THE HUMAN FACTOR: Time spent by CEOs on nurturing good relations with investors and the City can pay dividends. It may even help compensate for poor performance

THE HUMAN FACTOR: Time spent by CEOs on nurturing good relations with investors and the City can pay dividends. It may even help compensate for poor performance - Jeffrey Skilling was, briefly, president of Enron, the energy trading company that spectacul

by PATIENCE WHEATCROFT, business and City editor of The Times
Last Updated: 31 Aug 2010

Jeffrey Skilling was, briefly, president of Enron, the energy trading company that spectacularly imploded just before Christmas. Enron's fate had been determined by dubious dealings before Skilling assumed the presidential mantle, but he probably hastened the end when, in a conference call with analysts, he took exception to a probing question and dubbed the inquirer an 'asshole'. Analysts do not respond well to public put-downs; neither do journalists. If they encounter hostility, they are likely to return it.

Executives may often be tempted to echo Skilling's behaviour when confronted with analysts or journalists they deem brash or ill-informed. In the interests of their companies, however, they should bite their tongues and smile patiently.

This is not easy, and some will find it impossible. Sir Richard Greenbury, for instance, could not disguise the contempt that he felt for those, generally very much younger and less experienced than he, who had the temerity to question what he was doing at Marks & Spencer. He grudgingly paid people to deal with press inquiries, but the tone of relationships is set at the top. After years of Greenbury's stewardship, M&S had few friends among the analysts and even fewer in the press. When the company's trading turned down, the pent-up antagonism that Greenbury's attitude had fostered flowed into print.

Naturally, commentators will insist that they do not allow personal feelings to influence their views. When M&S was trouncing the competition, the reviews had to reflect that success. But Greenbury had ensured that when he faced problems, those he had treated so disdainfully did not look so charitably on his predicament.

Creating good relations with those who influence share prices and investor attitudes is a wise insurance policy. Giving accurate and plentiful data is a good start, but the tenor of exchanges between companies and those who monitor them can colour the way that information is assessed.

Greg Hutchings might now see the sense in cultivating good relations with the City and the media. The former Hanson executive seemed to regard analysts and investors as nuisances while he was building up Tomkins. When investors became wary of conglomerates, and his collection of businesses fell from favour, he criticised them rather than wooed them.

So he should not have been surprised that, when damaging allegations were made against his stewardship of Tomkins, he received little support. He was pushed out of office as a new chairman launched investigations into how the company had been run. His protests that everything he had done had first been cleared with the board went largely unheeded. Instead, a largely hostile press dwelt on the fact that his wife and housekeeper had been paid through the company, and Hutchings had to reach for his lawyers to get the charges of foul play withdrawn.

While the first job of any chief executive must be to concentrate on running his business, most realise that time spent on nurturing good relations with investors and the media can pay dividends. It can even go some way towards compensating for poor performance: if business leaders are well liked, they stand more chance of being given the benefit of the doubt when things go wrong.

Eric Nicoli, for instance, has not had an entirely successful career. Under his reign as chief executive, United Biscuits often provided headline writers with the opportunity to use the adjective 'crumbling'. Now that he is at EMI, there has been a series of failed attempts to engineer mergers, and sales have faltered. But few who talk to Nicoli about his business fail to warm to his enthusiastic approach. He is the sort of chap that even the meanest of analysts would feel bad about kicking too hard.

John Mayo's approach as finance director of Marconi, on the other hand, won him few friends outside the firm and probably even fewer inside the former GEC. When it became clear that both he and chief executive Lord Simpson had taken the once great company to the brink of disaster, the reaction was tinged with the same animosity that greeted Greenbury's downfall.

But just how far companies could, and should, go in the quest to establish a positive rapport with commentators is not easy to define. Most analysts and journalists are capable of accepting corporate hospitality without it influencing their verdicts on what the outlook might be for corporate profits.

They are, however, only human. If they respect and like the people running a business, they may well see that business in a more positive light.

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