Trust actions, not words, life experience assures us. But when it comes to human lives, any manifestations of empathy, even if not backed up by any specifics or promises of action, have a very real positive effect. Which can be assessed, for example, by market value figures.
That's the conclusion reached by researchers from the University of Zurich and the London School of Economics who studied the speeches of 448 CEOs at the start of the Covid-19 pandemic. Their work was published March 11 in AOM Discoveries.
The authors of the work collected transcripts of 510 addresses to employees and investors by the heads of the largest American companies included in the Russell 3000 index (which covers 97% of the US public stock market). And carefully studied each of them.
Empathy matters
In general, all speeches were contextually socially oriented. However, only a little more than half of the CEOs expressed concern about the health and safety of colleagues, customers, shareholders, etc. in at least one phrase. There was no specifics in their words: no one promised any sky-high payments or compensation or any other action plans. For the most part, it was about general phrases that we usually ignore: “our key priority is the health and safety of people.”
However, it turned out that even one such phrase in the statement was clearly associated with a 2.49% increase in company profits compared to corporations whose directors did not make such statements. If we consider that the median capitalization of “caring” companies was $3.17 billion, this helped save about $80 million.
Further study of the phenomenon showed that verbal concern for people's health in CEO speeches was associated with lower volatility of the shares of the companies they led on the stock exchange. That is, shareholders believed in such companies more than in those whose directors did not include concerns about people's health in their speeches.
Here are just a few examples of quotes from CEOs during their speeches at the beginning of the pandemic:
“First of all, every time people get sick or tragically die, it’s a much more important topic than anything we’re covering today. So I just want to emphasize that,” Strauss Zelnick, CEO of Take-Two Interactive Software, Inc.
“First of all, the whole coronavirus situation is a human situation. It’s kind of a human tragedy,” said Andrew Anagnost, CEO of Autodesk, Inc.
“It is clear that the coronavirus is creating a very volatile situation. […] Let me start by saying that our top priority is the safety of our employees, partners, and customers,” said Anders Gustafsson, CEO of Zebra.
“The first and foremost task of business is to ensure the safety and security of our employees and our partners,” Nelson Mills, Columbia Sportswear CO.
Why it works
To interpret the associations discovered by the researchers, you don't even need to have a psychology degree. After all, we all remember well those first days of lockdown, when we were filled with fear for our loved ones and friends, fear of the future, and a sense of total uncertainty.
Two years later, Ukrainians faced an even more difficult and terrifying ordeal, which we are still experiencing today. Pain, unprecedented uncertainty, fear – if not for ourselves, then for our children, loved ones, and loved ones.
In times like these, each of us wants understanding, a little empathy. We want to hear three simple words: “everything will be fine.” Each of us understands that in reality they mean nothing. This is not a guarantee or even a promise. However, we need them, because each of us strives to get at least a piece of solid ground to lean on.
Something similar, apparently, works on the scale of global markets. A simple manifestation of understanding that trouble is not an abstraction that will be reflected in the numbers of statistics. That it is a part of every individual life, every tragedy that every individual person, family will have to go through - gives rise to a counter-feeling in millions of people. Then they begin to treat the company not as bricks of the headquarters or a logo on a letterhead, but as the same people. With the same experiences and worries.
