Firms need to dress to impress investors

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When I am coaching younger people ahead of a job interview, I talk to them about how the session effectively starts before you enter the building. Partly it is a matter of getting into the right frame of mind and partly it is because you never know who you might meet who knows the interviewer.

We also invariably talk about how you should dress in order to impress the prospective employer; how you present an appropriate demeanour; and how you create a positive connection between you and your future boss.

Much of this is about physical appearance, but also it is about creating rapport with the interviewer through body language.

We also talk about the questions you will inevitably have to ask at the end of the interview. Different employers will be looking for different personalities and competencies.

If all goes well you get the job. Then it is time to think about how you develop in your new role and make the right impression with your colleagues and the management team.

I have described an inter-view, an exchange of thoughts, impressions and insights, which determine whether a trusting relationship can be built between employer and employee.

It is a very rough and ready way for both employer and employee to tell whether they are suited or not.

Companies face the same challenge with investors. They have to dress up and behave in the way that investors expect them to. If they want the money (aka the job), then they have to dress to impress. That is the deal.

Knowing how a company should present itself is helped (and often hindered) by the need to produce a prospectus when they join a public equity market, press releases, annual reports and other information on their website.

The OECD has recently produced a report, Growth Companies, Access to Capital Markets and Corporate Governance. It says that, “…not only does the IPO [Initial Public Offering] provide immediate access to equity capital, the formalised corporate governance structure that follows may also increase the company’s financial flexibility and make it possible to ensure more sustainable access to other forms of market based-finance at a lower cost.”

By dressing up and behaving in the right way, the OECD is suggesting that publicly listed companies may be able to get better jobs and effectively be able to earn more as they grow.

In their world this is access to a wider range of finance at a lower cost. It is not often that a discussion on corporate governance makes such a strong case that good corporate governance lowers the cost of capital.

But, when you think about it, it is the same as the rest of human activity. You will get paid more if you create the right impression and – importantly – behave and perform in line with that impression.

Companies do not have to wear the same uniform or suit when they approach the markets for finance. As the OECD also says in its report, “…flexibility in terms of an individual company’s corporate governance should not be interpreted as a need for less demanding rules or the acceptance of sub-standard corporate governance practices.

Rather, it should be used to adapt corporate governance practices to the specific needs of both investors and corporations.” This is why a “comply and explain” approach to corporate governance allows responsible companies to be flexible and demonstrate their own characteristics and personality whilst building up trust with investors.

If everyone wears the same suit and tie then how are we to work out who we want to employ...or invest in?