Communication Is Key to Restoring Investor Trust

Article excerpt


In the past few months, there has been a combination of concern and scrutiny about whether or not corporate management teams are working with the company's shareholders in mind or simply running the company in their own interest. I suspect the reality of the situation falls somewhere in the middle.

As an investor in public companies and a shareholder in those that meet the grade and become part of our portfolio, I favor companies that have management teams that are not only motivated and properly incentivized to run a profitable and growing business but are also responsible stewards of the business for the long run rather than ones that focus on risky, short-term benefits.

At the same time, we have to recognize whose job it is to oversee the management team of a public company, and that responsibility falls on the shoulders of the board of directors. These individuals are elected as not only stewards of the company from a financial and business perspective but also to serve as overseers of the management team. However, there are times when board members are not as independent as shareholders would expect.

When they are not, it calls in question the board's ability to fulfill its fiduciary responsibility to company shareholders as well as the trust that they will make prudent, though difficult, decisions that are in the company's best interest not just that for the management team. This is as true in today's environment as it was in previous crises.

As Barbara Franklin, chairman of the board of the National Association of Corporate Directors and former secretary of commerce, has shared, We who are directors have a key role in restoring trust in Corporate America.

Restoring trust is a difficult challenge, especially for directors who have limited contact or dialogue with the shareholders they represent.

Imagine a world where the only contact between voters and their elected officials is an annual open-forum shouting match. This is essentially the situation we face today in Corporate America. It does not serve anyone's interest.

One need only to look to the example of Bank of America's annual shareholder meeting Wednesday: The level of frustration was a clear indication of a broken communication system.

Luckily for investors both professional and individual, there is a new company that is helping boards and shareholders better communicate with each other. …