A recent study from FTI consulting found that, while CEO reputation is consistently a critical factor in investment decisions, that importance is amplified during a CEO transition. The study revealed that 39% of investors would likely sell a stock based solely on the CEO. It stands to reason, then, that a new CEO—unproven as the company’s leader—is battling higher stakes than an established executive.
Further, Edelman claims that a company’s communication can move the company’s market value by up to 10% during the first 10 days following a CEO transition. So, in this volatile time when so much is on the line, how can a new executive—and the entire corporate communications team—leverage their communication strategy to maintain investor trust and ensure a smooth CEO transition?
Focus on establishing the new CEO’s credibility
The same study found that, in their evaluation of an incoming CEO, investors are most interested in his or her track record. Anything the communications team can do to build credibility—from highlighting the new executive’s prior achievements to citing former colleagues and customers—is likely to help maintain investor trust throughout the CEO transition.
Showcase the new CEO’s familiarity with the company, and industry know-how
While charm and leadership style are not to be overlooked, they’re not nearly as important as the incoming exec’s business-specific know-how. So, during a CEO transition, it’s critical that the new leader—with the support of the communications team—display a clear understanding of the company’s history, challenges and vision, as well as its place within its industry.
Align on messaging to shareholders throughout the transition
When investors start getting different messages in press releases versus shareholder letters versus earnings calls, that’s when they start to wonder what’s going on behind the scenes—whether the company is uncertain about the new leadership, or is hiding some sort internal trouble.
To help ensure a CEO transition doesn’t rattle investors’ confidence in a company, the communications team must work to keep messaging surround the transition consistent, from the announcement through the new leader’s first few months in the corner office.
Executing a CEO transition is no easy task.
To learn more about how we can help your team use analytics to prepare for a smooth transition—and improve all your executive communications—contact us at email@example.com.
More on CEO transitions and executive communication measurement from Quantified Communications