Honesty is best policy for investment – probably

The same is true for companies listed on the stock exchange where corporate reputation is everything. To stand out as a successful growth stock a company’s business strategy needs to be well known, particularly as so many complain that liquidity in their shares are poor as no-one knows them outside of their major investors.

Equally a company’s reputation needs to be well-respected by potential shareholders before they are likely to consider investing some of their hard-earned savings.

A company’s reputation needs to be one of consistency when performing against expectations; one of honesty, being upfront about the challenges that a business faces; and one of ambition, with the vision to deliver growth and significant returns.

No-one knows this better Gerald Ratner who famously undermined his jewellery brand value by describing the products as ‘total crap’ in a speech 28 years ago. The simple act of describing a set of earrings as “cheaper than an M&S prawn sandwich” managed to wipe off £500m from the valuation of Ratner Group and nearly brought the company to its knees.

It will be interesting then to see the reaction by consumers to the new television adverts from Carlsberg due out next month which admits that it is “Probably NOT the best beer in the world” - a reversal of the famous brand boast and ‘probably’ catch phrase used for nearly half a century.

Having admitted that they had lost their way Carlsberg have revamped their beer with new ingredients and new brewing methods. The television ads follow a social media campaign which saw Carlsberg employees reading out brutally direct tweets that describe the ‘probably’ best lager as tasting like "stale breadsticks” or “like drinking the bathwater your nan died in” (and those are the polite ones).

Time will tell whether the reformulated taste will address the problem of declining sales for the beer, but it’s a bold move by the company to take such a candid approach to their product’s quality and to address this in such an upfront way.

For listed companies I wouldn’t recommend getting staff to read out tweets from disgruntled shareholders, but clearly listening to feedback, evaluating your own performance, making adjustments to strategy and then communicating that well to stakeholders should be the aim of all CEOs.

Investors welcome authenticity and honesty when addressing the challenges that all businesses will face as the operate, and it is this transparency that is respected and which generates positive goodwill from existing shareholders and attracts new ones. Clearly the ability to deliver against a strategy is paramount, and the maintenance of a top reputation requires the performance to back it up.

It is encouraging that as a PR firm we are seeing an increasing number of smaller AIM listed companies looking to improve the way they communicate to investors.

A common theme amongst nearly all of the companies that I’ve met recently is that they’ve been through troubled times but are now on the up. They’ve disappointed in the past, they’ve taken steps to address issues, they’ve undertaken change at the top or they’ve refinanced the business ready for growth.

All of them have recognised the change that was needed and whilst a few existing major shareholders have seen the potential many of these companies are frustrated that the turnaround has yet to be recognised by the wider market.

These situations are a great opportunity, not just for communication advisers like myself, but for investors looking for value and for the companies themselves who are looking to re-engage with a wider investor base and return to growth.

If communications with all investors, big and small, is consistent, open and honest then this will go a long way to ensuring a strong corporate reputation.

Couple this with delivering on expected performance and you will have a recipe for success that works for everyone … probably!