An Introduction to Dissecting Chairman/CEO letters

November 16, 2016

Words matter! Mahatma Gandhi says:

“Your beliefs become your thoughts,

Your thoughts become your words,

Your words become your actions,

Your actions become your habits,

Your habits become your values,

Your values become your destiny.”

 

Most annual reports will include a letter from the CEO, chairman, or both.

I dissect every word in these letters, because it gives me interesting insights about the person and the company.

In an annual report I’m reading today, the chairman uses these words in a one-page letter:

“Over/During my tenure…” twice

“Throughout my chairmanship…” twice

These words may mean nothing. On the other hand, they might mean that the chairman cares a lot about HIS personal performance. Worst-case scenario: the chairman attributes a larger part of the company’s success to his efforts more than its 169,000 employees.

I will need to do more research to find out the true meaning of his words.

Why is dissecting every word important?

I believe that highly egotistical chairmen/CEOs tend to do worse for their shareholders than non-highly egotistical chairmen/CEOs. In other words, I think that the quality of the board and company executives have a big impact on shareholder returns.

In the above scenario, I would definitely do more research on the chairman and CEO through:

1) Google

2) Youtube

3) LinkedIn/Facebook/Twitter

4) Glassdoor

5) Books

6) Attending shareholder/investor events

7) In person meeting, if possible

8) People who may know the person

The purpose of this blog post is simply meant to pique your curiosity regarding the subject matter.

To learn more about why dissecting every word on the chairman/CEO letter is important and how to do it, the book  “Investing Between the Lines” by L.J. Rittenhouse will give you a very solid foundation on this topic.

 

If you would like to see more book recommendations, please read my blog post “7 Steps to Becoming a Great Stock Investor” http://mywealtharch.com/7-steps-to-becoming-a-great-stock-investor/

If you know someone who needs help with their investments, please let them know I can help. Share my website — www.mywealtharch.com

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