21st January 2018
Shiwei Yin of Grayling’s New York team shares some valuable observations on servicing international clients.
I have worked with Chinese management on investor relations and media assignments in the US for a number of years. And the cultural divide between Chinese management and American stakeholders presents a number of challenges.
Data-driven storytelling is a challenge for Chinese management. The root cause of the problem is complex, as it reflects the underdevelopment of accountability, transparency and good governance at a business and societal level in China.
Chinese management tend to polarize when it comes to data-driven storytelling (at least in the US). On the one hand, Chinese management would rather forfeit data-driven communications and its potential benefits if the perceived cost is higher. A case in point - whereas forward-looking guidance is a key communications tool that American management use to calibrate investor expectation and to build trust with market participants, this tool is underutilized by Chinese management as they are less comfortable with the ongoing management of guidance, especially in the public domain where they are held accountable, and the possible miss on guidance and a sell-off in stock.
On the other hand, Chinese management can get too liberal with data presentation in private conversations, and are either not aware or choose to forget that that every data point they mention will likely be fact checked. I recall a media assignment where the publication of a WSJ story on a Chinese client was delayed partially due to difficulty in verifying my client’s claim on the company's product market share.
Consistent communications in the face of adversity presents another challenge. When Chinese management struggle to get certain points across to American investors and reporters, they may be tempted to attribute the communications difficulty to real or imagined cultural differences. Such attribution is maximized in times of crisis, and can spiral downward into a vicious cycle of mutual distrust between Chinese management and their American audiences.
Between 2010 and 2012, US listed Chinese companies were en masse targeted by short sellers for alleged accounting irregularities, disclosure violations, and corporate governance malpractices. Although proven wrongdoings were few and far between, the investment space became so toxic that a whole slew of US listed Chinese companies saw their stock price got halved in a day. Many Chinese management simply gave up on communications and went dark, as they were convinced that American investors either don't get some of the local ways of doing business in China, or just don't want to believe management, no matter what.
Obviously, silence on the part of Chinese management only led to more suspicion among American investors, many of whom chose to sell first and ask questions later.
Bridging the cultural divide
After four decades of unprecedented economic growth in China, many of today's Chinese CEOs are still first generation entrepreneurs, who are not properly informed or trained to perform communications responsibilities that come with running public companies, let alone doing so in a cross-border setting.
It is our job as communications advisors to drive home the message that the journey of a public company begins with listing, and that investor and public relations have real-world consequences on stock valuation, operational and financial performance and corporate reputation, and therefore should be treated with high management priority.
For providing guidance, my experience has been to ease management into the practice with something achievable such as providing annual top line guidance only, to seek investor feedback thereafter and to increase the frequency (from annual to half year to quarterly) and parameters (from top line only to top and bottom line and margins) of guidance over time.
As for consistent communications, we can attempt to bridge the cultural divide by getting management involved in creating the communications plan, helping them to stay on track with the plan in good times and bad, and with the help of relevant lessons from the past.
Shiwei Yin works with many Chinese and other international companies, as part of Grayling’s New York Investor Relations team.
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