A new study led by the University of Zurich has found that when CEOs expressed concern for people during the COVID-19 pandemic, their companies’ stock prices performed better. The researchers looked at data from 510 conference calls between CEOs and financial analysts during the crisis.
Surprising Findings: Empathy Matters to Investors
First author Lauren Howe was surprised to find that some CEOs talked about their concern for employees, customers, and others affected by the virus during these calls. “At first glance, these statements seem to be of little relevance for financial analysts and therefore should not affect them,” she said.
However, the study discovered that companies whose CEOs made at least one statement showing care for people had better stock prices than those whose CEOs did not, even though most of these statements were superficial and did not include specific actions.
Small Gestures, Big Impact
The researchers found that just one additional statement of care for people was linked to a 2.49 percentage point increase in a company’s stock returns. For the median company in the study, with a market value of around $3.17 billion, this meant about $78.9 million of financial value was preserved during the crisis.
Leadership: Balancing Performance and People
Further analysis showed that CEO statements of care were associated with lower stock volatility during the crisis, but not with analysts’ predictions of future earnings. This suggests that investors saw these companies as less risky when their CEOs expressed concern for people, even if the statements were generic and not directly related to finances.
“Leadership is about both performance and people,” said last author Jochen Menges. “Our study provides evidence that care for people pays off – even in conference calls with analysts and investors who are expected to focus squarely on performance.”
Examples of CEO Statements
Some examples of CEO statements from the study include:
“I mean, first of all, any time people are sick or tragically lost their lives that’s a much more important topic than anything we’re covering today. So, I just want to sort of put a fine point on that.” – Strauss H. Zelnick, CEO of Take-Two Interactive Software, Inc.
“First off, the whole coronavirus situation is a human situation. It’s kind of a human tragedy.” – Andrew Anagnost, CEO of Autodesk, Inc.
“Obviously, the coronavirus makes a very fluid situation. […] I’ll start by saying, our first priority is making sure that our employees, partners and customers are safe.” – Anders Gustafsson, CEO of Zebra