CEO Messaging: It Matters

The earnings report was ho-hum: neither good nor bad. On the quarterly earnings call, the CEO, CFO, and COO were calm and jocular. But after ticking off the numbers, they unexpectedly found themselves fielding questions, from both journalists and analysts, about the war.

Typically, earnings calls are for the Wall Street crowd, but a new Korn Ferry study suggests that a leader’s remarks on those calls can hugely affect their company’s long-term financial performance—particularly if the leader is unprepared to respond thoughtfully to questions about current events. “You can use control messaging about a chaotic event and its impact,” Peter McDermott, head of the Corporate Affairs practice in North America for Korn Ferry.

Korn Ferry researchers analyzed over 540 earnings calls from 90 companies during the eighteen months following CEO successions. They subsequently tracked companies’ stock performances over the next three years. They found that stock growth at companies whose CEOs used strong messaging was 12% higher than that of industry peers; at firms whose leaders used weaker messaging, it was 15% lower. “How a leader speaks may be among the earliest reliable measures of whether the leadership is working,” says Guangrong Dai, senior director of research at the Korn Ferry Institute.

In recent years, CEOs and other leaders have found themselves drawn into geopolitical issues—including new tariffs, inflation, and AI—far more often than their predecessors were. In the Korn Ferry study, the so-called external awareness of the leader mattered: CEOs weak in that category were five times more likely to be underperforming than peers with stronger awareness were.

During global conflicts, what’s said by leaders—and how it’s said—truly matters, especially in an age when analytics platforms like S&P Capital IQ can analyze earnings-call language according to metrics like sentiment (positive, negative), tone shifts, themes (strategy, results), and language complexity (more complicated = less favorable). “Unlike conventional metrics, AI can really tell whether or not the communication is transparent,” says Dai. The market doesn’t respond well to a lack of transparency.

Experts advise leaders to get ahead of these questions by clearly articulating the conflict’s impact on the firm—for instance, on energy costs, supply-chain disruption, market instability, and/or recruiting. “Embed these ideas in what they say to the Street,” says Jean-Marc Laouchez, president of the Korn Ferry Institute. “The market doesn’t like surprises.” The leader, he stipulates, should come across as empathetic, authentic, and—since no one knows what the future holds—neutral.

Rather than shying away from questions about current events that may or may not bear on the company, experts say leaders need to be thoroughly prepared. They should have talking points at the ready to address any current events—what’s happening, how it’s affecting the firm, and how the firm is responding, says McDermott. “Be a thought leader,” he advises. This can mean making a broader statement providing perspective on, say, the economy and the talent market. If stakeholders are truly unaffected by the event, the leader can follow up by saying, “Our thoughts are with anyone who’s been impacted,” before pivoting back to a company-related topic.

The trick is to avoid making a controversial statement, especially one that favors a particular side. “It carries the risk of getting drawn into polarization and backlash,” says communications expert Richard Marshall, a consultant at Korn Ferry. These kinds of clashes have been common in recent years, as executives have found themselves drawn into lightning-rod issues. Leaders are not politicians, but the environment is very political, Marshall says. “The market does not like surprises,” notes Laouchez.

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