Global Investors Sound Off On Positive Corporate Investment Traits

June 4, 2003 ( - "Prospects for growth" and the "integrity of the corporate management team" were tops among global money manager investment criteria when looking for places to make their portfolio bets.

However, investors are showing concerned about the credibility of information they receive, whether it comes directly from CEOs themselves or from printed corporate materials. When asked to rate a series of sources of information, fewer than half of the investors surveyed (43%) said they felt conversations with CEOs and top management of the company are credible sources of information, according to the Formula for Confidence: Resetting Investment Criteria” study conducted by Russell Reynolds Associates.

Overall, it was i nvestors in Germany (60%) and Japan (50%) that are the most likely to find conversations with the CEO and top management credible.   Conversely investors in France (26%) and the UK (36%) are least likely to find these conversations credible.  

Surprisingly, despite a recent spat of high profile corporate scandals, it was institutional investors in the US that remained more likely to trust corporate information than their global counterparts.   Overall, 55% of US investors view corporate information as credible.   In addition, fully 91% of US investors believe information is “neutral” to “extremely credible.”   Conversely, less than one-third in the UK, France, Japan and China hold the same view.

In the US, among those rated as “most reliable sources of information” were investors’ own company analysts (83%), followed by the company’s formal documents (71%).   Not surprisingly, the CEO is viewed as less credible as a source of information (46%) with sell-side and buy-side analysts behind at 29% and 35%, respectively.   The media trailed, coming in last with 6%.

Positive Traits

Investors were then asked what traits they looking for in a CEO. The results were very similar across the six countries sampled, as “low-profile” and an “internal focus” came out on top.   However, Japanese and French investors tend to favor an “external focus”.

Among the traits specifically being sought after, “great thinker” was preferred by 51% over “great communicator.”   Chinese investors prefer a great communicator (63%), and French investors are evenly split.   Investors are evenly split between a preference for general management expertise (50%) and industry-specific expertise (48%).   US, UK and Japanese investors favor industry expertise.   French, German and Chinese investors favor general management expertise.

Additionally, investors see steps being taken in the right direction as 63% of US institutional investors say holding CEOs and CFOs responsible for their company’s financial statements is a “positive step” toward restoring public confidence in corporate America.   Further, a full 100% of French and Japanese investors agree, with China, Germany and UK investors not far behind.

Regulation Nods

Leading this positive charge of disclosure is the Sarbanes-Oxley Act, according to the money managers.   Overall, more than seven out of 10 (73%) global institutional investors say that having CEOs and CFOs certify their companies’ financial statements is a positive step.

On the other hand, raising the red flag for 77% of the asset managers were too many inside directors serving on the board.   This number was less so for those in France (53%) and Japan (57%).

In the UK and China, board members who serve on many boards are of particular concern (72% and 63%, respectively).   This situation is less of a concern among investors in France (24%).

UK investors are much more likely than the average investor to look at the quality of a company’s board of directors (81% versus 56% overall) and performance of the CEO (75% versus 63% overall) when making investment decisions.

In the end though, it was still the US that was seen as an attractive country for investments, for 82% of the respondents, while Japan and Latin America are not seen as attractive.   Behind the US was China, ranked a little bit more attractive country (67%) for investment opportunities than Western Europe (65%).