Holmes Report 11 Mar 2012 // 12:00AM GMT
Shareholders believe the chief executives of companies with interests in the United States should be engaged in Washington, DC, policy debates, according to a new survey of institutional investors conducted by the strategic communications practice of FTI Consulting (the former FD).
The report’s findings run counter to a viewpoint in corporate America that the machinations of government and public policy are no place for corporate executives. In fact, the message from the FTI research is that analysts and investors not only give their permission for CEOs to engage in the political process, these analysts and stakeholders mandate it.
The study, The CEO as Statesman, shows that institutional investors believe that decisions made in Washington, DC, have had a significant negative impact on the value of investors’ portfolios. By extension, investors want the management of their portfolio companies to explain how public policy can affect the business and how those executives are managing the impact of policy changes.
With respect to CEO-level engagement inside the Beltway, more than 85 percent of participants in the study feel CEOs must proactively engage with policymakers to help protect shareholder value. Not surprisingly, chief executives who connect with DC influencers are significantly more likely to be seen in a positive light by institutional investors, who would welcome greater transparency into efforts of companies that aim to shape government action.
“Much has been made of the gulf between Wall Street and Capitol Hill and, while many corporate leaders are alarmed by the increased oversight of business as a response to the Great Recession, few CEOs have made it part of their mission to engage in policy debates,” says Edward Reilly, global chief executive officer of the strategic communications practice at FTI Consulting. “When you consider just how much even a small policy shift can shape a market—not to mention more serious overhauls on the magnitude of healthcare, financial services regulation and America’s corporate tax rate—it is self-evident that executives must be part of the dialogue. Along with customers, suppliers and investors, policymakers can be critical to the success of a business, and this constituency cannot be left to chance.”
The survey found that:
• A large percentage (89 percent) believe that current policy decisions are important to investors’ portfolios.
• Nearly all (95 percent) overwhelmingly report that the impact of the decisions coming out of Washington, D.C., has been negative for investment portfolios.
• Eighty-six percent wish for CEOs to be at least moderately engaged in public policy debates related to their business. More than one-half of investors say that CEOs should be actively engaged.
According to Reilly, the research shows that company management should be required to protect its organization from political and regulatory threats. “A thoughtful and rational civic engagement program can give a CEO or company access to policymakers and opinion leaders who are interested in finding common ground and solutions that are mutually beneficial. Becoming a ‘CEO Statesman’ is essential to position executives above the partisan fray as policy leaders and broad advocates — for industry and for the country as a whole.”