2010)
Last week in this column I asked companies to take the position of Chairman of the Board very seriously. This is a demanding role, fit only for genuine leaders with an array of talents. It is not a position to be decided by rotation, or on the basis of spurious seniority.
This week, let me expand on one of the chair’s key roles: that of Chief Storyteller. Don’t be horrified – I’m dead serious. By stories I do not mean exaggerated fables or outright lies about the company; I mean the very interesting, compelling account of what makes the company unique and what will continue to make it successful in years to come.
Every good organisation has such a story. Safaricom’s story is about remarkable innovation and obsessive execution. Serena Hotels’ story is about dedication to customer service and meticulous selection of locations. KCB’s story is of a vigorous turnaround in governance and management. Standard Chartered’s story focuses on intelligent segment selection and deep relationships with clients. Kenya Red Cross’s story is one of rallying the workforce around a big cause.
These stories tell of why an organisation has succeeded, and why it will continue to do so. The stories are all different, but all deeply interesting. As a company talks to its many constituencies, it must understand its own story, and put it across very well.
As an investor, I am less interested in numbers than I am in the story behind the numbers. Sure, I will look at the company’s balance sheet and and its capacity to earn income, with interest. But what is more intriguing is the reason why those numbers are being realised. Why this company, and not another? What makes this one so different, and why doesn’t everyone do what it does? What is the compelling reason customers stick to this company? Do its employees love to work for it, and why? Will these advantages waste away, or will they stand the test of time?
That’s the story I want to hear. Who should tell it? Well, CEOs are usually given the role of communicator-in-chief, and perhaps rightly so. But I agree with Stefan Stern: it is time board leaders also stood up to talk the talk – particularly to shareholders present and future. As I have written before, boards only communicate with shareholders through two channels: the Annual Report and the Annual General Meeting. Both are formulaic, stilted, tedious, contrived and unnatural affairs. Who decided that shareholders only want to hear about changes in working capital, earnings per share and amortisation rates?
In Kenya we are very bad at telling the real story about our organisation. We hide behind figures and charts, when we should be instilling excitement in our stakeholders. We need chairmen who can keep the crowd gripped, who can liven up proceedings, who can convince and persuade. Not charlatans and spin-doctors, please understand; but people who have the story at their fingertips and can weave it into life. Business was never meant to be as dull as we seem to have made it.